Introducing the Transport Rule: Why Should We CAIR?

Introduction

The U.S. EPA’s ambitious regulatory agenda continued on August 2, 2010 with the publication of a Notice of Proposed Rulemaking for the Federal Implementation Plans to Reduce Interstate Transport of Fine Particulate Matter and Ozone. Now known as the “Transport Rule,” it is intended to replace the existing Clean Air Interstate Rule (CAIR).  With the Transport Rule, U.S. EPA is proposing to limit the interstate transport of emissions of nitrogen oxides (NOX) and sulfur dioxide (SO2). Under this proposal U.S. EPA would both identify and limit emissions within 32 states in the Eastern United States that affect the ability of downwind states to attain and maintain compliance with the 1997 and 2006 fine particulate matter (PM2.5) National Ambient Air Quality Standards (NAAQS) and the 1997 ozone NAAQS. U.S. EPA is proposing to limit these emissions through Federal Implementation Plans (FIPs) that would regulate electric generating units (EGUs) in the 32 states. Emissions reductions would begin to take effect very quickly, in 2012, within one (1) year after the rule is finalized. This proposed rule, when promulgated, will replace CAIR. The comment period for the Transport Rule closes on October 1, 2010.

Background

U.S. EPA initially promulgated CAIR on May 12, 2005, and followed up by promulgating the CAIR FIPs on April 26, 2006.  On July 11, 2008 the U.S. Court of Appeals for the District of Columbia (Court) Circuit struck down CAIR and the CAIR FIPs. In ruling on CAIR, the Court found “more than several” fatal flaws and stated that “[n]o amount of tinkering with the rule or revising of the explanations will transform CAIR, as written, into an acceptable rule.” As such, the Court indicated that CAIR was to be vacated in its entirety and remanded back to U.S. EPA with direction to promulgate a rule consistent with its opinion. While the Court had originally considered completely vacating CAIR, a final decision was made to instead leave the CAIR rule in place while requiring U.S. EPA to fix its multiple flaws. Some of the major flaws identified in CAIR included region-wide emission caps with no state-specific quantitative contribution determinations or emissions requirements, and the need to redo its analysis of required emission reductions from the ground up.  This proposed Transport Rule is the U.S. EPA’s response which it believes is consistent with the Court’s opinion.

Rule Specifics

Emissions Reductions

The proposed Transport Rule includes an aggressive schedule of emission reduction requirements that would begin soon after final rule promulgation.  The first phase of emission reductions would be required in 2012, with additional requirements that would result in power plant SO2 emissions reductions of 6.3 million tons per year by 2014, representing a 71 percent drop from 2005 levels.  Additionally, power plant

NOX emissions are anticipated to drop by 1.4 million tons, including by 300,000 tons per year during the ozone season, representing a 52 percent reduction from 2005 levels.

 Allowances

While the existing CAIR emission Allowances were tied to the Allowances issued for the Acid Rain Program for SO2, the budgets under the Transport Rule have been derived by U.S. EPA through air quality modeling to demonstrate elimination of significant contributions to downwind nonattainment and interference with NAAQS attainment maintenance for both ozone and fine particulate.

Emission Reduction Mechanisms

Because U.S. EPA anticipates the need for additional emission reductions in response to more stringent NAAQS for ozone or fine particulate in the future, the Agency believes that the approach identified in the proposed Transport Rule will allow it to more easily mandate future emission reductions. Each time that U.S. EPA lowers a NAAQS, the Agency will evaluate whether additional emission reductions will be required from upwind states.

Affected Units

The Proposed Transport Rule affects 31 states and the District of Columbia.  Of these, 28 states would be required to reduce both annual SO2 and NOX emissions.  In addition, 26 states would be required to reduce NOX emissions during the downwind states’ ozone season to attain NAAQS levels, specifically the 1997 ground-level ozone standard.  Sources that are affected by the proposed Transport Rule include any stationary, fossil fuel-fired boiler or stationary, fossil fuel-fired combustion turbine serving, at any time since the later of November 15, 1990 or the start-up of the unit’s combustion device, a generator with nameplate capacity of more than 25 MWe producing electricity for sale.  The Transport Rule applicability criteria is identical to the existing CAIR rule which is notable in that a steam generating unit that burns any amount of fossil fuel and produces steam that serves a turbine generator rate at 25 MW or greater could be potentially be subject to the Transport Rule.  The applicability criteria could potentially draw in certain biomass fired boilers at industrial facilities even if they only use fossil fuel for startup.

The Transport Rule also includes exemptions for certain cogeneration and incineration units, again, similar to the defined exemptions under CAIR for sources that would otherwise be covered units.  U.S. EPA is proposing the following two changes to the cogeneration unit definition as it was written in CAIR:

1. The requirement to show that a unit could meet the cogeneration unit efficiency standards every year since it started to produce electricity has been removed.   Under the Transport Rule cogeneration units only have to demonstrate the efficiency standard was met for every year since November 15, 1990 or the year electricity was first produced, whichever is later.
2. Potential cogeneration units may evaluate the cogeneration efficiency thresholds on a system wide basis (i.e., include all the units feeding steam to a turbine) instead of on a combustion unit specific basis.

Emission Reduction Alternatives Being Considered

U.S. EPA is proposing one approach for reducing SO2 and NOX emissions in affected states and is requesting public comment on two more alternatives:

• In the “preferred” approach, U.S. EPA is proposing to set an emission budget, or limit, for each listed state and the District of Columbia. U.S. EPA’s preferred approach would allow limited interstate emissions trading among power plants, but the Agency also believes that it will still assure that each state will meet its emission reduction obligations.
• In one alternative proposal, U.S. EPA would set an emission budget for each state, and only allow emissions trading among power plants within that state.
• In a second alternative proposal, U.S. EPA would set a pollution budget for each state and also set allowable emission limits for each power plant within the state while providing for limited trading and some emissions averaging.

FIPs

To assure the emissions reductions, U.S. EPA is proposing FIPs for each of the states covered by this rule.  The FIPs would impart requirements deemed necessary to reduce pollution in the affected states that significantly contributes to nonattainment of or interferes with maintenance of the NAAQs in other downwind states. States can develop their own plan (with Federal approval) to achieve the required reductions.

Available Emissions Reduction Methods

U.S. EPA anticipates that power plants may use the following to achieve emission reductions:

• Operate existing control equipment more frequently (e.g., entire year vs. ozone season).
• Switch to lower sulfur oil, coal, or repower using natural gas.
• Retrofit additional air pollution control equipment such as low NOX burners, selective catalytic reduction (SCR), or flue gas desulfurization (i.e., scrubbers).

U.S. EPA will take public comment on the proposed Transport Rule until October 1, 2010 and will also hold three (3) public hearings for presentation of comments on the proposed rule. In addition, on September 1, 2010, U.S. EPA published a Notice of Data Availability which contained supporting data on the development of the FIPs to Reduce Interstate Transport of Fine Particulate Matter and Ozone.  U.S. EPA opened a separate Comment Period on this supporting data for which comments are due no later than October 15, 2010.

The proposed Transport Rule is based on complex air quality modeling and inter-related responses to the emission budgets.  It is crucial, for both economic and demand driven reasons, that affected entities review the assumptions and conclusions used by U.S. EPA to arrive at the proposed rules and to provide meaningful comments on the proposed rule.  Decisions made for the Transport Rule are anticipated to strongly influence U.S. Energy Policy. Sadly, it seems that current Federal environmental policy decisions are a driving force with regard to our national energy policy, instead of our national energy policy being an integral part of the solution.