Other rules affecting the power sector

Release Date: 9/15/2016

In addition to the CPP, many regulations or guidelines were either ruled upon by the Supreme Court or were finalized by EPA and the U.S. Department of the Interior (DOI) after the publication of the AEO2015. Several of the regulations or guidelines primarily affect the use of coal in electricity generation. Furthermore, the Cross State Air Pollution Rule (CSAPR) [14], which was upheld recently by the Supreme Court, replaces the Clean Air Interstate Rule (CAIR) [15], which was modeled in AEO2015. AEO2016 also includes the Mercury Air Toxics Standard (MATS) [16], despite the recent remand by the Supreme Court to incorporate an analysis of costs [17]. Although not included in AEO2016, EPA has finalized three additional rules that allow for site-specific compliance methods:

1. The Clean Water Act Section 316(b) rule [18], which affects all electricity generating and manufacturing facilities with cooling water intakes that have the potential to use at least 2 million gallons of water per day
2. Revised Steam Electric Power Generating Effluent Guidelines and Standards (EG) [19] specifying permissible levels of emissions in wastewater streams
3. Coal Combustion Residual rule (CCR) [20] affecting the disposal of coal ash (a waste byproduct from coal-fired generation)

EPA regulatory analyses indicate a relatively small increase in coal plant retirements and costs to the power industry as a result of these regulations. These and other pending regulations or actions with the potential to affect coal supply for the power sector and other end-use sectors are discussed in detail in the following sections.

CAA rules. AEO2016 includes representation of CSAPR, which addresses the interstate transport of air emissions from power plants. After a series of court rulings over the years, the Supreme Court in October 2014, lifted its stay and upheld CSAPR as a replacement for CAIR. In an interim final rule in December 2014 (and reaffirmed in a ministerial action in February 2016), EPA realigned the CSAPR schedule to comply with the Court’s ruling. Phase I began that month, and more stringent Phase II targets will take effect in January 2017. Although CSAPR remains in place, the courts remanded CSAPR back to EPA in June 2015 for additional refinement that affected the Phase II implementation of NOx emission limits.

Under CSAPR, 28 eastern states must restrict emissions of sulfur dioxide and nitrogen oxide, which are precursors to the formation of fine particulate matter (PM2.5) and ozone. CSAPR establishes four distinct cap-and-trade system groups composed of different member states. CSAPR permits allowance trading between states within a group (approximated in NEMS by trade between coal demand regions) but not between groups.

Under the authority of the CAA, EPA also established the Mercury and Air Toxics Standard (MATS), which regulates acid gases and mercury from coal-fired generators with capacities of 25 megawatts (MW) or greater. In June 2015, the Supreme Court remanded MATS to the District of Columbia Court of Appeals, stating that EPA failed to consider costs in developing the regulation. AEO2016 includes MATS, because many generators already have complied either by investing in retrofit equipment or by retiring capacity, and the court did not vacate or stay the regulation, thereby leaving MATS in place and enforceable.

Under MATS, mercury emissions must be 90% below their uncontrolled levels, which can be achieved through the application of various types of pollution control equipment and activated carbon injection. To simulate compliance with MATS restrictions on other hazardous air pollutants (such as acid gases), NEMS requires the installation of either a scrubber or a dry sorbent injection (DSI) system. A full fabric filter is modeled in combination with DSI to further meet the standard's acid gas requirement. Because 141 gigawatts of coal-fired generators were granted EPA's one-year extension for compliance [21], AEO2016 assumes that MATS is fully in place in 2016 (rather than in 2015).

Clean Water Act (CWA) rules. In August 2014, EPA promulgated Section 316(b) of the CWA, regulating electric power and manufacturing facilities that require cooling water structures to address the trapping of aquatic organisms against water intake structures (impingement) or within cooling water systems where they encounter thermal and mechanical stresses (entrainment). With consideration of costs, the rule establishes that best available technology (BAT) must be used for compliance and must be implemented in accordance with the expiration of a facility’s National Pollutant Discharge Elimination System (NPDES) permits. Some negotiation of the compliance timeline between the facility and EPA may occur, depending on the date of expiration of the
permit, but all facilities must provide a compliance plan by July 2018. Variation in compliance methods is expected, given that sitespecific considerations may affect the practicality of some technologies. Existing technologies deemed as BAT for impingement include a closed-cycle system, reduction of intake flows to 0.5 feet per second, and a minimum distance of 800 feet from shore for intakes that use bar screens. Under the Section 316(b) rule, repowered units will be regulated as existing rather than new units.

The 316(b) rule also provides for some potential aberration from BAT compliance. Facilities that operate with a capacity utilization of 8% or less over a 24-month period may negotiate less stringent compliance standards. A power plant that is scheduled to be retired may also avoid implementation of BAT. Additional options include restriction of aquatic mortality to 24% over a two-year span. In some cases, facilities that use impoundments for cooling water, or that stock and manage fisheries, may be able to negotiate deviations from the BAT requirements provided that endangered species are not present at the site. Other methods or combinations of methods may be negotiated with EPA. For entrainment, NPDES state directors are responsible for determining the BAT required, and they can do so on a site-specific basis.

EPA's regulatory impact analysis found that about 1 gigawatt of coal-fired generation capacity would be retired as a result of implementation of Section 316(b), and that the industry would incur costs of $275 million to $297 million annually (excluding entrainment costs)—assuming that CSAPR and MATS already are in place but without accounting for costs associated with the CPP. Section 316(b) is not represented in AEO2016.

Under the authority of the CWA, EPA also promulgated revisions to the Steam Electric Power Generating Effluent Guidelines (EG) in September 2015. The guidelines, which are not included in AEO2016, address liquid waste streams from power plants (primarily coal-fired power plants) discharged directly or indirectly into water bodies and, for the first time, emissions of toxic or bio-accumulating chemicals (including arsenic, nickel, selenium, chromium, and cadmium) in the wastewater of coal power plants, which will be restricted using BAT.

Last updated in 1982, the guidelines are intended in part to address pollutants potentially detoured to wastewater streams as the result of compliance with CAA regulations. Under the rule, flue gas desulfurization wastewater (a byproduct of the use of air emission control equipment) must be treated chemically or biologically to address the potential presence of arsenic, mercury, selenium, and nitrate/nitrite. Flue gas mercury control wastewater, as well as fly ash transport water and bottom ash (including boiler slag) transport water, also must achieve zero discharge levels through use of dry handling. The rule also sets limits on total suspended solids in gasification wastewater and combustion residual leachate.

Although the EG became effective as of January 2016, specific compliance deadlines vary by power plant, according to the expiration date of each plant's NPDES permit. For all power plants, compliance must be achieved between 2018 and 2023. Because there are synergies between the EG and CCR compliance options (described below), it is likely that the facilities' compliance plans will meet the EG and CCR goals simultaneously to minimize costs. In particular, many facilities are expected to dispose of coal ash via dry methods to comply with both regulations.

EPA's regulatory impact analysis found that about 1 gigawatt of coal-fired plant capacity would be retired as a result of the changes in the EG, and that the industry as a whole would incur costs of $471 million to $480 million annually, assuming that CSAPR, MATS, 316(b), the CCR rule, and the CPP are in place before the EG takes effect.

In June 2015, under the authority of the CWA, EPA also published its final "Waters of the United States" rule, specifying the waterways that are subject to the jurisdiction of EPA and the U.S. Army Corps of Engineers. The rule defines the scope of a navigable body of water to include tributaries that contain flowing water for some portion of a year [22]. Although the rule is final, it was stayed by the U.S. Court of Appeals for the Sixth Circuit in October 2015 [23], and it is not included in AEO2016. If upheld, the rule could pose additional permitting responsibilities for the coal industry, requiring the added burden of considering nonperennial tributaries that previously were outside the scope of the permitting process and potentially affecting coal supplies.

Resource Conservation Recovery Act rules. According to the American Ash Association [24], 130 million tons of coal ash (an inorganic waste byproduct of coal combustion) were produced in 2014. Generators dispose of coal ash in a variety of ways. In some cases, coal ash is disposed directly in landfills, with or without liners to mitigate leaching. In other cases the ash is mixed with water to produce a wet slurry that can be transported via pipeline or truck and discarded in waste ponds or impoundments rather than as a dry solid. In still other cases, coal ash may be discarded in abandoned mines. Generators have also sold coal ash waste for use in consumer and industrial products.

In 2008, the failure of the Kingston coal ash impoundment in Tennessee highlighted issues surrounding coal ash disposal, and EPA considered whether coal ash should be regulated as a hazardous waste. Since the Kingston spill, additional accidents and citizen complaints and suits about groundwater leaching from coal ash containment structures have contributed to continued concerns about coal ash disposal.

In April 2015, EPA published its final CCR rule, which took effect in October 2015. The rule sets regulations for both new and existing landfills and impoundments used for the disposal of coal ash. As a result of the rule, coal ash will continue to be regulated as a nonhazardous waste under Subtitle D of the Resource Conservation Recovery Act [25]. However, any method of disposal via impoundments or landfills must comply with certain national minimum criteria. The compliance criteria were established with consideration of groundwater leaching, dust control, and avoidance of catastrophic failure. The rule also requires long-term recordkeeping and monitoring beyond the closure of the disposal site. Waivers for retrofitting include the closure of existing disposal sites. Although no regulatory enforcement mechanism is in place under the rule, responsible parties are susceptible to litigation from citizen groups or other stakeholders if compliance is not achieved.

In 2014, an estimated 48% of coal ash [26] was used for beneficial purposes as an input for consumer and industrial products, avoiding both disposal in an impoundment or similar structure and disposal costs while also providing revenue for the generator. A label of hazardous would have severely restricted this option. To the benefit of the generators, the final CCR rule allows for CCR products to remain unregulated if the CCR is encapsulated in a product that displaces the use of virgin materials. These products include gypsum wall board and concrete, but the use of coal ash as ground fill is specifically excluded.

EPA's regulatory impact analysis found that an incremental 0.8 gigawatts of coal-fired capacity retire as a result of the CCR rule, and that the industry would incur incremental costs of $509 million to $735 million annually evaluated over a 100-year period (2013 dollars). For its analysis, EPA assumed that CSAPR, MATS, and 316(b) were already in place, but the EG and CPP were not. EPA also included a sensitivity case in which the CPP was included. As indicated above, certain compliance synergies between the CCR and the amended Effluent Guidelines are expected.

U.S. Department of Interior (DOI) actions: In July 2015, the Office of Surface Mining Reclamation and Enforcement proposed the Stream Protection Rule (SPR) under the authority of the Surface Mining and Reclamation Act of 1977 [27]. The proposed rule would affect all surface mining operations and any underground mining operations that disturb the surface. The earliest implementation date for the rule is January 2017. Under the proposed rule, permits specifying the maximum allowable damage to the area would be a condition of mining, and the SPR would stipulate that the mining area be returned to a condition appropriate for its premining use after operations cease. The rule would require data collection before beginning mining operations to provide baseline environmental conditions for the area. Critics have said that the rule would strand coal assets and pose additional permitting difficulties for the coal industry. The SPR is not final and is not represented in AEO2016.

In January 2016, DOI issued a temporary moratorium on additional coal leases on federal lands while it reviews the coal royalty program and leasing process [28]. DOI expects to complete the review process within three years and has stated that exceptions will be granted to ensure the reliability of coal supply. In particular, some pending leases that already are in progress may continue to be processed [29]. Three of those pending leases are located in the Wyoming Powder River Basin (PRB), where 100% of coal production comes from federal lands. About 40% of U.S. coal production is from federal and Indian lands, and about 80% of that amount is produced in Wyoming. Most of the current PRB leases contain enough coal to last 20 years or longer. Existing annual permit levels at individual mines [30], in combination with total recoverable reserves (reported to EIA by the mine operators), will allow the PRB region to reach its projected production levels in the AEO2016 Reference case until the mid- to late-2030s in the absence of further lease sales, although some individual mines may have difficulty maintaining production levels before then. In addition to Wyoming, regulations on coal production from federal lands largely affect western states. Alabama, Oklahoma, North Dakota, Arizona, New Mexico, Utah, Colorado, and Montana (in order from lowest to highest levels) produced between 0.8 million tons and 25 million tons of coal on federal and Indian lands in 2013, accounting for different percentages of each state’s total coal production. The final outcome of DOI’s leasing moratorium is uncertain, and it is not represented in AEO2016.

Endnotes

14. U.S. Environmental Protection Agency, "Cross-State Air Pollution Rule (CSAPR)" (Washington, DC: February 29, 2016), https://www3.epa.gov/crossstaterule/.
15. U.S. Environmental Protection Agency, "Clean Air Interstate Rule (CAIR)" (Washington, DC: February 21, 2016), https://archive.epa.gov/airmarkets/programs/cair/web/html/index.html.
16. U.S. Environmental Protection Agency, "Regulatory Actions: Final Mercury and Air Toxics Standards (MATS) for Power Plants" (Washington, DC: last updated April 15, 2016), https://www.epa.gov/mats.
17. U.S. Environmental Protection Agency, "Legal Memorandum Accompanying the Proposed Supplemental Finding that it is Appropriate and Necessary to Regulate Hazardous Air Pollutants from Coal- and Oil-Fired Electric Utility Steam Generating Units (EGUs)" (Washington, DC: December 1, 2014), https://www.epa.gov/mats.
18. U.S. Environmental Protection Agency, "National Pollutant Discharge Elimination System—Final Regulations To Establish Requirements for Cooling Water Intake Structures at Existing Facilities and Amend Requirements at Phase I Facilities ," Federal Register, Vol. 79, No. 158 (Washington, DC: August 15, 2014), https://www.gpo.gov/fdsys/pkg/FR-2014-08-15/pdf/2014-12164.pdf.
19. U.S. Environmental Protection Agency, "Effluent Limitations Guidelines and Standards for the Steam Electric Power Generating Point Source Category; Final Rule," Federal Register, Vol. 80, No. 212 (Washington, DC: November 3, 2015), https://www.gpo.gov/fdsys/pkg/FR-2015-11-03/pdf/2015-25663.pdf.
20. U.S. Environmental Protection Agency, "Hazardous and Solid Waste Management System; Disposal of Coal Combustion Residuals From Electric Utilities; Final Rule," Federal Register, Vol. 80, No. 74 (Washington, DC: April 17, 2015), https://www.gpo.gov/fdsys/pkg/FR-2015-04-17/pdf/2015-00257.pdf.
21. "Supreme Court's eventual MATS ruling will be (mostly) moot," SNL data dispatch (May 14, 2015), https://www.snl.com/Interactivex/article.aspx?CdId=A-32620730-13109.
22. U.S. Department of Defense, Department of the Army, Corps of Engineers, and U.S. Environmental Protection Agency, "Clean Water Rule: Definition of ‘Waters of the United States'; Final Rule," Federal Register, Vol. 80, No. 124 (Washington, DC: June 29, 2015), https://www.epa.gov/wotus-rule/final-rule-definition-waters-united-states-addition-applicability-date-2015-clean-water.
23. U.S. Environmental Protection Agency, "Clean Water Rule Litigation Statement" (Washington, DC: November 17 2015), https://www.epa.gov/cleanwaterrule/clean-water-rule-litigation-statement.
24. American Coal Ash Association, "2014 Coal Combustion Product (CCP) Production & Use Survey Report" (Farmington Hills, MI: not dated; accessed March 31, 2016), https://www.acaa-usa.org/Portals/9/Files/PDFs/2014ReportFinal.pdf.
25. U.S. Environmental Protection Agency, "Hazardous and Solid Waste Management System; Disposal of Coal Combustion Residuals From Electric Utilities; Final Rule," Federal Register, Vol. 80, No. 74 (Washington, DC: April 17, 2015), https://www.gpo.gov/fdsys/pkg/FR-2015-04-17/pdf/2015-00257.pdf.
26. American Coal Ash Association, :2014 Coal Combustion Product (CCP) Production & Use Survey Report” (Farmington Hills, MI: not dated; accessed March 31, 2016), https://www.acaa-usa.org/Portals/9/Files/PDFs/2014ReportFinal.pdf.
27. U.S. Department of the Interior, Office of Surface Mining Reclamation and Enforcement, "Stream Protection Rule; Proposed Rule," Federal Register, Vol. 80, No. 143 (Washington, DC: July 27, 2015), https://www.gpo.gov/fdsys/pkg/FR-2015-07-27/pdf/2015-17308.pdf.
28. U.S. Department of the Interior, "Order No. 3338, Subject: Discretionary Programmatic Environmental Impact Statement to Modernize the Federal Coal Program" (Washington, DC: January 15, 2016), https://www.blm.gov/sites/blm.gov/files/programs_energyandminerals_coalSO3338.pdf
    release_attachments.Par.4909.File.dat/FINAL%20SO%203338%20Coal.pdf.
29. U.S. Department of the Interior, Bureau of Land Management, "Status of Currently Pending Lease and Lease Modification Applications (Updated 2/5/16)" (Washington, DC: February 5, 2016), http://www.blm.gov/style/medialib/blm/wo/Communications_Directorate/public_affairs/news_
    release_attachments.Par.16330.File.dat/Status%20of%20Pending%20Leases.pdf.
30. U.S. Department of the Interior, "Wyoming Powder River Basin Coal Lease Status" (Washington, DC: January 22, 2016), https://www.blm.gov/style/medialib/blm/wy/programs/energy/coal/prb_maps.Par.66178.File.dat/prbcoallsestatmap.pdf.