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The Art of the Plausible

Prospects for clean energy legislation in 2011.

Fortnightly Magazine - April 2011

staying part of EPA’s GHG authority for two years.

However, the clear threat of a presidential veto looms over all such legislation. So the obvious question becomes whether an offer by the administration to sign such legislation would put a CES in play in the House. While expressing no opinion on the issue, Sen. Graham doesn’t see a ban on EPA regulation of GHGs and a CES “as inconsistent,” adding that “we need some logical energy policy to replace the EPA.” 6

EPA Train Wreck

The second piece of possible (but far less certain) energy- and environmental-related legislation the House might consider would seek to address elements of what some lawmakers have called the EPA “train wreck.” This issue, detailed in a variety of reports including one published by the North American Electric Reliability Corp., 7 describes a series of EPA regulations slated to be finalized in the next two years or so that will address air emissions from power plants— e.g., the electric generating utility Maximum Available Control Technology (MACT rule) covering mercury and other air toxics such as acid gases; NOx and SOx emissions standards (known as the Transport Rule); coal-ash handling and disposal regulations; cooling water intake requirements (the Clean Water Act 316(b) rule); and tighter ambient air quality standards for ozone and particulate matter less than 2.5 micrometers in diameter.

The suite of EPA regulations is expected to require substantial capital investment in—or retirement of—coal-fired power plants; specifics will depend on the final requirements of the individual rules. One study from last year projected the regulations will impose up to $231 billion in compliance or replacement power costs on the electric power industry (and ratepayers) by 2017, and shutter nearly 75 GW of coal-fired capacity. 8

Utility companies will need to make key compliance decisions in a relatively short period of time, since the new EPA regulations are expected to require compliance in the 2015 through 2018 time frame. These retrofit-or-retire decisions will also have to be made in the face of great uncertainty, including what types of generation should replace the retired coal-fired units ( e.g., will there be a CES , and what generating sources will be eligible), and what will be the actual economic life of plants that are retrofitted.

As a consequence, coal-fired power generators would welcome Congressional measures to mitigate the timing or other aspects of new EPA regulations to allow, at minimum, an orderly transition. Such measures also might make sense from an overall energy policy perspective. While no specifics have been announced in the House, Chairman Upton pledged to consider appropriate legislative fixes to address what he views as costly overregulation.

The Senate has made previous attempts at addressing some of these broader EPA issues legislatively. Last Congress, Sens. Tom Carper (D-Del.) and Lamar Alexander (R-Tenn.) collaborated to craft a “three-pollutant” bill that would address NOx, SOx and mercury emissions from power plants, and to resolve a few other air quality issues associated with the new EPA regulations, such as emissions trading. Carper recently indicated he isn’t actively working on a