EPA took another step last month toward encouraging less reliance on the use of coal as a domestic energy source by proposing the first ever Clean Air Act ("CAA") new source performance standards for emissions of carbon dioxide (CO2), a greenhouse gas, from fossil fired electricity generating units. 77 Fed. Reg. 22,392 (Apr. 13, 2012). The proposal would limit CO2 emissions from new fossil fuel-fired electricity generating units greater than 25 megawatt electric to 1,000 pounds per megawatt-hour, a level based on the CO2 emissions from natural gas-fired combined cycle units ("NGCC"). Comments on the proposal must be submitted on or before June 12, 2012.
The proposal is predicated on an important assumption that fossil-fuel-fired units – including coal-fired units in particular – can meet the lower CO2 emission standards using carbon capture and sequestration ("CCS") technology. This is a significant assumption, given that the economic viability of the large-scale commercial application of CCS technology is still an open question. A proposed 30-year averaging compliance option for coal and pet coke-fired units would allow facilities that burn fuel that emits relatively higher amounts of CO2 to take steps over a period of years to come into compliance using CCS technology. EPA also assumes that "very few new coal-fired power plants will be constructed in the foreseeable future" because lower natural gas prices will lead electricity-generating companies to choose to construct NGCC power plants rather than coal-burning power plants.
The proposed standards would apply only to new facilities and not to existing facilities that are modified or reconstructed. EPA asserts that existing facilities are most likely to undertake projects to install pollution controls, required under other CAA regulations, that may emit CO2 as a byproduct; therefore, these projects would be exempt under the EPA regulations that exclude pollution control projects from being considered "modifications." EPA's position may be the subject of legal debate. Despite EPA's assertions, if the rule is finalized as proposed, it could have major impacts on existing coal-burning power plants, particularly if a court were to decide that modified existing power plants are subject to the standards.
There have even been reports that some groups may take the unusual step of challenging the proposal because it already is having the practical effect of delaying or blocking altogether plans for the construction of new coal-fired power plants. The significance of the proposal is not limited to coal-fired power products, but could impact any company involved in coal production or transportation, as it is likely that this proposed rule is the first of many proposals targeting CO2 emissions.
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