Ohio Edison agrees to repower coal plant with biomass, reducing carbon emissions
Ohio Edison Company has agreed, as part of a consent decree, to retrofit one of its coal-fired power plants to use primarily biomass. The agreement was reached in federal court in the Southern District of Ohio and announced by the US Justice Department and the US Environmental Protection Agency last month. The agreement originates from a lawsuit filed in 1999 against Ohio Edison for violations of the Clean Air Act. The original lawsuit was resolved with a consent decree in 2005, which mandated that the company reduce the emissions of sulfur dioxide (SO2) and nitrogen oxide (NOx). In order to accomplish this goal, the 2005 consent decree left Ohio Edison with only three options: close the plant, install a scrubber or repower with natural gas. The new, modified consent decree, however, opts for what the parties believe will be a more cost-efficient and environmentally sound fourth option.
Beginning in 2012, the R.E. Burger plant Units 4 and 5 near Shadyside, Ohio will repower with mostly biomass fuels. These units will run on at least 80% biomass; 100% biomass if all goes according to plan. Ohio Edison may co-fire the plant with not more than 20% low sulfur coal. By switching to biomass, the new plant will reduce emissions of SO2 from current levels by 14,000 tons annually, reduce emissions of NOx from current levels by 1,300 tons annually and reduce emissions of carbon dioxide (CO2) from current levels by more than 1.3 million tons annually. After the retrofit, the company will be in compliance with the Clear Air Act’s New Source Review provisions.
Officials also hope that this new facility will be largely “carbon neutral.” Even though carbon dioxide emissions are greatly reduced from present levels, when the biomass is burned it will still emit about 400,000 tons of carbon dioxide annually. However, officials hope that these emissions will be largely offset by the amount of carbon dioxide absorbed by the biomass as it is grown. Biomass fuels include wood from tree trimmings and dedicated sustainable nurseries, agricultural crops, grasses and vegetation waste. Examples include the fast growing cottonwood tree or left-over corn stalks.
The new retrofit is also less costly that the other options. For example, a spokesperson for Ohio Edison’s parent company, FirstEnergy Corp., stated that installing scrubbers would cost the company $330 million, while the cost of converting to biomass was significantly cheaper at an estimated $200 million.
The modified consent decree is subject to a 30-day comment period, which will end September 16, and is awaiting approval by the US District Court for the Southern District of Ohio.
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.
WCI to close public comment on mandatory GHG reporting policy June 4
The Western Climate Initiative (WCI) will close the public comment period on its “Final Draft Essential Requirements of Mandatory Reporting for the WCI this Thursday, June 4. The Final Draft and Response to Stakeholder Comments, made available together on May 8, 2009, describe both WCI’s responses to prior public comment (regarding its January 2009 greenhouse gas reporting requirements) and the changes it made in response to those comments.
Although the report informs the public of changes WCI considered in response to public comment, recommended changes to key policy details were largely rejected. For instance, “many commenters” expressed concern that the reporting and verification thresholds (e.g., 25,000 metric tons of CO2e for the cap and trade program; 10,000 metric tons of CO2e for mandatory emissions reporting) were too low and that third-party verification of emissions reports was unnecessary.
With regard to the threshold comments, WCI responded:
The choice of the cap-and-trade program threshold was made after analysis of estimated facility-level emissions and was designed to ensure capture of 85-90% of WCI Partner jurisdiction emissions. Raising this threshold to 50,000 or 100,000 metric tons … would incentivize “leakage” of emissions to smaller facilities within an industry. The reporting threshold was set at a lower level to allow monitoring of uncapped sources for “leakage”, to allow WCI Partner jurisdictions to check for avoidance of the cap by facilities underestimating their emissions . . .. WCI expects that many of the facilities . . . in the 10,000 to 25,000 metric tons of CO2e emissions range will have only simple combustion sources [for which] emissions quantification … will be fairly simple.
In response to the verification comments, WCI stated that it “still firmly believes that third party verification is necessary” and that after “examining the experience of other GHG programs, WCI has found that third party verification is a cornerstone of national and international GHG reporting protocols.” WCI also rejected calls for reporter exemptions for CO2 emissions from biomass combustion. However, WCI did agree to relax the blanket requirement for a full verification if a reporter engaged a new verifier merely due to a change in verifier personnel.
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.
New York's participation in RGGI to be reconsidered
New York Governor David Paterson plans to reconsider the rules that enable New York’s participation in the Regional Greenhouse Gas Initiative (RGGI), according to a recent report in the New York Times. Power plants have long contended that the RGGI system of auctioning emission allowances puts companies who are locked into long term contracts at a serious disadvantage. Such generators, argue representative groups such as the Independent Power Producers of New York (IPPNY), cannot recoup the extra costs associated with purchasing allowances. Similar concerns prompted Indeck Energy in January to file a lawsuit challenging New York’s authority to implement RGGI, and alleging that the regulations would essentially impose an unauthorized tax.
News of Paterson’s agreement to reexamine the rules has provoked a sharp response from environmental groups. Luis Martinez, energy attorney with the Natural Resources Defense Council, commented, “Reopening the rule for the Regional Greenhouse Gas Initiative to give power plant owners another bite at the apple is not only unnecessary to address their concerns, it takes us in the wrong direction. Governor Paterson should be fulfilling the needs of consumers, not making deals with industry behind closed doors.” IPPNY has disputed any suggestion that the decision to reopen the rules was the result of behind the scenes maneuvering, stating, “For several years, these concerns were communicated in IPPNY's comments to the Department of Environmental Conservation and to the press and public through multiple press releases during the RGGI rulemaking process. Both during the rulemaking process and after, IPPNY made those same concerns known to the Executive Branch in a manner that is available to every citizen and interest group in this state.”
Environmental groups have submitted Freedom of Information Act requests for Governor Paterson’s schedule and records of any communications with power generator groups and are calling on his administration to release the details of any agreement with energy producers.
New York RGGI Implementing Regulations:
House Agriculture Committee contributes to a bumper crop of proposed climate change legislation
On March 12, 2009, House Agriculture Committee Chairman Collin C. Peterson (D-Minn.) announced that the committee, which has jurisdiction over the Commodity Futures Trading Commission ("CFTC"), is seeking comments from agricultural, environmental and other groups and members of the public on priorities for future climate change legislation. The committee has prepared an instruction letter and a questionnaire, with responses due by April 10, 2009.
Rep. Peterson’s announcement follows the committee’s February 12, 2009, passage of H.R. 977, The Derivatives Markets Transparency and Accountability Act of 2009 (“DMTAA”). Although the DMTAA has received attention primarily for its provisions addressing financial derivatives – including authorizing the CFTC to suspend U.S. trading of so-called “naked” credit default swaps under certain circumstances and requiring that most over-the-counter derivatives be cleared through central clearinghouses – the bill would also require carbon offsets and emissions allowances to be traded on a designated contract market under CFTC oversight.
The DMTAA finds itself in the midst of a Congressional turf battle on both the financial derivatives and carbon emissions fronts. Introduced by Rep. Peterson, the DMTAA has been sent for review to the House Financial Services Committee, whose chairman, Rep. Barney Frank (D-Mass.), has reportedly expressed displeasure that the Agriculture Committee jumped ahead on derivatives reform without input from the Financial Services Committee and has said that he plans to tackle legislation for a new systemic risk regulator first, with hearings scheduled for mid-to-late March 2009.
The bill’s future in the carbon emissions arena is equally hazy. Edward Rosen, testifying on behalf of the Securities Industry and Financial Markets Association, argued that the prohibition of off-exchange trading in carbon offsets and emission allowances would create an exchange monopoly and thus impede the successful development of cap-and-trade programs. Paul N. Cicio, President of Industrial Energy Consumers of America, expressed his concern that adoption of the DMTAA would prejudice the outcome of the debate on how to control GHG emissions and recommended that Congress consider regulatory options other than a cap-and-trade system.
Meanwhile, Congress is awash in competing legislative efforts, among them:
- February 4, 2009: Rep. Edward J. Markey (D-Mass.) introduced H.R. 889, the Save American Energy Act, which would create a federal energy efficiency resource standard for retail electricity and natural gas distributors.
- February 4, 2009: Rep. Markey joined Rep. Todd Platts (R-Pa.) to introduce H.R. 890, the American Renewable Energy Act, which would create an electricity standard requiring that by 2025, 25% of electricity be generated from renewable sources like wind, solar and geothermal.
- March 5, 2009: Rep. John B. Larson (D-Conn.) introduced H.R. 1337, America's Energy Security Trust Fund Act of 2009, intended to reduce carbon dioxide emissions by imposing a tax on “taxable carbon substances,” which the bill defines to include coal, petroleum and petroleum products and natural gas.
- March 5, 2009: Sen. John Thune (D-S.D.) and Sen. Charles E. Schumer (D-N.Y.) introduced S. 527, which would amend the Clean Air Act to prohibit requiring farmers to purchase permits “for any carbon dioxide, nitrogen oxide, water vapor, or methane emissions resulting from biological processes associated with livestock production.” According to a press release from Sen. Thune’s office, the bill “will once and for all prevent the government from imposing an onerous ‘cow tax’ on farmers across the country.” S. 527 has been referred to the Committee on Environment and Public Works.
- March 11, 2009: Rep. Jeff Fortenberry (D-Neb.) introduced a similar bill, H.R. 1438, with the announced goal of “prohibit[ing] any Federal agency or official, in carrying out any Act or program to reduce the effects of greenhouse gas emissions on climate change, from imposing a fee or tax on gaseous emissions emitted directly by livestock.” A press release from Rep. Fortenberry’s office quotes the Congressman as observing that “As climate change issues are debated, the consideration of a tax on natural livestock emissions is unreasonable and peculiar.”
- March 12, 2009: In response to reports that the administration was considering using budget reconciliation rules to shield a cap-and-trade bill from a threatened Republican filibuster, twenty-eight Senators wrote a letter to the leaders of the Senate Budget Committee, Chairman Kent Conrad (D-N.D.) and ranking member Judd Gregg (R-N.H.), voicing their opposition to “using the budget reconciliation process to expedite passage of climate legislation.” The group explained:
Enactment of a cap-and-trade regime is likely to influence nearly every feature of the US economy. Legislation so far-reaching should be fully vetted and given appropriate time for debate, something the budget reconciliation process does not allow. Using this procedure would circumvent normal Senate practice and would be inconsistent with the Administration’s stated goals of bipartisanship, cooperation, and openness.
- March 22, 2009: Asked about the idea of folding cap-and-trade legislation into a budget reconciliation bill, Sen. Conrad said on ABC’s “This Week”:
I'll put it this way: It is not included in the budget that I will present to my colleagues . . . . I have said for weeks, I don't think it is the right way to write substantive legislation, because if you get into the details – and we won't do that here – it just doesn't work very well.
- Rep. Markey – who chairs both the House Select Committee on Energy Independence and Global Warming and the Energy and Environment Subcommittee of the House Energy and Commerce Committee – is leading the effort on the House version of climate change legislation and has said that he hopes to complete that legislation by Memorial Day.
- Senate Majority Leader Harry Reid (D-Nev.) has indicated that he will combine measures on a nationwide renewable electricity standard, a modernized electrical grid and GHG cap-and-trade into a single bill. Commenting on the respective Senate and House legislative strategies, Sen. Reid told a reporter, “The House has decided to take them all up together. That’s probably where we’re headed,” adding, “We're not going to be able to get this [Senate package cleared] until sometime in the summer at the earliest.”
There has also been activity on the regulatory front:
- On March 10, 2009, the Environmental Protection Agency announced its proposal for “the first comprehensive national system for reporting emissions of carbon dioxide and other greenhouse gases produced by major sources in the United States.” The EPA’s proposed rule would require mandatory annual GHG emissions reports from suppliers of fossil fuel and industrial chemicals, manufacturers of motor vehicles and engines, and industrial facilities that emit 25,000 metric tons or more of GHG emissions per year.
- Last Friday, the EPA reportedly sent a proposal to the White House finding that global warming is endangering the public’s health and welfare. Greenwire had reported earlier this month that according to a leaked internal EPA PowerPoint, the EPA was moving quickly toward an endangerment finding but would not propose immediate GHG regulations.
A rather active year so far, and we’re still in March . . . .
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.
Sunflower Electric seeks oral argument on preliminary injunction regarding air quality permit for coal-fired power plant
Sunflower Electric Power Corp. of Kansas has asked the US District Court for the District of Kansas to allow a hearing on its request for a preliminary injunction in Sunflower's $1.5 billion lawsuit against the state. Sunflower filed the lawsuit last month (Sunflower Electric Power Corporation v. Sebelius) claiming that Kansas Department of Health and Environment (“KDHE”) officials had violated Sunflower's rights to equal protection and to conduct interstate commerce by denying Sunflower's application for an air quality permit for two coal-fired plants in western Kansas. The lawsuit seeks $1.5 billion in damages and an injunction to prevent the state from considering carbon dioxide emissions in future proceedings in connection with Sunflower's application for an air quality permit for the coal-fired energy plants.
The Kansas Attorney General has moved to dismiss the case, contending that the federal court lacks jurisdiction because an appeal is pending before the Department of Administration's Office of Administrative Hearings. On July 22, 2008, a state court dismissed an action by Sunflower saying that it did not have jurisdiction to rule on the matter because the Kansas Court of Appeals has exclusive jurisdiction over issues arising from the Kansas Department of Health and Environment's denial of a permit application. The Kansas Supreme Court has postponed the case before it until the Office of Administrative Hearings rules.
Sunflower contends that it is not asking the federal court to rule on issues of state law or to enjoin the state administrative proceedings. Instead, the company is bringing its challenge based on Equal Protection and Interstate Commerce claims under the United States Constitution, alleging that Kansas Health and Environmental Secretary Rod Bremby denied the permit despite his own staff's recommendation to approve the application. Bremby denied the permit on the grounds that the new plants' carbon emissions would contribute to global warming. Sunflower contends that carbon dioxide emissions are not currently regulated in Kansas or the United States and have not been used as a reason to deny an air permit for any other facility in Kansas. Sunflower contends that the case implicates the rights of over 400,000 citizens of Kansas and over 1.5 million citizens of other states whose energy needs would be met in part by electricity generated by the proposed coal-fired plants.
Electric company brings federal lawsuit against Kansas Governor for denial of permit for coal-fired power plant expansion
A Kansas electric power company, Sunflower Electric Power Corporation (“Sunflower Electric”), has sued the state government in federal court, seeking injunctive relief relating to the denial of an air quality permit for its planned power plant expansion. On Monday, November 17, 2008, Sunflower Electric filed a complaint (Sunflower Electric Power Corporation v. Sebelius) in the United States District Court for the District of Kansas, asserting that Kansas Governor Kathleen Sebelius and her administration have violated Sunflower Electric's right to equal protection under the law and are unlawfully prohibiting interstate commerce. Sunflower Electric seeks a Court Order declaring that its rights have been violated and enjoining and vacating the Kansas government’s denial of an air quality permit.
Back in October of 2007, the Kansas Department of Health and Environment (“KDHE”) denied Sunflower’s air quality permit required for construction of new coal-fired electricity generating units. Citing that carbon dioxide emissions from the proposed coal-fired power plant presented a “substantial endangerment to the health of persons or to the environment,” KDHE Secretary Roderick Bremby explained that KDHE had the authority under KSA 65-3012 to deny such permit “[n]otwithstanding a permit applicant’s compliance with all other existing provisions of the Kansas air quality act.” In announcing his decision, Secretary Bremby stated that, “KDHE will work to engage various industries and stakeholders to establish goals for reducing carbon dioxide emissions and strategies to achieve them . . . which is consistent with initiatives underway in states leading the effort to address climate change.”
Sunflower Electric, a consumer-owned, electric distribution cooperative, argues in its action that the KDHE’s purported basis for denying the permit is a “pretext,” and in actuality, KDHE was motivated by the improper purposes of (a) advancing “political aspirations, and (b) prohibiting the exportation of electric energy outside the State of Kansas.” Complaint, p. 2. Several of the allegations point to Secretary Bremby’s testimony at a Kansas legislative hearing where he testified perfunctorily about his analysis that the potential carbon emissions from the power plants constituted a “substantial endangerment.” Complaint, ¶¶ 47-54.
Other allegations mention that in early 2008, the Kansas Legislature passed bills that would require the Secretary to reconsider the denial of the permits and evaluate the permit application without considering in any way the potential carbon dioxide emissions. All three of these bills were vetoed by Governor Sebelius. Complaint, ¶¶ 61-66.
The air permit application is for a power plant expansion at Sunflower Electric’s Holcomb Station in Finney County, Kansas. According to Earl Watkins, president and CEO of Sunflower Electric, the $3.6 billion project would “create 329 jobs earning more than $16 million in annual wages and fully complies with all state and federal requirements while helping to secure our energy independence.”
