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EPA Proposes CO2 Emission Limits for New Power Plants and on Track to Regulate CO2 Emissions from Existing Plants by 2015

by Jacob Hollinger and Bethany Hatef

The U.S. Environmental Protection Agency (EPA) has issued a proposed rule concerning carbon dioxide (CO2) emissions from new coal-fired and natural gas-fired power plants. The September 20 proposal meets a deadline set by President Obama in a June 25 Presidential Memorandum and keeps EPA on track to meet the President’s June 2015 deadline for regulating emissions from existing power plants. Once the September 20 proposed rule is published in the Federal Register, interested parties will have 60 days to comment on it. 

Under EPA’s September 20 proposal, which replaces an earlier, April 2012 proposal, new coal plants would be limited to 1,100 pounds of CO2 emissions per megawatt-hour (lbs/MWh) of electricity produced, with compliance measured on a 12-operating month rolling average basis.  The proposed rule would also require new small natural gas plants to meet a 1,100 lbs/MWh emission limit, while requiring larger, more efficient natural gas units to meet a limit of 1,000 lbs/MWh. 

EPA is required to set emission limits for new plants at a level that reflects use of the “best system of emission reduction” (BSER) that it determines has been “adequately demonstrated.”  For coal, EPA has determined that the BSER is installation of carbon capture and sequestration (CCS) technology that captures some of the CO2 released by burning coal.  In essence, EPA is saying partial CCS is the BSER for new coal plants. But for gas, EPA is saying that the BSER is a modern, efficient, combined cycle plant.  Thus, CCS is not required for new gas plants.

An important feature of the proposed rule is the definition of a “new” plant. Under the pertinent section of the Clean Air Act (CAA), a “new” plant is one for which construction commences after publication of a proposed rule. EPA’s regulations, in turn, define “construction” as the “fabrication, erection, or installation of an affected facility,” and define “commenced” as undertaking “a continuous program of construction” or entering “into a contractual obligation to undertake and complete, within a reasonable time, a continuous program of construction.” 

EPA has concluded that its new proposal will have “negligible” benefits and costs – it won’t reduce CO2 emissions and it won’t raise the cost of electricity. This is based on EPA’s conclusion that even in the absence of the new proposed rule, all foreseeable new fossil fuel plants will be either modern, efficient combined cycle natural gas plants or coal plants that have CCS. In essence, EPA is proposing emission limits that it thinks would be met even in the absence of new regulations.

But if the rule won’t reduce CO2 emissions, why issue it?  First, EPA is of the view that it is required by the CAA to issue the rule; having already determined that CO2 emissions are endangering public health and welfare, EPA is required by § 111(b) of the CAA to publish regulations to address those emissions.  Second, EPA thinks the rule will provide regulatory certainty about what is expected of new plants.  Third, and perhaps most importantly, the rule [...]

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EPA Releases Final Fracturing Air Rule

by James A. Pardo and Brandon H. Barnes

The U.S. Environmental Protection Agency (EPA) released final regulations on April 17 to reduce certain emissions at hydraulically fractured wells by 95 percent.  The rule, a product of a February 2010 consent decree with WildEarth Guardians and the San Juan Citizens Alliance, adds New Source Performance Standards (NSPS) and amends existing National Emissions Standards for Hazardous Air Pollutants (NESHAPS) for the oil and gas industry.

NSPS Standards

The NSPS standards will reduce by 95 percent volatile organic compound (VOC) emissions during the completion phase of hydraulically fracturing a well.  In addition, although not a regulated substance under NSPS, the new rules have the effect of reducing fugitive methane emissions by 25 percent.  These VOC and methane emissions reductions will be attained by requiring that all newly fractured or refractured wells incorporate reduced emissions controls (RECs).  In total, EPA estimates that the rule will result in reductions of 11,000 tons of Hazardous Air Pollutants (HAPs), 190,000 tons of VOCs, and 1 million tons of methane, with a net benefit of $15 million as a result of the increased profit from captured methane sales. 

The final rule adopts several changes suggested during the public comment period, most important of which is the delayed deadline of  January 1, 2015 for requiring the use of RECs.  While REC technology currently exists, EPA recognized that the number of REC units required to meet the new regulations far exceeds those actually in existence today.  Until then, well operators or owners can achieve specified VOC reductions using flaring or other approved combustion methods. 

The final rule also modifies the definition of "well completions," limiting the REC requirement to that period when fracing operations end and flowback begins.  The requirement remains in effect until the well is either continuously flowing to the flow line or storage vessel for collection (in which case there should be no fugitive emissions) or shut in, whichever occurs first. 

In addition, EPA has exempted low-pressure wells from the REC requirement in response to comments that it is unfeasible to require RECs for low-pressure wells.  For low-pressure wells, as well as wildcat (or exploratory) and delineation wells, which are also exempted from the REC requirement, operators can continue to use flaring to achieve specified reductions.

EPA also has rewarded early adopters of REC technology, and encourages others to join early, by redefining actions that constitute "modifications" triggering NSPS requirements.  Some states require that any source subject to federal NSPS must get a state minor source air permit.  This new definition allows owners and operators of existing wells employing RECs to refracture without changing state permit status, thus avoiding delays and costs associated with the state permitting process.

Finally, but importantly, the rest of EPA’s new rules are not delayed, and take effect 60 days from publication in the Federal Register.

NESHAPS Standards

While EPA adopted many of the comments about the NSPS rules, stakeholders were less successful in obtaining changes to the proposed [...]

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