Will EPA Scrap the Carbon Capture Mandate?

“EPA appears to have dropped its controversial requirement that new coal plants install partial carbon capture and sequestration (CCS) from its draft final new source performance standards (NSPS) that it recently sent to the White House for interagency review, according to one informed source,” Dawn Reeves reported last week in InsideEPA ($).

Despite repeated trust-us-we’re-the-experts assurances that partial CCS is the “adequately demonstrated” (i.e. commercially viable) “best system” for controlling carbon dioxide (CO2) emissions from new coal-fired power plants, EPA apparently realizes such claims won’t survive judicial scrutiny (as this blog has often argued). According to Reeves:

The source believes EPA decided to drop the CCS mandate in the face of growing legal concern that the technology requirement would not withstand court review, because the projects the agency had relied on to show that CCS is “adequately demonstrated” and “commercially available” are faltering.

Reeves further notes that: 

A final NSPS must be in place in order for EPA to go forward with its final existing source performance standards (ESPS) to cut greenhouse gas (GHG) emissions from the current power fleet — a rule that the agency also plans to complete this summer and one that would achieve far more emissions reductions than the NSPS, particularly because there are no new coal plants planned in the U.S.

In EPA parlance, the agency’s Carbon Pollution Standards rule for new power plants imperils its Clean Power Plan (CPP) rule for existing power plants.

What will the White House do? President Obama’s longstanding ambition is to “bankrupt” anyone who would build a new coal-fired power plant. The NSPS rule is a de-facto ban on new coal generation, because new natural gas combined cycle (NGCC) power plants are already cheaper to build than new coal-fired power plants, and CCS can more than double the cost of a new coal plant.

Nonetheless, because hardly anyone is building new coal power plants anyway, the NSPS rule’s chief function is to provide a regulatory stepping stone to establish CO2 performance standards for existing power plants.

For Obama and his environmentalist allies, the CPP must be protected at all cost. They view it as vital to the triumph of ‘progressive’ politics in two ways. First, the CPP is transformational — a strategy to impose California-style climate and energy policies on the nation as a whole. Second, the CPP makes up the biggest component of the U.S. Government’s emission reduction pledge in the COP 21 climate treaty negotiations.

Simply put, an imploding Carbon Pollution Standards rule would take the CPP down with it, which in turn would likely doom the forthcoming Paris conference to another Copenhagen-like failure.

Reeves also mentions that “EPA staff has already considered the possibility of finalizing the NSPS without the CCS requirement in an analysis of fallback options that included ultra super critical pulverized coal (USCPC) and integrated gasification combined-cycle (IGCC) without CCS.”

Although dropping CCS might save the Carbon Pollution Standards rule, it could increase the legal vulnerability of the CPP itself. As discussed previously on this blog, the CPP is arguably unlawful on least 10 separate counts. One of those is that an existing source performance standard (ESPS) cannot be more stringent than the corresponding NSPS.

The CPP nationwide average emission performance standard for existing power plants in 2030 is 990 lbs. CO2/MWh — below EPA’s proposed NSPS for both new coal-fired power plants (1,100 lbs. CO2/MWh) and new NGCC power plants (1,000 lbs. CO2/MWh). Half the states’ existing-source CO2 performance targets are more stringent than the corresponding NSPS for new NGCC power plants.

That defies the logic and intent of the Clean Air Act, which is to set the toughest standards for new sources and use the experience to develop analogous controls for existing sources. As expressed in EPA’s 1975 implementing regulation (40 FR 53341):

Although the general principle (application of best adequately demonstrated control technology, considering costs) will be the same in both cases, the degrees of control represented by EPA’s emission guidelines [for existing sources] will generally be less stringent than those required by standards of performance for new sources because the costs of controlling existing facilities will ordinarily be greater than those for control of new sources.

The regulation implies that in infrequent cases, ESPS may be as stringent as NSPS. It clearly does not contemplate that ESPS will be more stringent. No such rule was ever proposed in the history of the Clean Air Act prior to the CPP.

Now, whereas coal with partial CCS can meet a standard of 1,100 lbs. CO2/MWh, EPA’s “fallback” options have significantly higher emission rates. According to comments submitted to EPA in September 2013 by the National Energy Technology Laboratory (NETL), the emission rate of a typical supercritical pulverized coal (SCPC) power plant is 1,675 lbs. CO2/MWh; that of a typical integrated gasification combined cycle (IGCC) coal power is 1,433 lbs. CO2/MWh.

Since nobody is building IGCC power plants without government subsidy, the most defensible fallback is to define SCPC as the adequately demonstrated “best system” for reducing CO2 emissions from new coal power plants. But in that case, the new source standard (1,675 lbs. CO2/MWh) would be 40% less stringent than the existing source standard (990 lbs. CO2/MWh). A judge must be fiercely ‘progressive’ not to question the statutory interpretation that produces such a topsy turvy pair of rules.

American Commitment President Phil Kerpen opines that although EPA received two million comments on the NSPS rule, “it looks like it was just one five-page comment from the Energy and Environment Legal Institute (E&E Legal) that sent EPA scrambling back to the drawing board.”

E&E Legal argues that, on the issue of whether CCS is an “adequately demonstrated” technology, EPA is not entitled to judicial deference as the expert agency because EPA itself did not defer to the NETL experts on whom it relied to estimate the costs of partial CCS.

In its September 2013 comments on a draft of EPA’s NSPS rule, NETL distinguishes stages of technology development and the cost estimates appropriate to them. The acronyms are barbarous but, hey, it’s your tax dollars at work:

For an emerging technology like CCS, costs can be estimated for a first-of-a-kind (FOAK) plant or an nth-of-a-kind (NOAK) plant, the latter of which has lower costs due to “learning by doing” and risk reduction benefits that result from serial deployments as well as from continuing R&D. . . .For plants that utilize technologies that are not fully mature. . . somewhere between FOAK and NOAK, [NETL’s estimates are] sometimes referred to as “next-of-a-kind.”

NETL makes three main points about EPA’s CCS cost estimates:

• “EPA’s CCS costs were based on NETL’s ‘next-of-a-kind’ COE [levelized cost of electricity] estimates, but the technology’s current first-of-a-kind costs should be used instead.”
• “Next-of-a-kind’ costs will not be realized before more demonstration projects proceed.”
• “The NETL costs used by EPA represent the low end of the COE range, but the high end of the range should also be considered.”

The table below shows both the cost estimates presented in EPA’s draft and the more complete information that NETL advises EPA to include:

In the proposed Carbon Pollution Standards rule as published in the Federal Register (79 FR 1476), EPA cites NETL’s 2012 COE estimates and explains the differences between NOAK, FOAK, and “next-of-a-kind,” but ignores NETL’s advice. EPA presents no first-of-a-kind cost estimates, gives the impression that next-of-a-kind costs are already realized (estimates “utilize currently available cost bases”), and provides only low-end next-of-a-kind costs.

EPA goes on to conclude (79 FR 1477) that new coal generation with partial CCS sufficient to meet the proposed standard (1,100 lbs. CO2/MWh) would have a levelized cost of electricity of $110/MWh — similar to that of a new nuclear power plant (“about $103/MWh–$114/MWh”). Hence the cost of the proposed standard is “reasonable.”

According to NETL’s chart above, however, the next-of-a-kind cost of partial CCS ranges from $110/MWh to $147/MWh. The top of the range is significantly more costly than new nuclear. If first-of-a-kind costs are also considered, as NETL recommends, the low end of the range ($121/MWh) exceeds the high end of the range for new nuclear.

In their comment letter, the E&E Legal team conclude that “EPA must withdraw the rule making or reopen the comment period so that the public may comment on the real costs of this regulation.”

Apparently, EPA has decided to do neither but instead relax the standard and replace CCS with a cheaper technology raising fewer litigation risks.

That, however, will do nothing to save the CPP from its own internal defects. The great unravel begins.