In Short
The Situation: On April 25, 2024, the Environmental Protection Agency ("EPA") finalized four rules to regulate pollution from fossil fuel-fired power plants. EPA's stated goal was to provide a framework on which power plants can rely for long-term investment, but these rules may ultimately force coal-fired power plants to cease operations in the near future.
The Result: The regulations target pollution from: (i) emissions of greenhouse gases, mercury, and other air toxics; (ii) wastewater at coal-fired steam energy generating units; and (iii) coal combustion residual landfills. While coal-fired power plants that have planned retirement dates are exempted from many of the new regulations, plants without such plans may need to incur significant costs to comply with the newly promulgated requirements.
Looking Ahead: While the timeline for the imposition of some of the rules' most restrictive provisions extend out over the next five-10 years, we expect legal challenges to each of the new rules promulgated by EPA.
On April 25, 2024, EPA announced four final rules aimed at reducing pollution from fossil fuel-fired power plants. The rules finalized were: (i) Greenhouse Gas Standards and Guidelines for Fossil Fuel-Fired Power Plants; (ii) Mercury and Air Toxics Standards ("MATS"); (iii) Steam Electric Power Generating Effluent Guidelines; and (iv) Legacy Coal Combustion Residuals Surface Impoundments and CCR Management Units.
Greenhouse Gas Standards and Guidelines for Fossil Fuel-Fired Power Plants
In this rule, EPA took four actions to address emissions from fossil fuel-fired power plants. First, it repealed the Affordable Clean Energy ("ACE") Rule, which originated during the Trump administration. Second, it finalized greenhouse gas ("GHG") emission guidelines for existing fossil fuel-fired steam-generating electric utility generating units ("EGUs"). Third, it finalized new source performance standards ("NSPS") for GHG emissions from new and reconstructed fossil fuel-fired stationary combustion turbine EGUs. Fourth, it finalized revisions to the NSPS for GHG emissions from fossil fuel-fired steam EGUs that undertake a large modification.
First, EPA repealed the ACE Rule because, according to EPA: (i) the best system of emission reduction ("BSER") under the rule is not appropriate for existing coal-fired EGUs; (ii) the ACE Rule rejected carbon capture and sequestration ("CCS") as the BSER for outdated reasons; and (iii) the ACE Rule conflicted with Clean Air Act ("CAA") section 111 due to insufficient specificity as to the BSER.
Second, EPA finalized guidelines for existing fossil fuel-fired steam EGUs. For existing coal-fired steam EGUs, EPA determined that CCS technology with a 90% capture rate will be the BSER. The compliance deadline is January 1, 2032. EPA claims that the cost of installing CCS technology is reasonable due to a decline in the technology costs and the tax credits available under the Inflation Reduction Act and other federal programs. If a coal-fired steam EGU plans to cease operations by January 1, 2039, then its BSER is to co-fire with natural gas at a level of 40% of the units annual heat input. The compliance deadline for those EGUs is January 1, 2030. Coal-fired EGUs that demonstrate they plan to permanently shut down by January 1, 2032, are exempted from these requirements.
For oil- and gas-fired steam EGUs, EPA broke the standards into three categories: (i) those with annual capacity factors greater than 45% (base load); (ii) those between 8% and 45% (intermediate load); and (iii) those less than 8% (low load). Base load sources have a standard of 1,400 lb CO2/MWh-gross while intermediate load sources have a standard of 1,600 lb CO2/MWh-gross. Low load sources have a standard of 170 lb CO2/MMBtu for oil-fired sources and 130 lb CO2/MMBtu for natural gas-fired sources.
Third, EPA set standards of performance for new and reconstructed fossil fuel-fired combustion turbines. EPA broke combustion turbines into base load, intermediate load, and low load categories as well. For base load turbines, the BSER is: (i) highly effective generation (based on the emissions of best performing units); and (ii) CCS technology with a 90% capture rate. The CCS requirement has a compliance deadline of January 1, 2032. Low and intermediate load sources have a BSER of using lower-emitting fuels and highly efficient simple cycle generation respectively.
Fourth and finally, EPA revised the standards for coal-fired steam EGUs that undertook large modifications to match the standards of existing coal-fired steam EGUs (i.e., CCS with a 90% capture rate by 2032). EPA specifies that a large modification means an increase in hourly emission rate of more than 10%.
Presumably anticipating that these rules will be challenged in court, EPA emphasized that each of these regulations is an independent rule that can be severed from the remaining regulations should a court strike it down.
Mercury and Air Toxics Standards
EPA is updating the standards in MATS based on its determination that existing technologies and methods can achieve additional hazardous air pollutant ("HAP") controls from coal-fired EGUs at reasonable costs. Such updates include: (i) changing the emission standard for filterable particulate matter ("fPM") from 0.030 lb/MMBtu to 0.010 lb/MMBtu; (ii) changing the mercury (Hg) emission standard at lignite-fired EGUs from 4.0 lb/TBtu to 1.2 lb/TBtu; and (iii) requiring existing coal- and oil-fired EGUs to utilize continuous emission monitoring systems ("CEMS") to demonstrate compliance with the fPM standard.
EPA is setting the more stringent standard for fPM—which serves as a surrogate for non-mercury HAP metals—on the basis of its technology review. In its justification, EPA notes that 93% of coal-fired capacity without a known retirement date prior to the compliance period have already demonstrated an fPM emissions rate at or below the new 0.010 lb/MMBtu rate.
EPA is also setting the more stringent Hg emissions standard for lignite-fired EGUs on the basis of its technological review. EPA claims that lignite-fired EGUs can meet the 1.2 lb/TBtu mercury emission level with available control technologies and/or improved methods of operation at reasonable costs.
Finally, EPA is requiring the use of CEMS on the basis that it provides regulators, the public, and facility owners and operators with continuous emissions information, which may lead to improved control of emissions and reduced community exposure. EPA also based its decision on updated information on the cost of quarterly testing compared to the cost of CEMS.
According to EPA, the regulations will prevent the emission of 1,000 lb. of mercury, 770 tons of fine particulate matter, 280 tons of nitrogen oxides, 65,000 tons of carbon dioxide, and at least seven tons of non-mercury HAP metals.
Notably, EPA's monetized cost-benefit analysis shows that the estimated monetized compliance costs far outweigh the estimated monetized benefits. At EPA's preferred 2% discount rate, EPA's monetized cost estimates indicate health benefits of $300 million, climate benefits of $130 million, and a compliance cost of $860 million, creating a net cost of $440 million. EPA attempts to justify the monetized portion of their cost-benefit analysis by stating that many of the benefits "are not monetizable" due to data limitations.
Steam Electric Power Generating Effluent Guidelines
EPA established new effluent limitations guidelines and standards ("ELGs") for coal-fired steam EGUs. The ELGs are designed to regulate the content of wastewater discharged from EGUs.
This rule establishes a zero discharge of pollutants limitation for flue gas desulfurization ("FGD") wastewater, bottom ash transport water ("BATW"), and combustion residual leachate ("CRL"). The rule also establishes a limit for mercury and arsenic for CRL discharged through groundwater and for "legacy wastewater" discharged from surface impoundments that have not commenced closure under the CCR regulations as of the effective date of the rule.
Coal-fired steam EGUs that will permanently cease coal combustion by 2034 are exempt from the rule and must continue to comply with previous ELGs.
Legacy Coal Combustion Residuals Surface Impoundments and CCR Management Units
EPA established standards for legacy coal combustion residual ("CCRs") surface impoundments. Previous rules exempted these units from requirements applicable to inactive surface impoundments at active facilities, but the D.C. Circuit vacated that exemption in 2018. The rule largely mirrors the requirements for inactive impoundments at active facilities by incorporating most of 40 CFR part 257, subpart D, including requirements for the closure of impoundments, groundwater monitoring, remediation of CCR-contaminated groundwater, and record-keeping.
EPA also established rules for coal ash that had been disposed of outside of regulated units. These "CCR management units" must adhere to the EPA requirements for monitoring, corrective action, closure, and post closure care requirements established in this rule.
The rule becomes effective six months after its publication.
Three Key Takeaways
- On April 25, 2024, EPA announced four final rules aimed at reducing pollution from fossil fuel-fired power plants.
- The finalized rules will significantly impact coal-fired EGUs. Coal fired EGUs that have plans to retire by 2032 are exempt from some of the air pollutant regulations, and those with plans to retire by 2039 have less stringent standards—but also an earlier compliance deadline of 2030. Coal-fired EGUs that plan to retire or switch fuels by 2034 are also exempt from the new effluent guidelines. That said, the new, more stringent requirements may cause additional coal-fired EGUs to cease operations.
- We expect that some or all of these rules will be subject to legal challenges, which may delay or thwart EPA's efforts to more stringently regulate fossil fuel-fired EGUs, particularly those fired by coal.
