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Battle Lines: 2011 Law and Lawyers Report

Generators fight back against EPA’s new regulations

Fortnightly Magazine - November 2011

these revisions are finalized, thereby smoothing the transition from CAIR programs to the CSAPR programs in 2012.” In other words, EPA hopes the delay will provide time for allowances to become readily available in trading markets so emitters like Luminant can keep non-compliant plants running while they work to reduce emissions.

In a letter to Luminant CEO David Campbell dated Sept. 11, EPA Deputy Administrator Bob Perciasepe alluded to “alternative compliance approaches we are presenting to you, and have presented to you [that would avoid] impacting electric reliability in Texas” or “result in the unnecessary loss of jobs.” Such approaches include “relying more on already-installed pollution controls”— i.e., operating scrubbers on other plants more frequently to reduce overall emissions, and using dry sorbent injection at un-scrubbed plants.

Further, EPA points out that while the first compliance period begins on Jan. 1, 2012, that doesn’t mean every plant must curtail emissions to meet its budget on day one. “Sources covered by the CSAPR annual SO 2 and NO X programs are not required to comply—that is, surrender allowances to cover their 2012 emissions—until March of 2013,” EPA stated in a written response to Fortnightly’s interview request. As a result, Luminant and other companies have 15 months to either reduce emissions or acquire allowances to cover their 2012 obligations.

“We aren’t trying to eliminate the Clean Air Act. We’re weighing the real-world issues, and trying to come out with a rational yet aggressive plan.” – Nick Akins, American Electric Power

However, regulated companies like Luminant aren’t satisfied with that timeline. EPA’s assertions about the development of an allowance market to cover any gaps provide little reassurance, because the CSAPR trading regime puts a cap (18 percent) on the amount of allowances that an emitter can procure from across state lines. This leaves companies uncertain about whether and how they’ll meet the agency’s new standards, starting in just a couple of months. “You need three or four years to install environmental retrofits,” Oney says. “A timeline like that would be more reasonable.”

Calling out AEP

American Electric Power (AEP) also takes issue with EPA’s timeline for implementing CSAPR. But for the past couple of years, the company has been fighting against not only the Transport Rule, but the agency’s entire slate of new regulations—from smog standards to coal ash disposal requirements. And it doesn’t want just a few more years to comply; it wants until the end of 2020. To promote the idea of delaying the standards across the board, AEP put itself in a position to drive the environmental policy debate—and doing that exposed the company to what AEP President Nick Akins calls a “firestorm” of attention from environmental groups.

“AEP came out front, leading the charge on issues associated with the cumulative impact of the EPA rules,” Akins says. “We realized that by the time EPA’s Utility MACT [maximum achievable control technology] rule is in place, if we’re obligated to install scrubbers and SCRs [selective catalytic reduction for NO X emissions] by the end of 2014, then we’ll be in trouble. Physically it can’t get done from a standpoint of operations and workforce development. We’d be looking at removing 6,000 MW of generation from the grid.”

Like Luminant, AEP expresses concern about the