Despite lack of regulation, power plant permit applicant voluntarily agrees to limit greenhouse gases
On June 23, 2009, the Bay Area Air Quality Management District (BAAQMD) released for public comment a revised draft Clean Air Act permit for the Russell City Energy Center power plant, which – apparently for the first time ever – includes limits on the emission of greenhouse gases. Taking on what some might consider an unnecessary legal obligation, Calpine Corporation, majority owner of the plant to be built in Hayward, CA, agreed to limit heat input and mass emissions of carbon dioxide (CO2), methane (CH4), and nitrous oxide (N2O), expressed as “CO2-equivelents” (CO2E).
In a written statement, Calpine’s president and CEO states that “The combined-cycle technology allows us to commit to lower emissions while increasing efficiency – meaning we use less natural gas and emit fewer greenhouse gases while delivering more power to our customers and ultimately the American consumer.” This may well reflect Calpine’s “long-term commitment to environmental stewardship,” but a strong case can also be made that Calpine simply made a smart business decision by recognizing that the Environmental Appeals Board will no longer pass on any power plant permit that fails to limit greenhouse gas emissions.
The permitting of a power plant has for decades been an expensive, time-consuming, and extremely uncertain endeavor. Recent developments in administrative law, legislative proposals, growing public concerns about global climate issues, and a new administration have combined to create a sea of change. This may well explain why a large, sophisticated power generator would voluntarily assume unprecedented regulatory obligations.
New power plants must obtain a Clean Air Act permit under the EPA’s “prevention of significant deterioration” (PSD) rulemaking. PSD requires that “best available control technology” (BACT) be applied to control emission of air pollutants. In recent years the environmental community has attempted to require permitting authorities to limit greenhouse gas emissions under PSD permits. As part of this effort, in November 2008, the Environmental Appeals Board (EAB) reviewed the appeal of a PSD permit issued by the EPA, Region 8 in In re: Deseret Power Electric Cooperative. In Deseret, the Sierra Club argued that Region 8 had erred by failing to apply BACT to CO2 emissions from the permit granted for a waste-coal-fired electric generating unit proposed for a power plant near Bonanza, Utah. Asserting that the US Supreme Court had determined that CO2 was an “air pollutant” within the meaning of the Clean Air Act in Massachusetts v. EPA, the Sierra Club argued that the power plant permit violated the requirement to include a BACT emissions limit for “each pollutant subject to regulation under the Clean Air Act.” In a dense decision, the EAB determined that Region 8 was not bound by prior agency interpretations of PSD regulations, and on that basis remanded the permit so that Region 8 could develop a record for the decision to not apply BACT requirements to CO2 emissions. The EAB suggested, however, that it would be best if the EPA provided overarching guidance, rather than require each PSD permitting authority to consider anew the question whether greenhouse gas emissions required regulation in the context of discrete PSD applications.
In response to Deseret, a month before President Obama’s inauguration, the EPA issued a memorandum entitled “Interpretation of Regulations that Determine Pollutants Covered by Federal Prevention of Significant Deterioration (PSD) Permit Program” (the “PSD Memo”). In the PSD Memo, the outgoing Administrator of the EPA determined that air pollutants, like CO2, that had only been subject to monitoring and reporting requirements should not be considered in the PSD program. Moreover, although noting the substantial public interest in global climate issues, by framing the PSD Memo as an “interpretation,” the Administrator avoided the public participation process that rulemaking requires.
The environmental community promptly sought reconsideration of the PSD Memo and, shortly after President Obama’s inauguration, the EPA’s new Administrator granted reconsideration and opened the issue to public comment. At the same time, however, the EPA “decline[d] to take action to stay the effectiveness of the [PSD Memo] at this time.” In doing so, Lisa Jackson, the Obama administration’s new head of EPA, emphasized that the PSD Memo did not bind any state permitting authorities that issue permits under State Implementation Plans and that, in light of the grant of reconsideration, “other PSD permitting authorities should not assume that the [PSD Memo] is the final word on the appropriate interpretation of Clean Air Act requirements.”
Two subsequent events are worth noting: On April 17, 2009, the EPA released for public comment the Proposed Endangerment and Cause or Contribute Findings for Greenhouse Gases under Section 202(a) of the Clean Air Act, in which it proposed finding that greenhouse gases are air pollutants subject to regulation under the provisions that govern motor vehicle emissions. The EPA emphasized, however, that its endangerment finding proposal, “as well as any final action in the future, would not itself impose any requirements on industry or other entities. An endangerment finding under one provision of the Clean Air Act would not by itself automatically trigger regulation under the entire Act.” In other words, simply because the EPA intends to regulate vehicle emissions of greenhouse gases does not mean that stationary source emissions of greenhouse gases will be regulated under the Clean Air Act. Nevertheless, several weeks later the EPA voluntarily asked the EAB to remand a permit for the Desert Rock Energy Facility in New Mexico so that it could apply BACT to greenhouse gas emissions.
Against this rather complicated background, Calpine’s decision to voluntarily agree to limit greenhouse gas emissions makes sense, as it had already decided to employ the most energy efficient, commercially available generating technology that would meet the power generating needs of the project. Doing so, however, is apparently unprecedented: According to BAAQMD, “no facility the Air District is aware of has ever been subject to an enforceable BACT limit on its emissions of greenhouse gases; nor has any facility, to the Air District’s knowledge, been subject to an enforceable limitation on its efficiency (heat rate per kW-hr of power output).”
One might expect such environmental gains to moderate the opposition of the environmental community. Not so: Opposition to the proposed Russell City Energy Center remains undeterred. According to Brian Bateman, BAAQMD’s Director of Engineering, the Air District expects the final permit will be appealed to the EAB. For environmentalists, one major remaining concern is the level of NOX emissions. Even if an EAB appeal failed to remand a final permit for NOX emissions limits, the delay could be enough to ensure that pending legislation – which in its present form requires major stationary sources of NOX to obtain offsets – would apply. In such an uncertain regulatory and economic climate, the one certainty that seems to exist is opposition to new power plants.
Georgia court ruling regarding Longleaf Energy coal plant reversed
The Georgia Court of Appeals last week reversed and remanded a Superior Court decision that would have required Best Available Control Technology (BACT) for carbon dioxide emissions from a proposed new coal power plant. The $2 billion Longleaf Energy Plant would be the first new coal plant in Georgia in more than two decades. GreenLaw, the Sierra Club and other environmental groups sought to block the plant’s construction based on the US Supreme Court’s ruling in Massachusetts v. EPA allowing greenhouse gases to be regulated under the Clean Air Act. Construction was halted in June 2008 when Fulton County Superior Court Judge Thelma Wyatt Cummings Moore ruled that federal air pollution laws require permits for all pollutants that could be regulated under the federal Clean Air Act - including carbon dioxide. Judge Moore’s ruling invalidated the Longleaf Energy Plant’s permit, and was the first time a judge applied the Massachusetts v. EPA carbon dioxide holding to emissions from an industrial source.
With federal legislation to regulate CO2 and other greenhouse gases pending, the Appeals Court held that Judge Moore's order would pre-empt federal efforts to regulate the gas, require the state to invent new regulations and ultimately lead to "a regulatory burden on Georgia never imposed elsewhere."
In reaching their decision, the three-judge panel agreed with Judge Moore on one key claim: that the Administrative Law Judge (ALJ) was not independent in her evaluation of the decision to issue the permit. Therefore, the appeals panel sent the case back to the Superior Court with directions to vacate ALJ Stephanie M. Howells' approval of the coal-fired plant permit saying Howells had employed the wrong standard of review in approving the permit. Howells' 108-page decision, which followed a 21-day hearing, contained language suggesting the EPD director's decision to issue a permit should be given some deference.
LS Power, the plant's developer, said the company looks forward to moving the project forward after years of delays. "We'll take it," said company spokesman Mike Vogt, who said the ruling overturns 95 percent of the trial judge's order. "We feel pretty good about our chances here."
“We are very disappointed that the Court rejected other important claims that are critical to the protection of public health," said Justine Thompson, director of GreenLaw, which challenged the permit. Ms. Thompson asserts that the Court of Appeals confused congressional discussions of comprehensive carbon dioxide controls through a cap-and-trade scheme with the regulatory scheme at issue in the case before the court. She said GreenLaw will appeal to the Georgia Supreme Court.
Desert Rock power plant owner challenges EPA request to remand permit in order to consider requiring technology to control GHG emissions
On June 11, 2009 owners of the Desert Rock Energy Facility – a new 1500 megawatt coal-fired power plant on the Navajo Nation tribal reservation in New Mexico – argued to the EPA Administrative Appeals Board that the agency will violate the Clean Air Act if it is allowed to consider requiring the plant to use low-carbon-dioxide gasification technology.
On April 27, 2009, the EPA asked the Environmental Appeals Board (EAB) for a voluntary remand of the permit in order to provide the EPA an opportunity to consider requiring integrated gasification combined cycle technology (IGCC) as best available control technology (BACT) at the Desert Rock plant. Specifically, the EPA has said that it is reconsidering the Bush administration's stance that the Clean Air Act’s prevention of significant deterioration (PSD) provisions do not apply to greenhouse gas emissions. According to Desert Rock, the EPA’s remand request violates Section 165(c) of the Clean Air Act, which requires the EPA to grant or deny a PSD permit within a year of filing the permit request by the applicant. Also, EPA regulations (40 C.F.R. Part 124) prohibit EPA from withdrawing a permit after the EAB has granted a petition for review.
The EPA originally issued a permit for the Desert Rock facility on July 31, 2008 – just one day before the deadline negotiated between the EPA and Desert Rock due to litigation over the EPA’s delay. Under the Bush administration, the EPA did not consider carbon dioxide emissions under PSD, which requires new and modified plants that increase emissions to use BACT to control emissions. Under the Obama administration, however, the EPA is seeking to regulate greenhouse gas emissions via the Clean Air Act, including consideration of greenhouse gas emissions under PSD.
Proponents of the EPA’s request to remand the permit argue that the EPA should be allowed to take back the permit and consider it in light of the new information regarding IGCC and the agency’s new approach to PSD and controlling carbon dioxide emissions. Environmental groups also have argued to the EAB that Desert Rock's lawsuit regarding alleged delay in issuing the PSD permit forced the EPA to issue the permit before the review was complete.
Those in favor of reinstating Desert Rock’s permit counter that the EPA’s ability to rescind a previously issued permit under these circumstances has serious ramifications. On June 11, 2009, Desert Rock filed its opposition to the EPA’s voluntary remand. “The matter now before the Board is unprecedented,” argued Desert Rock Energy Co. in its brief filed with the EAB. “Although it arises in the context of a challenge to a Clean Air Act permit, the Board's decision in this case will reflect on the integrity of EPA as an institution and its respect for basic notions of fairness and due process.”
Desert Rock argues that the EPA is trying to apply rules that do not yet exist to a permit that has previously been issued, which it describes as arbitrary and capricious. As such, Desert Rock argues that the EPA is seeking to bind Desert Rock today to the prospective change in the agency’s energy policy of tomorrow. And according to Desert Rock, the EPA is seeking to change long-standing agency positions without public notice and comment. Finally, Desert Rock asserts that if the EAB grants the EPA’s request for a voluntary remand of the permit, it would effectively be withdrawing Desert Rock's PSD permit without hearing or review, in violation of due process.
In addition to the EPA’s reputation, the due process concerns, and the potential Clean Air Act violations, Desert Rock is concerned about the financial investment and economic risk to the Navajo people. Argued the power plant’s owner, “At immediate stake are the millions of dollars already invested in the Desert Rock Project, hundreds of millions of dollars in revenue and thousands of jobs for the Navajos, and a reliable source of energy for an area of the country that desperately needs it.”
On June 22, 2009, the appeals board issued an order granting the EPA’s request to file a reply brief to Desert Rock’s June 11th opposition. The EPA’s reply is due to the appeals board no later than June 29, 2009.
EPA seeks remand of Desert Rock coal fired power plant permit to consider gasification technology as BACT
Despite granting a permit for the proposed Desert Rock coal fired power plant in New Mexico less than a year ago, the US Environmental Protection Agency (“EPA”) recently moved its Environmental Appeals Board (“EAB”) to remand the permit to allow the EPA to reevaluate its decision. In particular, the EPA wants to consider requiring the plant, which would be built by Desert Rock Energy Co., to use low-carbon dioxide gasification technology. The technology gasifies coal before it is burned, resulting in lower carbon dioxide emissions than conventional coal burning technology.
The EPA’s move appears to be the latest example of a shift in policy at the agency regarding carbon dioxide emissions. The EPA under the Bush administration did not generally seek to regulate carbon dioxide. Indeed, the EPA refused to consider the plant’s potential carbon dioxide emissions during the original permitting process last year. The EPA under the Obama administration, on the other hand, has been actively seeking to regulate greenhouse gases such as carbon dioxide. In the future, the EPA is expected to reverse its former policy on power plants such as the proposed Desert Rock plant and require them to consider carbon dioxide emissions as part of their prevention of significant deterioration (“PSD”) permit applications.
Proponents of the proposed Desert Rock power plant on the Navajo Indian Reservation in northwestern New Mexico claim it will generate $50 million a year in revenue and bring badly needed jobs to a reservation that faces massive unemployment rates. Opponents of the Desert Rock plant, including environmental groups and the state of New Mexico, have argued that the plant, which would be the third coal fired power plant in the region, will damage the region’s air quality and the health of its residents.
The EPA’s request is also the latest in a series of setbacks for proposed coal fired power plants across the country. Earlier this year, under pressure from environmental groups, the Southern Montana Electric Generation & Transportation Cooperative announced that it would not build a coal fired power plant as planned. Instead it now plans to build a natural gas fired plant along with a few wind towers. In Kansas, Sunflower Electric Power Corp. has taken to the courts to fight the state’s denial of its application for an air quality permit for two coal-fired plants in western Kansas.
EAB remands several issues in Ripley Heating Plant dispute; decision suggests regulation of CO2 under Clean Air Act
On February 18, the Environmental Appeals Board (EAB) issued a decision remanding several issues and denying review of others, in response to a Sierra Club petition regarding a permit authorizing Northern Michigan University to construct a boiler at the Ripley Heating Plant on its Marquette, Michigan Campus. The Michigan Department of Environmental Quality (MDEQ) issued the permit on May 12, 2008, after issuing a draft permit for public review and comment in October 2007. On June 13, 2008, the Sierra Club filed a petition for review which challenged seven aspects of the MDEQ decision and response to comments. In particular, the Sierra Club petition addressed several aspects of MDEQ’s analysis of Best Available Control Technology (BACT), as well as MDEQ’s air quality analysis. The EAB held that MDEQ “clearly erred” in selecting SO2 limits, because it did not follow the EPA New Source Review Manual or other relevant guidelines.
AB also remanded the following for reevaluation: MDEQ’s source impact modeling for SO2, PM2.5 (particulate matter), and carbon monoxide, to base the modeling on “worst-case” emissions; BACT analysis of CO2 and NO2 emissions; calculus of PSD increments; and preconstruction monitoring of the site. The EAB denied review of MDEQ’s BACT analysis of PM2.5 emissions, and of MDEQ’s response to concerns about wilderness and wildlife that may be affected by the emissions.
EAB’s remand regarding the BACT analysis of CO2 and NO2 suggests an end to the EPA’s prior stance, outlined in a December 2008 memorandum by former EPA Administrator Stephen Johnson, that CO2 emissions were not subject to regulation under the Clean Air Act. This memorandum came after EAB’s November 2008 decision in In re Deseret Power Electric Cooperative, in which EAB remanded a permit for a generating unit in Utah, ordering the issuing authority to reconsider whether to impose a BACT limit for CO2 emissions. Significantly, the Michigan decision orders the MDEQ to reconsider BACT analysis of CO2 in light of Deseret, but does not mention the Johnson memorandum. In fact, this February, new EPA Administrator Lisa Jackson announced that the EPA will reconsider Johnson’s memorandum.
In a related development, Michigan Governor Jennifer Granholm issued a clean energy directive in February, which has already resulted in other coal plant permits being put on hold.
New EPA Administrator partially grants Sierra Club petition toward Agency regulation of CO2 in PSD permits
On February 17, 2009, US EPA Administrator Lisa Jackson partially granted a petition by the Sierra Club to reconsider the prior EPA Administrator’s late 2008 interpretative memorandum excluding carbon dioxide, and other monitored but uncontrolled pollutants, from Prevention of Significant Deterioration (“PSD”) permit program requirements. While Administrator Jackson opted against a complete stay of the memorandum, she announced her intention to open a public comment period regarding the PSD issue. This clearly is a move by EPA toward potential regulation of carbon dioxide as a “pollutant” under the Clean Air Act, which the Bush Administration had infamously resisted. A Sierra Club organizer was quoted as saying that the Jackson letter “should halt virtually all new coal plant development until the EPA decides how to handle global warming pollution.”
In this instance, the issue arose during an appeal of EPA Region 8’s grant of a PSD permit on August 30, 2007, authorizing the construction of a waste-coal-fired electric generating unit near Bonanza, Utah (In re Deseret Power Electric Cooperative). In briefing submitted to the Agency’s Environmental Appeals Board, the Sierra Club argued that because the Supreme Court had found in Massachusetts v. EPA that carbon dioxide is an air pollutant under the Clean Air Act, and the EPA regulated carbon dioxide by imposing monitoring and reporting requirements, a PSD permit for the Bonanza facility must require Best Available Control Technology (“BACT”) for carbon dioxide emissions. Region 8 disagreed, arguing that the Clean Air Act phrase requiring BACT for “each pollutant subject to regulation” was ambiguous, and that the Agency had “historically interpreted the [ambiguous] term … to describe pollutants that are presently subject to a statutory or regulatory provision that requires actual control of emissions ….”
On November 13, 2008, the Environmental Appeals Board rejected both parties’ positions:
The Board rejects Sierra Club’s contention that the phrase “subject to regulation” has a plain meaning and that this meaning compels the Region to impose a CO2 BACT limit in the permit. On the contrary, the Board finds that the statute is not so clear and unequivocal as to preclude Agency interpretation of the phrase “subject to regulation under this Act,” and therefore the statute does not dictate whether the Agency must impose a BACT limit ….
* * *
The administrative record of the Region’s permitting decision … does not support the Region’s view that it is bound by an Agency historical interpretation of “subject to regulation” as meaning “subject to a statutory or regulatory provision that requires actual control of emissions of that pollutant.” The Region did not identify … any Agency document expressly stating that “subject to regulation under this Act” has this meaning.
Although the Board concluded that the matter should be remanded to Region 8 so that it could reconsider a CO2 BACT limit, the Board also suggested that the Agency might be best served through “an action of nationwide scope, rather than through this specific permitting proceeding.”
EPA’s recent partial grant of the Sierra Club petition stated that EPA would publish a Notice of Proposed Rulemaking in the near term to open the interpretative memorandum and the Environmental Appeals Board’s determinations to public comment. Although the Administrator refused to stay the memorandum, she did strongly suggest that it could not be used as support for interim permit decision making on a state level:
In the meantime, the Agency emphasizes a point noted in the memorandum itself: the memorandum does not bind States issuing permits under their own State Implementation Plans. In addition, given the Agency’s decision to grant reconsideration … other PSD permitting authorities should not assume that the memorandum is the final word on the appropriate interpretation of Clean Air Act requirements.
This uncertainty created by the former Administration’s interpretative memorandum and the current EPA’s move away from that interpretation will be a critical issue to watch.
EAB ruling in In re Deseret Power Electric Cooperative opens door to a new regulatory era on climate change
The USEPA Environmental Appeals Board (EAB) issued a potentially groundbreaking decision in In re Deseret Power Electric Cooperative (PSD Appeal No. 0703) by ruling that EPA Region 8 was incorrect when it exempted a new coal fired unit at an existing Utah power plant from limiting carbon dioxide emissions and remanded the permit decision to the Region to reopen the record and reconsider its refusal to impose limits on carbon-dioxide emissions. In its November 13 decision the EAB rejected the Region 8 contention that it was not required to regulate carbon dioxide because the greenhouse gas, while a “pollutant” under the Clean Air Act, was not subject to current regulatory standards. (“We hold that this conclusion is clearly erroneous because the region’s permitting authority is not constrained in this matter by authoritative agency interpretation.”)
Under EPA’s existing Prevention of Significant Deterioration (PSD) rules, new and modified projects in areas that have acceptable air quality must install costly best available control technologies or “BACT” if the construction could cause an increase in the emissions of “pollutants.” The decision does not mandate industry to install BACT to meet greenhouse gas emission limits. Relying on the recent U.S. Supreme Court ruling in Massachusetts v. EPA, the ruling only requires the Region to develop and adequate record for its decision that does not rely on the “historical agency interpretations” regarding the regulation of CO2.
The EAB decision prominently recognizes the national importance of the climate change issue. The EAB ruling cautions that EPA “would be better served by the Agency addressing the interpretation [of CO2 regulation] in the context of an action of nationwide scope, rather than through this specific permitting proceeding.” Nevertheless, the decision clears the way for the Obama administration to impose new limits on CO2 emissions through the administrative process and permitting decisions. The Obama administration might use this decision and its administrative authority under the Clean Air Act as leverage to obtain sensible climate change legislation. The enormous cost and delay of applying PSD permitting and BACT with regard to CO2 emissions to existing facilities on construction projects of all sorts involving energy, infrastructure, and general industrial expansion would be disastrous in this sharply down economy. Nearly every large facility construction project would trip the 250 ton per year major source category if CO2 is regulated under the current Clean Air Act, causing years of delay in permitting and huge costs of retrofitting existing facilities. If Congress does not quickly address climate change through legislation, the EAB has shown through the Deseret decision that the EPA will.
