Climate:

Bracewell & Giuliani's Segal previews EPA's reproposal of new source standards

With U.S. EPA expected to release its reproposed rule for greenhouse gas emissions from new power plants this week, how will the agency address coal-fired power? During today's OnPoint, Scott Segal, a partner at the Policy Resolution Group at Bracewell & Giuliani and director of the Electric Reliability Coordinating Council, previews his expectations for the rule and subsequent litigation.

Transcript

Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Scott Segal, a partner at the Policy Resolution Group at Bracewell & Giuliani, and director of the Electric Reliability Coordinating Council. Scott, thanks for joining me as always.

Scott Segal: Great to be here.

Monica Trauzzi: Scott, just last week, you met with the Office of Management and Nudget on EPA's repurposed standards for greenhouse gas emissions for new power plants. And we are expecting to see those at the end of this week on Friday. And the expectation there is that the agency will lower emissions targets for coal but keep them at a level where carbon capture and storage technology will still be required. Was that your understanding coming out of that meeting?

Scott Segal: Well, as usual, with meetings with the Office of Management and Budget, there was not, shall we say, a wealth of information coming from the government back to the regulating community. So we didn't hear a whole lot about specificity. One thing I will say is the numbers that we are hearing about, not from OMB, but from others, are indicative of perhaps a range of eleven hundred for coal-fired power plants. And that's unfortunate because consider this: An average advanced technology power plant at this point is at about 1,700 pounds per hour. And if you were to reduce to 1,100, that's about a 60 percent reduction. Engineers, at the EPA and elsewhere, define full carbon capture and sequestration as about 90 percent capture. So this is two-thirds of full capture. And to say the least, there is no data. There are no demonstrated projects. There is not an administrative record upon which a rule like that can be based. It doesn't meet the standards of the clean air act. The clean air act is clear on this point. You have to have a demonstrated technology taking into consideration both cost and energy impacts, and such a rule couldn't do it.

Monica Trauzzi: So you want to see that number, where at 1,400?

Scott Segal: Well, I want to see that number considerably above 1,100. Where do I want it? I want a rule that will allow the construction of a new coal-fired power plant utilizing at least super critical technology. That would be technology that achieves substantial benefits in terms of energy efficiency that reduces the carbon footprint to the extent the more efficient your power plant is, the less coal you have to burn to generate the same amount of electricity.

Monica Trauzzi: But isn't CCS where the technology is going, and isn't this, you know, industry perhaps not wanting to make certain investments?

Scott Segal: Well, two things to consider. The law is not where the technology is going. It's about a demonstrated technology taking into account both cost and energy impacts. That's what the law says. Secondarily, there have been great strides for carbon capture, and in fact, the Kemper plant that Southern is developing in Mississippi is about 75 percent, 70-75 percent complete. And Mississippi should be very proud of that power plant. It's definitely cutting edge. It has a worldwide impact. But that one power plant is not a sufficient basis for a standard. We have seen, if you look at the court cases that construe the Clean Air Act, you will see in the precedent of agency decisionmaking. You will see a number of technologies when they were not ready for primetime. They were rejected by the agency as sufficient for establishment of new source performance standards. And those technologies when we look back on them were at a far more robust stage then CCS is today.

Monica Trauzzi: So based on your conversation, and previous conversations, do you believe that there is willingness from OMB and EPA to listen to the various stakeholders and apply what you all are saying to the rule once it becomes final?

Scott Segal: Well, I must say that I'm not certain we're going to see a lot of motion in the rule for new power plants. That's when we are expecting no later than September 20th, which will be Friday, so I think it'll come out when it comes out. But the bottom line is this. I don't think we're gonna see a lot of movement on that rule. But, remember, after that rule is announced that it's a proposed rule, there will be a lot of comments taken, and I suspect some of those comments will be very technical, very pointed in nature. It may move the rule a little bit. And then of course there will be, I'm going to go out on a limb here and tell you I think there will be litigation.

Monica Trauzzi: So does the clock really start clicking for you on September 20th, or whenever it actually is reproposed, not just for those comments on the new power plant standards, but also to sort of tee things up for the existing rule.

Scott Segal: Well, one of the issues we've tried to make clear is that the rule for new power plants should not be perceived to be a steppingstone for the existing fleet. And I still believe that very much. The Clean Air Act is a very messy instrument to be used to regulate carbon emissions from the existing fleet. Remember, coal still provides about 40 percent of U.S. electric generation. During the first half of 2013, that's what EIA showed. It is still the number one source of electricity, and it's even a higher percentage when measured in terms of base load. And the base load of electricity in the United States has been under a significant amount of threats. We just saw a recent retirement, for example, of the ultimate base load technology, which is a nuclear power plant up in Vermont Yankee with a statement being that market designs are such that it's a hostile environment for base load. This is not the time to be taking threats directly to base load requirements, which is what an attack on 40 percent of U.S. electricity would be.

Monica Trauzzi: You've talked about litigation and you assumed that perhaps we will see some. How far off of its timeline could EPA get if we do start to see litigation piling up?

Scott Segal: Well, let me come at it from a different direction. Even if there were no litigation, the president's timeline that he established in the memorandum to the agency is an incredibly aggressive timeline, and has more to do with political science then with technological science. He wants to get it done before he leaves office; meaning at the rule in existing power plants to be finalized by 2015, so that it can be on its way to implementation and state plans thereafter. I think that's very aggressive, particularly since the agency, frankly, doesn't have any idea about what technologies to apply to an existing power plant. You can't move a power plant, if it's not near a spent oil and gas field, you can move it to be closer to one in order to do CCS. So they don't have any idea about what the right technology would be. Plus, let me just say this, you got a lot of talk about social cost of carbon and other issues that deal with the benefits that might be associated with this rule. I want to be real clear with you, Monica, there are no benefits associated with this rule. How can I say something like that? The percentage of carbon emissions that come even from the existing fleet of coal-fired power is relatively small looking at a worldwide carbon budget.

Monica Trauzzi: That's not true.

Scott Segal: Twenty-five percent of carbon comes from the fleets of India and China compared to 3 percent from the United States. Even if you got relatively good control on U.S. carbon emissions, that is not a substantial reduction in global warming, which I think is the point of this exercise. Not just hostility towards coal, but global warming.

Monica Trauzzi: So if the new rule looks like we're assuming it will, then what would you foreshadow the rule for existing power plants will look like?

Scott Segal: Well, I just don't know. I'm hoping that the agency will keep its wits about it and recognize that there is a substantial relationship between the health of the existing coal fleet and baseload power, reliability and affordability for households and businesses, for hospitals, et cetera. I am hoping they won't do anything untoward, and they don't have to. It's not what the law compels. You know, for the very reason that they are supposed to take into account: cost, and they are supposed to take into account energy impacts before they proceed. If they do that, then we ought not to worry. But my fear is that that is not the direction they are headed.

Monica Trauzzi: OK. It's going to be an interesting week ahead.

Scott Segal: I'll say.

Monica Trauzzi: Thank you for coming on the show.

Scott Segal: Yeah, it's great.

Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.

[End of audio]

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