the future of electric generating units under the epa’s new nsr … · 2013. 8. 9. · epa mats...
TRANSCRIPT
The Future of Electric Generating Units Under the EPA’s New NSRRules Cross State Air Pollution Rules, Cross-State Air Pollution Rules, and New Clean Air Act Regulations
Brought to you by Winston & Strawn LLP and lEnvironmental Resources Management.
Today’s Speakers
Jay HollowayKen WeissLiz WilliamsonPeter BelmontePeter BelmonteGeorge Holder
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Peter Belmonte, ERMJay Holloway Winston & StrawnJay Holloway, Winston & Strawn
3:00 p.m. – 4:15 p.m. (PST)
( )4:00 p.m. – 5:15 p.m. (MST)
5:00 p.m. – 6:15 p.m. (CST)
6:00 p.m. – 7:15 p.m. (EST)
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Pete Belmonte , ERM
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T i W k Wild M ?
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Train Wreck or Wild Mouse?
shows some dates originally proposed and some projected dates
U th C k U it 1Uptha Creek Unit 1• 300 MW PC
• Constructed 1962, internals rebuilt several times
• ESP 1973
• 42% CF
• 10,900 Btu/kWh
• Local, low-medium sulfur bituminous coal, $70/ton
• Once through cooling, Baron River
• Ash sluiced to an on-site surface impoundment
• Natural gas 3.5 miles east
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UC-1, Current Emissions
• Stack Testing (2006 and 2009)▫ PMfilterable = 0.06 lb/MMBtu (2x MACT Std of .03)
Hg 4 lb/TBtu ( 4X MACT Std of 1 2)▫ Hg = 4 lb/TBtu (~4X MACT Std of 1.2)▫ HCl = 0.004 lb/MMBtu (2X MACT Std of 0.002)
• NOx limited to 0.3 lb/MMBtu (LNB) 2002NOx ted to 0.3 b/ tu ( N ) 00• Acid Rain Source (NOx and SO2 CEMS)• 70% of current SO2 and NOx allocated under CAIR
and 50% per CSAPR• 400 Opacity exceedences in 2010 and another 300
in 2011in 2011
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C li S iCompliance StrategiesP i t f Point of
Compliance
Fuel switching / Co-firing
Supply
Existing Unit / ESP Modification
Fuel Flexibility
Other Train Wreck
APC Retrofit
ACI/DSIAddition
Permitting
Compliance Testing
CostEconomics
Other Train Wreck Cost
Each part of the process may be part of the compliance answer!
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answer!
EGU MACT Estimated Project Schedulej(Assumed Final Rule Publication January 2012)
2/16/2012: Final Rule Publication in FR
/ 6/ Eff ti D t f R l (6 D Aft FR 4/16/2012: Effective Date of Rule (60 Days After FR Publication)
6/2012:Preliminary Engineering & Design
4/16/2015: Compliance Deadline for
7/2012:Commence Permitting Process -12-18 months
4/16/2015: Compliance Deadline for Existing Sources
10/16/2015: Date by which Compliance must be Demonstrated
12/2012: Submit Permit application
1/2014: Receive Final PermitsNegotiate EPC and APCE Contracts & obtain PUC approval
4/2016: Deadline with 1 Yr Extension
3/2014: Commence Construction -18 – 24 months
obtain PUC approval
2012 2013 2014 2015 2016
Alternatives for 300 MW of Capacity
• Invest in controls and upgrades to UC-1▫ Aging unit▫ High heat rate, low CF
• Re-power UC-1 –natural gas combined cycle▫ Existing power plant, transmission, infrastructure▫ Older design STG, well maintained▫ Retain once through cooling? Cooling tower BTA?▫ Natural gas @ $17.5M ($5M/mile), $7/MMBtu
• New combined cycle▫ 1X1 7FA, 6,000 Btu/kwh▫ Near gas and transmission▫ Wells and cooling towers
C f MW f ff i / bl• Contract for 300 MW of offsite/renewables
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Managing Risk
• EGU MACT is here “MATS” / legislative initiatives▫ EPA MATS Final December 21, 2011▫ Presidential Memorandum issued to EPA Admin▫ Boiler MACT is final▫ Appeals and litigation
• Every unit is unique• 6-15 year planning horizon• Regulatory matrices (CSAPR, NAAQS, etc.)• Best Case, Reasonable Projected Case, Worst Case
▫ Compliance (expenditure) date▫ Requirements of compliance▫ Cost to comply
• Air, water, ash, other
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Adopting a Holistic Compliance Approach
CAIR/CSAPR
Boiler MACT
CAIR/CSAPR
GHG Permitting
NAAQS –NO2 & SO2
CCB’s
EGU MACT
316 (b) & 316 (b) & effluent
guidelines
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Projected Upgrades by 2020, UTC-1
• APC▫ Best case – LNB + advanced OFA, trona, ACI +
upgrades to ESPpg▫ Projected Reasonable Case – LNB + SNCR + existing
ESP + SDA + ACI + polishing FF▫ Worst Case – LNB + SNCR + SCR + ACI + FF + Wet ▫ Worst Case – LNB + SNCR + SCR + ACI + FF + Wet
FGD• Convert to dry ash system, on-site lined landfill
BTA• BTA▫ Best / projected case – fine mesh screens & VFD
pumpsp p▫ Worst case – cooling tower retrofit
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UC-1 Upgrades Cap-ex Op-ex (3 UC-1 Upgrades, Cap-ex Op-ex (3 Cases)• CUECost – APC upgrades screening▫ EPA & EPRI control cost estimating tool▫ Publicly available, transparent, repeatablePublicly available, transparent, repeatable▫ +/- 30% for stand-alones▫ SNCR, SCR, FF, SDA, wet FGD, ACIS l t d ith Old S k P C d t• Supplemented with Old Smokey Power Co. data▫ Fuels▫ Forecasts▫ Pond closure, on-site ash mono-fill▫ BTA – screens, pumps, cooling towers▫ OthersOthers
• Limitations and refinements84
Cooling Water Intake Structures• Design intake > 2 0 MGD & at least 25% for cooling Upper limit on • Design intake > 2.0 MGD & at least 25% for cooling. Upper limit on
number of fish killed allowed. Site specific technology including intake velocity reduction to 0.5 feet per second
• Withdraw at least 125 MGD; required to conduct entrainment • Withdraw at least 125 MGD; required to conduct entrainment studies to help permitting authorities determine whether/what site specific entrainment controls will be required
BTA / Mitigation Strategies• BTA / Mitigation Strategies▫ Reduce face velocity at screens
▫ Ultra-fine mesh screens
▫ VFDs
▫ Closed cycle cooling
▫ Other case-specific
• EPA cost guidance
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Ash Pond Closure and Replacement
• Closure costs understood• Convert to dry system▫ Beneficial re-use▫ On-site engineered mono-fill
Off site landfill▫ Off-site landfill• Permitting
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UTC 1 Range of APC CostsUTC-1 Range of APC CostsControl Technology Best Case Projected
ReasonableWorst Case
LNB & Advanced OFA $4.4 $4.4 $4.4
SNCR ----- $3.5 $31.9
ESP U d $8 0ESP Upgrade $8.0 ----- -----
Existing ESP + Polishing FF ------ $21.9 $36.9
Trona Injection $2.0 ------ ------
SDA ------ $65.5 ------
ACI $1.8 $1.8 $1.8
FF $ 8 $ 6FF ------ $21.8 $36.9
Wet FGD ____ _____ $130.1
Air upgrades to UC 1 $16 $119 $242
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Air upgrades to UC-1 $16 $119 $242
Worst Case Upgrades, UTC-1• Cap-ex $242 MillionCap ex $242 Million• Op-ex▫ Current generation = 1,681,920,000 kw-hr/yr
F l $6 / @ $ /MMB ▫ Fuel cost = $61,320,000 /yr @ $3/MMBtu, 12,500 Btu/kW-hr
• Annualized Production Cost▫ Cost Recovery Factor ~ $46,000,000/yr▫ $/yr / current kw-hr/yr = $0.064/kwh
• UTC-1 is still a 50-yr old unit • UTC-1 is still a 50-yr old unit. ▫ CO2, CSAPR▫ Politics, public perception, etc.
h b j d bl b• What about projected reasonable case or best case?
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New Combined Cycle Comparison• Cap ex ~ $210 Million (@ $700/kw EIA)• Cap-ex ~ $210 Million (@ $700/kw - EIA)• Op-ex▫ Current generation = 1,681,920,000 kw-hr/yrCurrent generation 1,681,920,000 kw hr/yr▫ Fuel cost = $70,640,000 /yr @ $7/MMBtu, 6,000
Btu/kW-hr• Annualized Production Cost▫ Cost Recovery Factor ~ $34,000,000/yr
$/ / k h / $ /k h▫ $/yr / current kw-hr/yr = $0.063/kwh• Brand new, state-of-the-art power plant
B t ill l b $7/MMBt ?• But will gas always be $7/MMBtu?
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Where Should Old Smokey Power Where Should Old Smokey Power Invest?• Status quo is not an option• Lowest cost to our customers• Reliability and fuel flexibility• Future environmental costs (i.e. CO2 tax)
Wh if h l i fl h i h ? ( ld • What if shale gas is a flash in the pan? (we could never go back) Do we have a plan? • Do we have a plan?
• What is the contingency plan?• My head hurts• My head hurts…
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Jay Holloway, Winston & Strawn
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CSAPR TimelineA 8 A i d h fi l C S Ai • August 8, 2011 – EPA issued the final Cross-State Air Pollution Rule (CSAPR).
• October 6, 2011 – EPA proposed technical revisions to l l d k ff
p pCSAPR, rule slated to take effect on January 1, 2012.
• December 15, 2011 – EPA finalized the supplemental rule to include five additional states.
• December 30, 2011 – D.C. Circuit Court of Appeals stayed CSAPR.
• February 9 2012 – Petitioners submitted briefs to the • February 9, 2012 – Petitioners submitted briefs to the Court.
• March 16, 2012 – Final briefs are due.A il O l • April 13, 2012 – Oral argument.
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EME Homer City Generation L.P. v. EPA• Over half of the states regulated by CSAPR filed suit Over half of the states regulated by CSAPR filed suit
against EPA, along with power companies, mining companies, labor groups, and others.
• These lawsuits were filed in the D C Circuit Court of • These lawsuits were filed in the D.C. Circuit Court of Appeals, and are consolidated in the case EMEHomer City Generation L.P. v. EPA.
• On February 9, 2012, the two groups of plaintiffs in the case (industry/labor and states) submitted briefs to the courtto the court.
• Both of these briefs request that the court vacate the rule.
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EME Homer City Generation EME Homer City Generation, Industry and Labor Brief
i f fil d b i i d i i f• Brief filed by 66 petitioners and amici from industry and labor sectors.These petitioners argue EPA e ceeded its • These petitioners argue EPA exceeded its authority by :▫ Setting emissions budgets without regard to each Setting emissions budgets without regard to each
state’s significant contribution to nonattainment in downwind states.
▫ Imposing emission reductions on upwind sources more stringent than necessary for downwind states to attain or maintain NAAQSstates to attain or maintain NAAQS.
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EME Homer City Generation EME Homer City Generation, Industry and Labor Brief• Industry and labor petitioners also argue that EPA’s
actions were impermissibly arbitrary and capricious:▫ EPA failed to consider whether less costly emissions EPA failed to consider whether less costly emissions
controls would achieve the same downwind air quality results as the more expensive controls it imposed.
▫ EPA relied on flawed air quality modeling to ▫ EPA relied on flawed air quality modeling to determine upwind states covered by CSAPR.
▫ EPA used erroneous projections of future air quality to determine state emissions budgetsdetermine state emissions budgets.
▫ EPA arbitrarily selected an accelerated compliance schedule that is unprecedented for a rule of this large scope.
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EME Homer City Generation EME Homer City Generation, States’ Brief• Brief filed by 23 petitioners including states,
municipalities, and state agencies.h i i h A d d i • These petitioners argue that EPA exceeded its
authority by:▫ Bypassing the SIP process and issuing a FIP that ▫ Bypassing the SIP process and issuing a FIP that
mandates how states must satisfy CSAPR’srequirements.q
▫ Regulating upwind state emissions collectively, without regard to their independent significance.
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EME Homer City Generation EME Homer City Generation, States’ Brief• The states also argue that CSAPR has critical flaws,
and EPA failed to follow appropriate administrative procedures in passing the rule.procedures in passing the rule.▫ EPA ignored the holding in North Carolina v. EPA
(the case which overturned CAIR) and tried to impose the same control requirements for nonattainment and the same control requirements for nonattainment and maintenance areas.
▫ EPA violated notice and comment requirements, promulgating a final rule that was not a logical promulgating a final rule that was not a logical outgrowth of the proposed rule. At the final rule stage, EPA included Texas as a covered
state included new data and models and made state, included new data and models, and made methodological changes from the proposed rule.
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CSAPR C i R lCSAPR Corrective Rule• On October 14, 2011, EPA issued a proposed revision to
CSAPR to address three perceived flaws in the final rule: ▫ Erroneous unit-specific modeling assumptions that affected
state emissions allocationsstate emissions allocations.
▫ Flawed allowance allocations to specific units covered by consent decrees that restrict the use of allowances.
▫ Harmful timing for enforcement of assurance penalty provisions.
• On February 21 2012 EPA finalized the Corrective Rule and • On February 21, 2012, EPA finalized the Corrective Rule and also issued a Direct Final Rule addressing other comments received in response to the Corrective Rule.
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Correction of Unit-Specific Modeling Correction of Unit-Specific Modeling Assumptions
fi li d d i i i i • EPA finalized proposed revisions to state emissions budgets in 10 regulated states: Michigan, Nebraska, Texas, Arkansas, New Jersey, Wisconsin, New York, L i i Mi i i i d Fl idLouisiana, Mississippi, and Florida.
• The revisions are designed to correct errors including erroneous assumptions of certain g pemissions control devices and failure to consider operational constraints likely to necessitate non-economic generation. g
• For each state budget revision, EPA is also finalizing corresponding revisions to the calculation of that state’s variability limit and assurance level.state s variability limit and assurance level.
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Corrective Rule — Texas• Under the final Corrective Rule, EPA increased Under the final Corrective Rule, EPA increased
the 2012 and 2014 Texas SO2 budgets to account for the following erroneous assumptions:▫ Assumed FGD would be installed at J.T. Deely
Units 1 and 2 and W.A. Parish Unit 6 by 2012.O ti t d SO l ffi i i f i ti ▫ Overestimated SO2 removal efficiencies of existing scrubbers on units at Martin Lake, Monticello, Sandow, W.A. Parish, and Oklaunion .Sandow, W.A. Parish, and Oklaunion .
• The revisions yield an increase in the 2012 and 2014 SO2 budgets of 50,517 tons. 2
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Correction of Allowances for Units Correction of Allowances for Units Under Consent Decrees (CDs)
h d C i l A dd d h f h • In the proposed Corrective Rule, EPA addressed the fact that CDs establish specific emissions limits, and may include surrender provisions that require units to surrender allowances in excess of their CD limits. allowances in excess of their CD limits.
• EPA recognized that in some instances, the allowances allocated to a unit under CSAPR exceeded the emissions limit established under its CD.
• EPA’s proposed to cap the CSAPR allowances for these units, and grant surplus allowances to the state’s new unit set aside.
• EPA finalized this proposed revision for certain units in six EPA finalized this proposed revision for certain units in six states (Alabama, Indiana, Kansas, Kentucky, Ohio, and Tennessee) that are subject to CDs with some small adjustments to reflect CD provisions that account for extraordinary events extraordinary events.
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Delayed Assurance Penalty Provisions• Under CSAPR if state emissions exceed the state • Under CSAPR, if state emissions exceed the state
assurance level, owners and operators of units in that state have to surrender allowances.
• This penalty provision was originally set to take effect on January 1, 2012. y ,
• On February 7, 2012, EPA finalized its proposal to revise the assurance penalty provisions to p y pmake them effective January 1, 2014.
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EPA’s Direct Final Rule
• In the proposed Corrective Rule, EPA sought additional comment on unit-level operational information similar to the information supporting the proposed revisions.
• Based on the comments received, EPA issued a Direct Final Rule that results in revisions to the 2012 and 2014 CSAPR state budgets in the following 13 regulated states: CSAPR state budgets in the following 13 regulated states: Arkansas, Georgia, Indiana, Kansas, Louisiana, Mississippi, Missouri, New York, Nebraska, Ohio, Oklahoma South Carolina and Texas Oklahoma, South Carolina, and Texas.
• Like the Corrective Rule, the revisions address erroneous assumptions of certain emissions control devices and f il t id t i ti l t i tfailures to consider certain operational constraints.
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Direct Final Rule — Texas
d h i i l l i i i h • Under the Direct Final Rule, EPA is increasing the 2012 and 2014 Texas annual NOx and ozone season NOx budgets to account for operational constraints
t i l t (J M C t Ni h l Pl t X at six plants (Jones, Moore County, Nichols, Plant X, Knox Lee, and Wilkes) based on comments received on the Corrective Rule.
• The commenters provided information showing that these plants were in out-of-merit-order dispatch areas with conditions likely to necessitate non-yeconomic generation.
• The revisions yield budget increases of 2,731 tons for annual NOx and 1,142 tons for ozone season NOx.annual NOx and 1,142 tons for ozone season NOx.
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NAAQS — Sulfur Dioxide (SO2) S d d b (h l ) l d i • New Standard: 75 ppb (hourly) promulgated in June 2010;
secondary standard proposed, not yet final.• Previous 24-hour and annual standards remain in effect until
one ear after an area designationone year after an area designation.• Area Designations Anticipated: June 2012.• Unclassifiable/Maintenance SIPs Due: June 2013.• Nonattainment SIPs Due: February 2014.• Initial Attainment Date: August 2017.• Heavy Reliance on Modeling• Heavy Reliance on Modeling.• New Requirements for Infrastructure SIPs.• Litigation Challenging Standard: Final Briefs were filed on
F b 8 2012 O l A t M 3 2012February 8, 2012; Oral Argument: May 3, 2012.
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NAAQS — Nitrogen Dioxide (NO2) • New Standard: 100 ppb (hourly) promulgated in January New Standard: 100 ppb (hourly), promulgated in January
2010; secondary standard proposed, not yet final.• Annual Standard of 53 ppb retained.
A D i i A i i d J • Area Designations Anticipated: January 2012.▫ Predicted to be all “unclassifiable.”
• New monitoring network to be implemented no later than g b pJanuary 1, 2013.
• After 3 years of data has been collected, EPA will re-designate areas (2016/2017)designate areas (2016/2017).
• Ultimate attainment date: January 2021/2022.• Litigation Challenging Standard: Oral Argument Scheduled
for February 21, 2012.
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NAAQS — Particulate Matter• 2006 Standard (PM 2.5): 24-hour - 35 µg/m3; annual – 15 µg/m3 (primary and
secondary)secondary).
• 2006 Standard (PM 10): 24 hour – 150 35 µg/m3 (primary and secondary).
• Activists sued arguing that the annual primary PM 2.5 standard was not protective enough (American Farm)
• Court remanded to EPA to revise and EPA wrapped review into the five year process, but continually postponed proposal.
• In EPA’s most recent filing in American Farm, it represented to the DC Circuit Court of Appeals its intent to propose a rule in June 2012 and finalize it by June Court of Appeals its intent to propose a rule in June 2012 and finalize it by June 2013.
▫ The DC Circuit Court of Appeals thereafter denied petitions filed by ten states and environmental activists seeking to impose stricter limits and court ordered deadline.
• Separately, eleven states and several environmental groups have filed lawsuits in the Southern District of New York and DC District Court arguing that EPA must update the PM standards sooner.
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NAAQS — Ozone• Standard (1997): 80 ppb (primary and secondary) currently in Standard (1997): 80 ppb (primary and secondary) currently in
effect.
• Standard was revised in 2008 to 75 ppb, but challenged as not t ti h ( ti i t ) d t t i t (i d t )protective enough (activists) and too stringent (industry).
• The lawsuit, State of Mississippi, was held in abeyance while EPA undertook a voluntary review. y
• In January 2010, EPA proposed to tighten the standard to between 60 and 70 ppb.
• A final rule with a limit of 70 ppb was submitted to the White House in July 2011.
• In September 2011 the President requested that EPA In September 2011, the President requested that EPA withdraw the rule.
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NAAQS — Ozone (cont.)• Under this timeline, EPA is due to propose a new rule consistent p p
with the 5 year NAAQS review.
▫ Proposed rule anticipated in fall 2013 with a final rule in the summer of 2014.
I h i i h S f Mi i i i ill i h • In the interim, the State of Mississippi case will resume with opening briefs due April 17, 2012 and final briefs due August 27, 2012.
• EPA has submitted a consent decree under the Wild Earth EPA has submitted a consent decree under the Wild Earth Guardians case, agreeing to make area designations under the 2008 standard by May 31, 2012, to be effective mid-August.
• On February 14, 2012, EPA proposed a rule containing thresholds f l if i tt i t d th 8 l d th for classifying nonattainment areas under the 2008 rule and the timing of attainment dates for each classification. Comments are due March 15, 2012.
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NAAQS — LeadL d St d d (2008) 0 15 / 3 ( i d • Lead Standard (2008): 0.15 µg/m3 (primary and secondary).
Re ised ambient monitoring in December 2010 • Revised ambient monitoring in December 2010 rulemaking; changed emission threshold for installation of an air quality monitor to 0 5 tpy installation of an air quality monitor to 0.5 tpy.
• 2010 rulemaking also required lead monitoring in large urban areas (must be implemented by in large urban areas (must be implemented by January 1, 2012).
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NAAQS — Carbon Monoxide (CO)• CO Standard (2011): 9 ppm (8 hour); 35 ppm (1• CO Standard (2011): 9 ppm (8-hour); 35 ppm (1-
hour); retained existing standards.▫ Requires 52 new monitoring sites new roads in q 5 g
urban areas, will be coordinated with NO2monitoring network.
• Communities for a Better Environment & Wild • Communities for a Better Environment & Wild Earth Guardians filed a suit in DC Court of Appeals in response to EPA’s decision to retain the standard.▫ Final Briefs: August 17, 2012; Oral Argument not
yet scheduledyet scheduled.
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