COAL:

Texas utility to idle boilers, mines in response to new EPA rule

Correction appended.

Luminant, the largest electricity producer in Texas, announced this morning that it will shut down two of its coal-fired boilers and close three lignite coal mines in response to a recent clampdown on interstate air pollution by U.S. EPA.

To meet tougher limits on sulfur dioxide, a chemical that causes soot, haze and acid rain, the company will idle two units with a combined capacity of 1,200 megawatts at the Monticello Steam Electric Station in northeastern Texas. The third boiler at the Monticello plant, along with both of the boilers at the Big Brown Steam Electric Station near Fairfield, Texas, will be equipped to start burning low-sulfur coal from the Powder River Basin of Wyoming and Montana.

Luminant, a division of Dallas-based Energy Future Holdings Corp., said it will stop producing coal at the three Texas lignite mines that currently provide fuel for the Monticello and Big Brown plants. The company will also spend about $280 million adding new air pollution controls to the rest of its Texas fleet by the end of 2012.

Luminant has sued EPA to stop the Cross-State Air Pollution Rule, which was proposed last year and finalized in July.

It has also undertaken a vigorous lobbying campaign on Capitol Hill, arguing that Texas utilities were blindsided by the decision to include Texas in the sulfur dioxide (SO2) program that starts on Jan. 1. EPA ordered Luminant to make a 64 percent cut in SO2 emissions from its coal plants.

"We have spent the last two months identifying all possible options to meet the requirements of this new rule, and we are launching a significant investment program to reduce emissions across our facilities," CEO David Campbell said in a statement. "However, meeting this unrealistic deadline also forces us to take steps that will idle facilities and result in the loss of jobs."

Luminant says it will lay off about 500 employees, mostly from the lignite mines. And while new jobs would presumably be created mining Powder River Basin coal and shipping it to Texas by railroad, these are the sorts of job losses that critics of EPA's pollution rules have sought to highlight on Capitol Hill.

The agency's top air official, Gina McCarthy, will be questioned on the interstate pollution rule Thursday by the House Science Committee, which is led by two Texans in Chairman Ralph Hall (R) and ranking member Eddie Bernice Johnson (D). Both have raised concerns about the decision to include Texas in the SO2 program.

EPA says the pollution cuts would produce huge health benefits because fine particles of soot are linked to premature death, heart attacks and breathing problems. The agency predicts that tougher limits on SO2 and other chemicals would save about 1,700 lives in Texas each year and tens of thousands more in other Eastern states (E&ENews PM, July 7).

Neil Carman, director of the air pollution program at the Sierra Club's Texas chapter, said it is good news that Luminant plans to retire some of the highest-emitting coal boilers rather than upgrade them.

"We would definitely prefer to see some of the units shut down," Carman said today. "They're old, they're inefficient, they're outdated -- there's no point throwing good money away on bad units."

Yet there are fears in Texas that closing two of the state's baseload power plants will cut into the amount of electricity available when demand peaks next year.

Texas broke records for electricity use several days in a row this summer, the Electric Reliability Council of Texas said.

If the new air pollution rule had taken 1,200 to 1,400 megawatts offline immediately, the power grid authority said in a recent report, there would have been rolling blackouts in Texas -- something that was averted this summer despite razor-thin margins of electricity on call.

That means more power generation will need to come online soon. Luminant, which has recently added 2,200 megawatts of generating capacity by opening new plants that burn lignite, won't have the capital to fill the void, spokesman Allan Koenig said today.

"From a market standpoint, we just brought three new units online in the last few years at a cost of $3 billion," he told Greenwire. "So it's not coming from us right now."

Correction: A previous version of this story described the wrong Texas Democrat as the ranking member of the House Science Committee. The committee's ranking member is Rep. Eddie Bernice Johnson.