The 2012 presidential election is starting to bend some of the Obama Administration’s environmental and energy policies.  I have noted previously that the White House realizes that gas prices are a huge threat to President Barack Obama’s re-election.  Consequently, the President is trying to shift the blame to oil companies and speculators while at the same time talking up what his Administration is doing to increase domestic oil production.  The reality, of course, is that the Obama Administration has moved across the board to decrease oil production in federal lands and offshore areas.

Another sign of the Administration’s focus on the President’s re-election is that the Environmental Protection Agency has suddenly started paying attention to the concerns of industry.  The timetables for new regulations of coal ash disposal and of surface coal mining in Appalachia have been extended.  EPA announced last week that it was reconsidering, but not delaying, some parts of its new Clean Air Act rule for cement plants.  This week EPA suspended indefinitely a similar rule for industrial boilers that it had promulgated in February.  EPA said that it will conduct more analyses and re-open the public comment period for the boiler rule.

EPA is also considering acceding to requests from Congress and electric utilities to extend the public comment period for its proposed Clean Air Act rule for coal-fired power plants. A good excuse for extending the comment period is that a simple mathematical error in EPA’s calculations has been pointed out by the Utility Air Regulatory Group, a utility industry coalition.

The boiler MACT (which stands for Maximum Achievable Control Technology), cement MACT, and utility MACT rules would limit air emissions of mercury and approximately 70 other metals and other substances.  The delays in finalizing and implementing these three rules may postpone the considerable economic damage that each of them will do until after the election.  Environmental pressure groups are naturally not happy with anything that delays shutting down the U. S. economy, but there are rumors that they have been told by the White House to shut up until after the election.

Three of the Congress’s most influential energy policymakers this week “urged” the Environmental Protection Agency to delay an ultra-costly regulation targeted at coal-fired power plants, the source of 50 percent of America’s electricity generation.  For the sake of keeping the lights on, all Americans should hope the Obama administration heeds these Congressmen’s request.

Senate Environment and Public Works Ranking Member James Inhofe (R-OK), House Energy and Commerce Chair Fred Upton (R-MI), and House Energy and Power Subcommittee Chair Ed Whitfield (R-KY) yesterday sent a letter to Environmental Protection Agency Administrator Lisa Jackson demanding a longer comment period for a proposed regulation known as the Utility HAP MACT

[The HAP stands for “Hazardous Air Pollutant,” and the MACT stands for "Maximum Achievable Control Technology"; to learn what these terms entail, read this summary of the regulation, Primer: EPA’s Power Plant MACT for Hazardous Air Pollutants.]

The EPA issued the Utility HAP MACT in mid-March, and it gave the public 60 days to comment. The Congressmen “urge the agency [to] extend the comment period to a minimum of 120 days to allow adequate time for stakeholders to assess and comment on the proposal.”

The extended comment period is well warranted. For starters, the EPA included a number of “pollutants” in the proposed regulation that shouldn’t be there. The EPA’s authority to regulate hazardous air pollutants from power plants is derivative of a study on the public health effect of mercury emissions. The EPA’s proposed regulation, however, would regulate acid gases, non-mercury metals, and organic air toxins, in addition to mercury. Yet the EPA’s evidence only pertains to mercury. The EPA’s authority to regulate these non-mercury emissions, despite their not having been a part of the aforementioned study, will be challenged, and the DC Circuit Court ultimately will decide.

Why would the EPA include these non-mercury emissions into its proposed regulation? My guess is that the agency wanted to leave no stone unturned in its war on domestic coal demand. Thanks to an emerging technology known as “sorbent injection,” removing mercury from post-combustion emissions could be achieved at many power plants without having to install flue gas desulphurization equipment, a.k.a. “scrubbers,” which are far more expensive, and which had been the primary method of mercury control. But the EPA wants all power plants to install these “scrubbers.” Consider the title of slide 8 of this EPA presentation on the proposed Utility HAP MACT rule, “Many Exiting Coal Units Lack Advanced Controls.” The only way to ensure that ALL plants have to install expensive “scrubbers” was to include non-mercury “pollutants” into the regulation.

As Inside the EPA reported on March 18,

Despite the focus on mercury emissions, the major upcoming fight over the rule could center on the proposed limits for emissions of other hazardous air pollutants (HAPs) including hydrogen chloride (HCl). EPA is proposing to set a “conventional” MACT limit for HCl that will act as a surrogate for limiting acid gases.

The HCl limit could set such strict limits on acid gases that even the smallest coal-fired power plants with the lowest emissions levels might have to install expensive “scrubber” technology to cut their emissions, an industry source has said, boosting concerns from mining and other industries about the rule’s potential costs…

…The National Mining Association (NMA) is warning that the HCl limit has the biggest potential for opposition from industry because it could require almost every coal-fired power plant in the country to invest in expensive scrubbers to reduce acid gas emissions.

The EPA’s Utility MACT overreach engenders serious reliability concerns. Many utilities will find it cheaper to shutter older, smaller units, rather than to install “scrubbers.” According to a study by Bernstein & Associates, mandating scrubbers, which is essentially what the EPA proposes, would result in the premature closure of almost 33,000 megawatts of coal fired power capacity. Moreover, most of that capacity is located east of the Mississippi, and this geographical concentration accentuates the regional threat to grid reliability. To put it another way, if you live in the Ohio Valley, you should be very concerned.

Then there’s the cost. “Scrubbers” entail huge capital expenditures, usually $100 million to $200 million per power plant. The EPA concedes that its proposed Utility HAP MACT regulation would cost $10 billion a year by 2015, making it one of the most expensive regulations, ever. This is likely a low ball. According to the Electric Reliability Coordinating Council, the price tag is as much as $100 billion a year.

Today, the Environmental Protection Agency proposed a major rule to regulate power plants under the Hazardous Air Pollutants (HAP) Section 112 of the Clean Air Act.

This post is a primer on this consequential and controversial decision.

Section 112 of the Clean Air Act

• In 1970, the Congress added Section 112 to the Clean Air Act, requiring that the EPA list and regulate Hazardous Air Pollutants (HAPs) that could “cause, or contribute to, an increase in mortality or an increase in serious irreversible or incapacitating reversible illness.” The Congress ordered the EPA to establish standards for HAPs that provided “an ample margin of safety to protect public health.”
• Due to difficulties interpreting what should constitute “an ample margin of safety,” the EPA largely ignored Section 112 for two decades.
• In 1990, the Congress, frustrated with the slow pace of HAP regulation, amended the Clean Air Act to remove much of EPA’s discretion over the implementation of Section 112. Lawmakers listed 189 pollutants for regulation. They also legislated HAP pollution controls, known as Maximum Achievable Control Technology (MACT) standards. The Clean Air Act amendments set a “MACT floor” (i.e., a minimum HAP pollution control) at “the average emission limitation achieved by the best performing 12 percent of the existing sources.”
• Section 112 MACT standards apply to both new and existing stationary sources.
• Notably, the Congress required the EPA to proceed with caution before it regulated Electricity Generating Units (“EGUs,” or power plants). The 1990 Clean Air Amendments mandated a study on the public health threats posed by EGU HAP emissions, and the EPA Administrator was authorized to proceed with the regulation of HAPs from EGUs only after evaluating the results of this study, and concluding that “such regulation is appropriate and necessary.”

Clinton’s Lame Duck Machinations

• In 1998, the EPA completed the study on the public health threats posed by EGU HAP emissions. It found a “plausible link” between EGU mercury emissions and harm to public health.
• On this evidence, the Clinton Administration EPA found it was “appropriate and necessary” to regulate HAPs from EGUs under Section 112 of the Clean Air Act. This decision was made during the ex-President’s lame-duck session.

Courts Kill Bush Administration’s Proposed Regulation

• As I explain above, the Congress narrowly defined MACT pollution controls in the 1990 amendments to the Clean Air Act, so the EPA had little discretion in creating a regulatory regime for HAP emissions from EGUs.
• In an effort to impart more flexibility, and thereby reduce costs, the Bush Administration EPA in 2004 proposed to delist EGUs from Section 112, and instead regulate HAPs from power plants under Section 111, the New Source Performance Standards. In particular, the EPA proposed regulation of HAPs from EGUs under Section 111(d), which (possibly) authorizes a cap-and-trade emissions trading scheme for existing sources.
• In February 2008, a federal appeals court struck down the Bush Administration’s proposed cap-and-trade for HAPs. The Court found that the EPA had failed to take a number of procedural steps before it tried to “de-list” EGUs from regulation under Section 112.

HAP Regulations Comport Well with Obama’s War on Coal

• In the wake of the federal appeals court’s decision to strike down President Bush’s proposed HAP regulation, environmentalist special interests sued the EPA to force it to promulgate a new regulation. In April 2010, a federal court approved a settlement between environmentalist litigants and the EPA, which set a March 16 2011 deadline for the proposal of HAP regulations for EGUs. Today is that deadline.
• Of course, environmentalists didn’t have to twist the President’s arm. Then-Senator Barack Obama campaigned for the White House on a promise to “bankrupt” the coal industry. The EPA’s proposed HAP regulation for EGUs is particularly onerous on fossil fuel generation, so it comports well with the President’s war on coal.
• The EPA concedes that the regulation would cost $10 billion a year by 2015. This is likely a low ball. According to the Electric Reliability Coordinating Council, the price tag is as much as $100 billion a year. There are also reliability concerns. In 2010, the North American Electric Reliability Corporation performed an analysis showing that the proposed HAP rule could lead to the retirement of up to 15 gigawatts of electricity generation.

What’s Next?

• Litigation. The aforementioned 1998 study on the public health effect of HAPs emitted by EGUs addressed only the effects of mercury. Today’s rule, however, covers mercury, arsenic, chromium, nickel and acid gases, despite the fact that EPA has yet to demonstrate an incremental health benefit caused by reductions in non-mercury HAPs from EGUs. It is likely that industry will challenge today’s proposed rule for including these non-mercury HAPs from EGUs without also providing evidence that their regulation would improve public health.