Will EPA keep carbon capture in its new power plant rule?

By Jean Chemnick | 07/31/2015 01:12 PM EDT

If U.S. EPA releases its final plans to cut carbon from power plants on Monday, as expected, the biggest shock might not be found in the Clean Power Plan.

If U.S. EPA releases its final plans to cut carbon from power plants on Monday, as expected, the biggest shock might not be found in the Clean Power Plan.

There have been rumblings for more than a month now that the New Source Performance Standard for future power plants under consideration at the White House does not contain what was the centerpiece of the draft version: a mandate that all future coal-fired power plants use carbon capture and storage (CCS) technology to capture a share of their emissions.

EPA has been tight-lipped about its power plant carbon regime, which is now expected to be unveiled Monday morning at the White House. But sources on Capitol Hill and elsewhere say they have heard from agency staff that the CCS mandate is out — likely replaced with a less stringent requirement that new coal plants use ultra-supercritical technology.


Some observers say they have heard mixed chatter from certain administration officials about what is in and what is out. But the uncertainty raises questions about what serves the Obama administration’s climate change legacy more: ensuring that no future coal-fired power plant can ever be built without CCS, or protecting the Clean Power Plan, which covers all the fossil fuel power plants currently belching carbon into the atmosphere throughout the United States.

That question rests on how legally stable the New Source Performance Standard is, which is a matter of hot debate.

If the new power plant rule is invalidated in courts, there is a strong likelihood the Clean Power Plan will fall with it, undermining the whole of EPA’s power plant carbon regime and the cornerstone of what the U.S. had to offer toward a potential global emissions deal this year in Paris. The Clean Air Act requires that a standard for new sources be in place before a standard for existing ones goes into effect, and while the agency argues in its rule that a separate standard for modified sources might serve that purpose, that claim is untested and many experts say it is unlikely to pass muster.

The best chance for the survival of any of EPA’s three power plant rules is therefore the survival of all its power plant rules. And that’s a legal judgment call, said Thomas Lorenzen, an attorney at Crowell & Moring LLP.

"Right now there are some people at EPA and at the Department of Justice that are engaged in a little bit of gambling, and they’re trying to decide which way is the best way to play this," he said.

Lorenzen said that if he still had his old job defending EPA rules at the Justice Department, he’d advise EPA to think twice before finalizing the CCS mandate.

"The conservative legal tack would be to tell them to abandon CCS," he said. Little would be lost by doing so — no new coal-fired power plants are in the construction pipeline anyway that would be covered by the NSPS — but a faulty rule for new sources puts at risk the Obama administration’s ability to deliver a Clean Power Plan that cuts power-sector emissions 30 percent compared with 2005 levels by 2030.

"There’s little reason for them to take the risk," said Jeff Holmstead, a partner at Bracewell & Giuliani LLP, who has long advanced the notion that a CCS mandate under Section 111(b) of the Clean Air Act would not be on firm legal footing.

"I do know that Gina and the other political appointees would like this to be part of their legacy: no new coal plants without CCS," he said, referring to EPA Administrator Gina McCarthy. "But they also know that even without that, given the current price of natural gas and the relatively low demand growth, no one is looking at building new coal-fired power plants anyway."

The agency could insert wording into its rule, he said, saying officials still think CCS is a promising technology and pledging to revisit the standard if the technology advances to the point where it meets the criteria for best system of emissions reduction (BSER).

Holmstead and other industry lawyers have long argued that CCS does not meet that standard now, while environmentalists strenuously disagree. Both sides have promised the dispute would be settled in litigation (Greenwire, Sept. 20, 2013).

But since the draft rule was unveiled in September 2013, new information has come to light, Holmstead argues, that makes the CCS gambit riskier than it might have seemed when EPA proposed it.

For one thing, EPA uses as part of its justification for tapping partial CCS as BSER for coal the fact that three CCS facilities were under development at power plants in the U.S. at the time of the proposal. But now only one of these still has a clear path to completion — and Kemper County Energy Facility’s CCS project in Mississippi is years behind schedule and billions of dollars over budget.

A project planned for California has been scrapped, and Summit Power’s Texas Clean Energy Project is still in search of funding (Greenwire, July 10).

Boundary Dam Power Station in Saskatchewan has opened, but Holmstead sees special conditions there in its financing, technology and location that he thinks would make it a less-than-ideal basis for a standard.

Perhaps more compelling, Republican members of Congress and industry attorneys say, is the fact that a provision in the Energy Policy Act of 2005 prohibited EPA from basing Clean Air Act air quality rules on technology demonstrated at facilities that received Energy Department funding — which all three CCS projects mentioned in the draft did.

The agency was apparently unaware of that provision of the Energy Policy Act when it rolled out the draft in September 2013, but it gained political prominence in the months that followed and EPA eventually released a supplementary document, published in the Federal Register in February 2014, that sought to put the issue to rest.

The notice of data availability states that EPA’s rationale for its CCS mandate "does not depend solely upon those projects, and the determination remains adequately supported without any information from facilities that have been allocated" partial funding and tax credits under the energy legislation.

"Thus, the EPA’s proposed standards, which are based on its determination that partial capture CCS represents the best system of emission reduction adequately demonstrated, are not beyond the scope of its legal authority," the agency concludes, soliciting comment on its interpretation of the 2005 law.

Holmstead dismissed EPA’s justification as "weak" and said it was further undermined by a passage from the administration’s own National Climate Assessment last year that appeared to pan CCS technology.

"Although the potential opportunities are large, many uncertainties remain, including cost, demonstration at scale, environmental impacts, and what constitutes a safe, long-term geologic repository for sequestering carbon dioxide," states the NCA, a voluminous account of the nation’s climatic risks and potential solutions that President Obama promoted in May of last year by providing interviews to local TV weather forecasters.

If EPA has now based its standard on ultra-supercritical technology like that used at Southwestern Electric Power Co.’s John W. Turk coal plant, that would still require a technology that has not been widely used in the U.S. but that is demonstrated, industry advocates say.

‘A step backwards’

But proponents of the CCS mandate say the statute intends Section 111(b) to be technology-forcing, a role it played in the past in helping to deploy scrubbers to limit power plant sulfur emissions. The fact that CCS is not currently operating at a U.S. power plant is not an impediment, they argue. All the components of the technology are available, and projects like Boundary Dam show they are working. CCS is not currently deployed in the U.S. because of a lack of a regulatory trigger, the advocates say — and the New Source Performance Standard would address that.

"I have no reason to believe that these rumors are accurate," said Ann Weeks, senior counsel and legal director at the Clean Air Task Force, who last month shared her views on the rule with the White House’s Office of Management and Budget.

Furthermore, jettisoning the mandate would have consequences for Obama’s climate efforts, both practical and political, she said.

While the U.S. is not currently building new coal-fired power plants, mostly for market reasons, the same is not true internationally. The Obama administration has reached several agreements with China over the last 18 months related to CCS that could help curb carbon at some of that country’s many new coal facilities. Just last month, McCarthy and Energy Secretary Ernest Moniz announced plans for a U.S.-China collaboration on a large-scale CCS project in which captured carbon would be used to recover and treat groundwater (E&ENews PM, June 23).

It would be difficult for the Obama administration to tell China it needs to invest in CCS if it isn’t telling U.S. utilities the same thing, Weeks said.

"That would be an unfortunate signal," she said — and it would send an inconsistent message to the broader international community ahead of December’s negotiations.

"As we get closer and closer to Paris, it seems to us that it would be in the administration’s interest to keep moving forward with things that would actually achieve emissions reductions," she said. "Providing a standard for coal plants that is meaningful does that. Taking CCS out is a step backwards."

And Weeks disputed that a new power plant standard based on technology already broadly in use would be a sturdier base on which to build the Clean Power Plan. The new power plant rule would be more legally vulnerable, she said, "because you’re not talking about much reduction from the coal sector, and what would be the basis for an emissions reduction future from the coal industry?"

But Weeks said EPA’s modified source rule, which is also written under Section 111(b) of the Clean Air Act, could support the Clean Power Plan if the rule for future power plants was struck down.

"It’s a ‘b’ standard. It’s enough," she said.