COLUMN-Courts should toss EPA's flawed power-plant rule: Kemp

Mon Sep 23, 2013 9:15am EDT

By John Kemp

LONDON, Sept 23 (Reuters) - The U.S. Environmental Protection Agency's proposed carbon pollution standard for new coal-fired power plants, published on Friday, is "arbitrary, capricious (and) an abuse of discretion," under the Administrative Procedure Act.

The federal courts should toss it out if the agency persists in adopting the rule in its current form.

On the basis of the evidence presented in the proposed rule, no rational decision-maker could conclude that partial implementation of carbon capture and storage (CCS) for new coal-fired power plants constitutes the best demonstrated system of emission reduction and should therefore be adopted as the performance standard for all new coal-fired power plants.

In writing the rule, officials have defied the law, which requires the Environmental Protection Agency (EPA) to consider "adequately demonstrated" technology and take cost into account, to require new coal-fired power plants be equipped with a technology that has not been shown to be commercially viable anywhere in the United States.

FLEXIBILITY LOST

The agency reaches its decision to require partial capture of CO2 by an odd route.

The EPA claims "existing and anticipated conditions mean that few if any solid fossil fuel-fired (power plants) will be built in the foreseeable future." Any gas-fired ones are likely to choose technologies that already comply with the standard.

As a result the EPA projects this proposed will result in "negligible CO2 emission changes, quantified benefits, and costs by 2022," which means it need not worry too much about the potential impact on power prices.

That finding is disingenuous. If gas prices rise significantly, as some analysts think they might, "some additional new coal-fired generation capacity may be built beyond 2020" as the EPA acknowledges.

The real benefit, and real cost, of the EPA's proposal is that it would prevent coal-fired power plants being built unless they were equipped with partial CCS, whatever happens to gas prices, significantly reducing the portfolio flexibility of power generation.

NO RELEVANT CASES

The EPA claims "nearly all of the coal-fired power plants that are currently under development are designed to use some type of CCS."

The EPA switches back and forth between "few if any" and "nearly all" in a deeply misleading manner: of the tiny number of coal-fired projects currently being planned, "nearly all" of those proposed would use CCS.

The EPA then cites four projects that are currently under construction or development that employ CCS technology. But not one of them has actually entered service yet and no one knows how they will perform in practice.

Southern Company's Kemper County Energy Facility, currently under construction in Kemper County, Mississippi, is the most advanced. But it is only 75 percent complete and has run billions of dollars over budget.

SaskPower's Boundary Dam project is under construction. The Texas Clean Energy Project is at the planning stage. And the Hydrogen Energy California project is still on the drawing board.

"Each of these projects has obtained some governmental financial assistance" the EPA admits. The reason is that CCS is still far too expensive to compete with other forms of power generation.

GREAT PLAINS SYNFUELS

The EPA highlights the Great Plains Synfuels Facility, part of the Basin Electric Power Cooperative, in North Dakota, a giant facility that produces natural gas from lignite, as an example of a gasification process successfully equipped with CCS technology.

"The Great Plains Synfuels Facility is a coal gasification facility that has captured at least 50 percent of its produced CO2 for use in enhanced oil recovery operations since 2000," the EPA observes.

The Great Plains Synfuels Plant is an engineering masterpiece. Conceived after the first oil shock, it was the largest construction project in North America in 1981-82, much of it built during the coldest winter in 100 years.

It produces natural gas for customers in the Midwest, supplies carbon dioxide to an enhanced oil recovery project in Canada, and makes a range of other specialty chemicals.

But the plant required prodigious amounts of federal assistance. It was loss-making when it opened and had to be taken over and bailed out by the federal government in 1985.

The official history, superbly told by Stan Stelter in his monograph on "The New Synfuels Energy Pioneers: A history of the Dakota Gasification Company and the Great Plains Synfuels Plant" makes fascinating reading; I cannot recommend it highly enough.

But no one familiar with the plant's history could think it is a good example of why gasification and CCS is a cost-effective solution to the problem of emissions reduction.

TECHNOLOGY FORCING

None of this seems to bother officials at the EPA. Its own rulemaking establishes there is not a single relevant instance of CCS being successfully implemented in the United States without substantial federal financial assistance. Not one project has been implemented on a commercial basis. And only one project has as yet actually captured any CO2.

Still the EPA notes laconically: "The projects in development for new coal-fired generation are few in number, and most would already meet an emission limit based on implementation of CCS. As a result, a standard based on partial CCS would not have a significant impact on nationwide energy prices."

"For example, the Hydrogen Energy California facility plans to capture approximately 90 percent of the CO2 in the emission stream," according to a footnote. But planning is not the same thing as doing, let alone doing profitably.

Necessity is the mother of invention. During national emergencies such as World War Two, the Cold War and the Space Race, engineers made enormous technical advances under intense pressure to find a solution to previously intractable problems.

The EPA's rule seems to rely on a similar approach to technological forcing: mandate a technology, and hope the engineers will solve all the problems.

MAKING WAR ON COAL?

Critics accuse the EPA of making war on coal; the rulemaking suggests they are right.

The EPA contemplated whether new natural gas combined cycle (NGCC) plants should also be required to implement partial CCS systems. But "the EPA considered whether NGCC with CCS could be identified as .. adequately demonstrated for new stationary combustion turbines, and we decided that it could not."

"At this time, CCS has not been implemented for NGCC units, and we believe that there is insufficient information to make a determination regarding the technical feasibility of implementing CCS in these types of units," the EPA wrote - without apparent irony.

"The EPA is aware of only one NGCC unit that has implemented CCS on a portion of its exhaust stream. This contrasts with coal units where, in addition to demonstration projects, there are several full-scale projects under construction and a coal gasification plant (North Dakota) which has been demonstrating much of the technology ... for more than ten years."

ARBITRARY, CAPRICIOUS

At least for coal, "CCS technology has been adequately demonstrated, and its implementation costs are reasonable," the EPA concludes. In fact nothing could be further from the truth.

The EPA is abusing natural language to suggest projects which have not yet entered into service, some of which are still on the drawing board, somehow prove the technology is viable and can be implemented cost effectively.

The Clean Air Act, passed by Congress, requires the EPA to pay due attention to costs and technical feasibility when it draws up new standards. In this instance, the agency has flagrantly ignored those requirements, misconstrued the record, and proposed a rule that far exceeds the intention of legislators.

There may be a very good case for employing CCS technology to reduce CO2 emissions from coal-fired power plants, but the EPA has not made it in this proposed rule. Other federal regulations have been thrown out by the courts for much less.

The EPA has rushed the production of this rule. It should have waited until more power plants actually had operational CCS systems before insisting it become mandatory for all new ones.

If the agency insists on pressing ahead regardless, the federal courts should not hesitate to strike it down as an abuse of the constrained discretion with which the agency is entrusted under the Clean Air Act.

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