Power Plant Multi-Pollutant Legislation: A Dialogue Examining the Proposals and Key Issues

Amy Royden

On November 27, 2001, the ABA Section of Environment, Energy, and Resources' Climate Change and Sustainable Development Committee and Air Quality Committee sponsored a dialogue reviewing the Clean Power Act (S. 556, introduced by Senator Jeffords) and various alternative power plant multi-pollutant regulatory approached proposed by industry groups. The discussion was moderated by Richard Ayres, Ayres Law Group. Participants compared the approaches of these proposals to regulating three criteria pollutants - (mercury, sulfur dioxide (SO2), and nitrogen oxides (NOx)) and carbon dioxide (CO2). [See chart entitled "Integrated Power Plant Proposals" for a side-by-side comparison of the different proposals. NOTE:Chart is large and will require scrolling left to right as well as top to bottom.] Participants also touched upon proposed amendments to New Source Review (NSR) and other provisions of the Clean Air Act.

Mercury
The National Environmental Trust (NET) and other environmental groups support the Clean Power Act (S. 556, introduced by Senator Jeffords), according to John Stanton, NET. There is clear evidence that mercury is a potent fetal neurotoxin, and utility emissions are a key unregulated source of mercury emissions. Stanton argued that the dates and rates of reduction in S.556 are attainable, as municipal waste and medical waste incinerators, whose emissions of mercury are regulated, have achieved these levels of reductions.

Chris Miller, majority counsel of the Senate Environment and Public Works (EPW) Committee, said that S.556 is necessary because a "morass" of litigation has impeded implementation of the hazardous air pollutant provisions of the Clean Air Act. Responding to comments about the lack of availability of control technology, Miller said that Senator Lieberman would hold a hearing in January 2002 to review mercury and carbon control technologies, and that he has heard about some "remarkable control technologies" already available. Jeffords' bill would not replace the maximum achievable control technology (MACT) regulations being developed by EPA, but rather create an "overlay."

Al Mannato, Edison Electric Institute (EEI), commented that no single control technology is capable of removing all forms of mercury from power plant emissions. Removal depends on the fuel used and power plant design, and some plants will be unable to meet the reductions in S. 556. He noted that controls undertaken by utilities to reduce other types of pollutants have already reduced mercury emissions by 40 percent. Lynn Ratzell, representing Energy for a Clean Air Future (ECAF), echoed Mannato's comments about the differences in mercury. (ECAF is coalition of energy companies including PPL, Reliant Energy, and Wisconsin Electric, TECO Energy and TransAlta with 62 percent coal generation, 20 percent natural gas and 15 percent nuclear generation.) He noted that mercury reductions would be especially difficult in the West because Western coal contains elemental mercury (as opposed to ionic mercury in Eastern coal), which is very difficult to remove. For that reason, ECAF supports a two-stage process for mercury regulation, with the first stage serving to pour money into technology development for more stringent regulation in the second stage. Trading is key to "incentivize" money going into mercury removal technology.

Joel Bluestein spoke for the Clean Power Group (CPG), which represents NiSource, Enron, Calpine, El Paso and Trigen. CPG's proposal would phase in control requirements gradually, not just for mercury, but for all pollutants. Large cuts all at once are disruptive and inefficient. Furthermore, phased-in requirements allow time for utilities to adopt better, less costly technology that will be developed along the way, rather than forcing utilities to adopt current less-effective technology now. CPG's proposal provides for trading, but because there are local impacts from mercury, it also includes a performance-based standard.

The Clean Energy Group (CEG)'s proposal was described by Rob LaCount, PG&E National Group. CEG comprises eight electricity generators with a diverse fuel mix and operating assets in all regions. (CEG includes Conectiv, Consolidated Edison, Exelon Corp., KeySpan Corporation, Northeast Utilities, Ontario Power Generation, PG&E National Energy Group, Public Service Enterprise Group and Sempra Energy.) CEG's proposal would replace MACT. Rather than lock in technology in 2003/4 (when the MACT regulations are due to come out), CEG's proposal would phase in requirements, allowing more time for research and development to get to the "right" technology. Trading would also be allowed. This will preserve fuel diversity, according to LaCount, because coal plants that are unable to meet mercury controls could purchase the necessary credits.

The Bush administration's proposal has not yet been finalized, according to Brian McLean, Director, Clean Air Markets Division, U.S. EPA Office of Air and Radiation. EPA's draft is under discussion in the administration. The administration does want to reduce mercury emissions, because mercury is a neurotoxin, but it is mindful of technical and cost constraints.

Trading is a difficult issue because, while trading reduces costs, mercury emissions do have local impacts. The administration is generally moving in the direction of agreeing that its proposal needs to address local and collective aspects of mercury emissions.

Carbon Dioxide (CO2)
Ayres asked panelists to address the following:

• Whether they supported a mandatory or voluntary program;
• What sources of credits to offset emissions should be allowed (i.e., could a utility use credits generated "off-system," such as sinks);
• Whether diversity of fuel supply was important; and
• How their proposal would support technological advancement, since there is currently no technology for reducing utility CO2 emissions.

Mandatory or Voluntary Program
EEI, ECAF and CPG prefer voluntary programs. Mannato added that any proposal should address all sectors, not just utilities, because utilities only account for one-third of U.S. emissions. NET, Miller (representing Sen. Jeffords) and CEG support mandatory programs. Stanton noted that the United States has already tried voluntary measures, and they have failed miserably. Ratzell responded that the U.S. voluntary program was never well-defined nor did it include trading. Miller said Jeffords' view is that the United States already has an internationally binding requirement to reduce emissions to 1990 levels. LaCount noted that CEG wants certainty, and states are already enacting carbon dioxide controls or offset requirements, so CO2 needs to be addressed at a federal level.

Sources of Credits: Off-System Allowed?
EEI, ECAF, CPG and CEG support crediting the widest range of activities in order to promote flexibility. This includes credits for activities off-system (for example, sinks) and activities internationally. (Bluestein said that while CPG did not support a mandatory program, if one were to be enacted, it should include these activities.) CEG's proposal would establish an independent board to review what could be credited.

NET would only support trading within capped sectors or between sectors with caps, but not allow utilities to use credits from an uncapped sector. Otherwise, Stanton said, a dysfunctional market would be created. Miller said that trading could occur outside a sector, but this discussion must await the administration's proposal.

Fuel Diversity
All the participants expressed concern about fuel diversity, but in different ways. Miller noted that currently 55 percent of electricity is generated using coal, so fuel supply in the utility sector is not diverse now. He said that Sen. Jeffords supports increasing funding for energy efficiency and renewables to address this. LaCount noted that even without CO2 restrictions, 94 percent of new plants in the United States will be natural gas plants. Thus, Stanton noted, the status quo hurts fuel diversity, because in the absence of certainty, the market picks natural gas. ECAF supports fuel and technology specific benchmarks to maintain fuel diversity. However, Bluestein did not think fuel specific requirements were necessary, because coal can be competitive through technologies such as coal gasification and clean coal technology

Technology Development
Industry representatives urged increasing resources in order to spur technological development. Because there are currently no cost-effective technologies for reducing greenhouse gas emissions, Mannato said we need a medium- and long-term intensive effort to develop this technology. Bluestein said one problem is that there is no market for carbon technology in the United States right now because there are no restrictions on emissions. CPG's phase-in proposal would create a market for carbon technology and time to test it and adopt it. By starting requirements in 2003/4, CPG's proposal would create value for this technology early on. Stanton and Miller both pointed to gasification technology as holding immense promise for reducing CO2 emissions. Gasifying coal and using it in combined cycle turbines is highly efficient and reduces carbon dioxide emissions.

Other Notes on CO2
Miller noted that if industry hoped to gain regulatory relief from the Clean Air Act, it needed to support a four-pollutant bill (not a three-pollutant bill). Miller said that Congress was prepared to go forward on carbon without the administration. McLean said that the administration was developing a comprehensive proposal on climate, which will not include mandatory regulation.

Nitrogen Oxides (NOx) and Sulfur Dioxide (SO2)
Ayres commented that all the proposals contained reductions in NOx and SO2, and asked participants to address the need for reductions and how the current system should be changed, including the allocation scheme.

Ratzell said the ECAF's reductions were based on EPA models, and that ECAF's goal was a coordinated approach. ECAF would maintain the current allocation scheme to provide certainty. CEG supports output-based standards within the cap and trade system and would change the existing allocations (through rulemaking) to accommodate new sources. CEG's support for NOx reductions means that an annual cap, rather than summertime restrictions, would be in effect in the East, providing significant flexibility for the NSR program. Mannato said that EEI's members had differing opinions on whether the allocation scheme should be changed, so he could not comment, but noted that impending regulations to control fine particulates (PM2.5) would be the principal driver for emissions controls because the standard is very stringent. CPG wants a proposal that is simple and treats all plants the same. Thus, CPG supports reallocating permits so that there can be new coal plants, mandating that all requirements apply to all plants (i.e., no grandfathering), and creating output-based requirements to reward efficiency.

NET supports the Jeffords bill because dramatic reductions are needed. 100 million people live in areas where ground-level ozone is a problem. Regional haze is a problem in national parks. Other problems associated with NOx and SO2 are acid deposition and eutrophication. Miller agreed that PM2.5 is very important, because fine particulates cause significant health problems around the country. The allocation scheme will depend on what gains political support.

McLean also agreed that PM2.5 is the strongest driver, but visibility and regional haze concerns were also factors. He supports a longer planning horizon, out 15-20 years. The distributional question (allocation scheme) will need to be resolved in Congress where interests can be balanced.

Amy Royden is a senior staff associate at the State and Territorial Air Pollution Program Administrators (STAPPA) and Association of Local Air Pollution Control Officials (ALAPCO). She is also the editor of the Section's Climate Change and Sustainable Development Committee Newsletter. Committee co-chair Kyle Danish also contributed to this article.