RPC Reg Spotlight September 20, 2011

 

Regulatory Action in the Spotlight:

 

Environmental Protection Agency (EPA) Cross-State Air Pollution Rule

 

 

Adverse Effects:

 

  • Loss of jobs.
  • Higher electric bills.
  • Less reliable electric grid.

 

 

Response of the Obama Administration:

 

On August 8, 2011, the EPA published a far-reaching Clean Air Act rule intended to address the interstate transport of sulfur dioxide and nitrogen oxides from upwind to downwind states.  Specifically, the Cross-State Air Pollution Rule (CSAPR), replacing the EPA's 2005 Clean Air Interstate Rule (CAIR), requires 27 states to make dramatic cuts in power plant emissions that contribute to ozone and/or fine particle pollution in other states.  Emissions reductions will take effect quickly, starting January 1, 2012 for sulfur dioxide and annual nitrogen oxide reductions, and May 1, 2012 for ozone season (May-September) nitrogen oxides reductions (76 Fed. Reg. 48208).  The emission reductions expected from the EPA's recently proposed Mercury and Air Toxics Standards (MATS) are not included in the estimated emission reductions from the CSAPR; once those standards are implemented, sulfur dioxide emissions from the power sector are likely to have to be reduced even further, according to the EPA.

 

 

Impact on the United States:

 

In spite of sulfur emissions being cut by 56 percent since 1980 and nitrogen oxide emissions decreasing by 77 percent since 1990, the EPA has published the CSAPR, with a short deadline for utilities to make modifications to existing equipment, costing as much as $100 million for a 350-megawatt power plant, or replace power generating plants.  Those costs would eventually be passed along to consumers.  In Texas, CSAPR could eliminate the use of lignite coal that now fuels critical base-load electricity generation.  According to the National Electric Reliability Council (NERC), the new EPA rules could so abruptly suppress coal-fired generators that basic electric reliability in the U.S. could suffer a loss of up to 100 gigawatts by 2014 — 10 percent of the nation’s total electric capacity.  The abrupt elimination of lignite in the Texas fuel mix could mean the loss of 7,000–13,000 megawatts of generation capacity in Texas alone.  This could reduce the generating capacity of Texas to as much as 3.8 percent below demand, as projected by the Electric Reliability Council of Texas (ERCOT) for the next two years.  With the loss of power plants, comes the loss of jobs.  A Texas-based power company, Luminant, recently announced plans to lay off over 500 employees, idling two generation units and ceasing operations at three mines, in preparation to meet the rule’s unrealistic compliance deadline.  Under the new rule, self-imposed grid unreliability, punctuated by power outages, could become routine during peak demand periods.

 

 

In Closing:

 

Since the new air pollution rule is only one of at least ten EPA rules with converging effective dates in the next three years, later rules could render irrelevant the expensive retrofits undertaken to comply with the CSAPR.  For many firms, closing some plants and idling others may be the only prudent economic decision.  Moreover, the Electric Reliability Council of Texas has found that the rule could result in rotating power outages, and further studies indicate it could contribute to double-digit increases in electricity prices and the loss of countless jobs.  The EPA promulgates these rules in piecemeal fashion with no consideration of how overlapping requirements and compliance costs will impact the economy, and without any regard to scientific method or realistic cost-benefit analysis.

                                                                                                         

 

Relevant Legislation:

 

H.R 2401, the Transparency in Regulatory Analysis of Impacts on the Nation (TRAIN) Act, sponsored by Rep. John Sullivan, would require a report on the cumulative and incremental impacts of covered rules and actions of the EPA.  The TRAIN Act would cover rules concerning air, waste, water, and climate change for each of calendar years 2016, 2020, and 2030.  Included among "covered rules" promulgated under specified provisions of the Clean Air Act on or after January 1, 2009 is CSAPR.  Additionally, the bill defers the promulgation and effective date of CSAPR and other specified rules until a date that is at least six months after submission of the final report.