* Texas fighting latest EPA air pollution rule in court
* Operating impact seen at Luminant, San Miguel coal units
HOUSTON, Sept 27 (Reuters) - NRG Energy Inc, (NRG.N), the second-largest electric power producer in Texas, does not expect to shut units at its coal-fired plants to comply with the latest federal mandate to cut air pollution, a spokesman said.
Texas is challenging the U.S. Environmental Protection Agency over its last-minute inclusion of Texas coal plants under the final Cross-State Air Pollution Rule (CSAPR).
The rule mandates much stricter limits on emissions of sulfur dioxide (SO2) and nitrogen oxide from coal and natural gas-fired power plants beginning in January. [ID:nS1E78K24V]
“Complying with these caps will be difficult, but we anticipate from our early analysis that NRG can comply through an integrated strategy,” said NRG spokesman David Knox.
Texas and Kansas have asked a federal court to impose a stay of the new regulations. Both states dispute the EPA’s view of the downwind damage from power-plant emissions and argue that utilities have not been given sufficient time to meet stricter standards.
In addition, Texas regulators argue that the EPA process to include Texas under the annual SO2 limit in the final rule was improper.
The Texas grid agency has warned that the required 47 percent reduction in SO2 emissions under CSAPR will result in increased rolling blackouts as coal-fired plants are forced to run fewer hours to avoid exceeding annual emission limits. [ID:nN1E78014K]
“Because of the EPA’s drastic demands — and the mere five months notice the EPA provided to the state’s electricity generators-the State’s electrical grid operator has expressed concerns that Texas “will face a shortage of generation necessary to ‘keep the lights on,’” Texas Attorney General Greg Abbott said in a statement.
NRG has 4,200 megawatts of coal and lignite-fired generation in Texas.
At its 1,690-MW Limestone facility which burns a mix of Texas lignite and lower-sulfur coal from the Powder River Basin (PRB), NRG plans to increase scrubber efficiency and to burn more low sulfur coal.
NRG’s 2,490-MW Parish coal plant, which already burns PRB coal, may use other coal with even lower sulfur content.
NRG also cited other compliance options, such as adjusting how it runs coal plants during low demand periods.
“We do not anticipate any plant closures nor layoffs,” Knox said.
In contrast, Dallas-based Luminant said CSAPR compliance will force it to idle two coal-fired units totaling 1,200 MW by Jan. 1 and to stop mining lignite at three sites.
Luminant, the state’s largest power producer, has also filed suit seeking to delay the rule’s implementation.
Timely compliance at another 400-MW lignite plant, owned by the San Miguel Electric Cooperative, is also questionable, the coop’s general manager told a legislative hearing last week.
“Our only real option is to purchase allowances or reduce output,” said Mike Kezar, San Miguel general manager.
Firms contacted by the coop do not expect an allowance market for Texas to emerge, given civil and criminal penalties for companies that exceed emission limits.
So the coop has leased truck-mounted equipment to help cut plant emissions for a period of time until allowances become available, Kezar said.
Donna Nelson, chairman of the Texas Public Utility Commission, told lawmakers that meetings this month with EPA officials “were cordial, but not all that productive.”
Some EPA conclusions were based on incorrect information about the state’s generating fleet, Nelson said.
“In some ways, the EPA was almost flip about about the challenges we face in Texas,” Nelson told legislators.
The EPA was invited, but did not participate in the legislative hearing, said Texas Rep. Byron Cook, chairman of the Texas House State Affairs Committee. (Reporting by Eileen O’Grady in Houston;editing by Sofina Mirza-Reid)