USEPA Cross State Air Rule threatens 55 GW of Power Generation

US EPA Cross State Air Rule messes with Texas in a big way. The reason ERCOT exists today is that the Lone Star State hated Federal regulation so much that it did everything in its power to avoid Federal Power Act jurisdiction and walled off Texas from the rest of the Eastern Interconnect to maintain its independence.

Today many Texans still think that is a good idea!

But avoiding Federal power regulation is not enough to save Texas from the US Environmental Protection Agency and its Cross State Air Pollution Rule (CSAPR) which September 12, 2011 forced Luminant to announce that it would shut down the 1200 MW of lignite-fired generation at Monticello Units 1 and 2 and convert Monticello Unit 3, and Big Brown units 1 and 2 in Freestone County to burn Powder River Basin coal. The Thermo, Winfield and Big Brown/Turlington mines will cease mining Texas lignite.

The US House of Representative Committee on Science, Space and Technology will hold a hearing on the US EPA Cross State Air Rule September 15th in response to calls for Congress to overturn the rule or delay its implementation.

The rule will cost 500 Texas jobs and the loss of tax revenue, local business and other impacts will hit these small Texas communities hard.  Ironically, this is happening the same week President Obama sends his jobs bill to Congress and is pressing for fast action to save or create jobs to spur GDP growth.  But the Federal Government is churning out new regulations at a feverish pace and has more than 40 new rulemakings pending that each have greater than $100 billion in economic impact on the very businesses that create those jobs.

Luminant was forced to take these actions even though Texas has struggled with electric reliability problems due to peak demand and a protracted drought because under the CSAPR Luminant must reduce SO2 emissions by 21 percent to satisfy EPA while increasing generation by 13 percent to satisfy expected ERCOT demand all by January 2012.

US EPA finalized the CSAPR July 6, 2011 making it effective January 1, 2012. Naturally the 27 states and their utilities affected are screaming over the lack of time to make process changes and capital investment in new equipment. Overall, based on 2005 emissions data, the affected Luminant power plants must cut their SO2 emissions 73 percent from 8.8 million tons/year to 2.4 million tons/year and their NOx emissions 54 percent from 2.6 million tons/year to 1.2 million tons/year.

The Cross-State Rule is estimated to cost $120 billion by 2015 and is expected to force retirement of more than 55 gigawatts of US power generation capacity (almost 4 percent), according to an impact study by the Brattle Group.

When US EPA first proposed the Cross State rule a year ago 31 states were affected but Texas was not even included in the annual SO2 and NOx reductions programs. But the final CSAPR adopted covers 27 states including Texas requiring 47 percent reduction in SO2 and substantial NOx reductions from Texas power generators by January 2012. The impact of the rule translates into a 64 percent reduction in Luminant’s SO2 emissions from fossil fuel generating units. Without the lead time for a more orderly transition, the only option is to shut down units.  Lignite is not as efficient as Powder River Basin Coal but it is a local, reliable resource and has been used in Texas for generations.

Luminant has asked the US Court of Appeals for the District of Columbia Circuit to remove Texas from the CSAPR and enjoin EPA from enforcing it because of the immediate and irreparable harm it causes.  This is not the first time US EPA has been hauled to court on this issue.  In 2005, the courts overturned an earlier Clean Air Interstate Rule (CAIR) because it said US EPA did not have the authority to impose such sweeping rules.  In that situation, the Northeast States sought regulatory action to force the Midwest coal plants to shut down their coal plants to reduce emissions.   This new CSAPR is another attempt at imposing limits on fossil fuel emissions.

There is one more problem for the US EPA in defending its Cross State Air Rule.  According to EPA’s own data between 1980 and 2008, NOx emissions fell 40 percent, SO2 emissions fell 56 percent, lead emissions fell 96% despite a 22 percent increase in population and a 19 percent increase in energy consumption since 1990.

The conclusion in Texas, at least, is that the US EPA is ‘Messin with Texas’.