Peter Spinney is Director of Market and Technology Assessment at 
Between two substantial events affecting rules regarding emissions regulations by the US EPA, unprecedented low natural gas prices, and what appears to finally be a sustained economic turn-around and associated impacts on electricity demand, it has truly been an eventful New Year for the power generation industry. Let me focus on CSAPR now, and will opine on the other topics in the days to come.
Arguably the most newsworthy and certainly the most surprising, the United States Court of Appeals for the D.C. Circuit issued a ruling on December 30, 2011 to stay the controversial Cross-State Air Pollution Rule (CSAPR), which was scheduled to take effect on January 1, 2012. It required 28 Eastern and Midwestern states to reduce SO2 and NOx emissions, accompanied by a supplemental rule finalized in December mandating five states to make summertime NOx reductions as part of CSAPR ozone season control program; which wasdesigned to assist states in attaining ozone and fine particle National Ambient Air Quality Standards.
The D.C. Circuit Court will be holding hearings in April 2012 to rule on the case. In the meantime the EPA is now busy reinstating allowance trading for the Clean Air Interstate Rule (CAIR), which it vacated in 2008 but re-instated as an interim regulation until a suitable replacement rule was promulgated.
The postponement of CSAPR obligations is a victory for parties objecting to it, but the EPA will be able to finalize “technical adjustments” before the rule is put into effect. While EPA has expressed hopes in a mid-2012 “go-ahead” ruling, in my view, actual implementation during the fall presidential race is “not bloody likely.”
The Court’s 11th hour decision took industry experts and energy markets alike by surprise. Many observers had anticipated an exemption for Texas due to both the large change in compliance requirements relative to CAIR and reliability issues related to low capacity reserve margins associated with coal units being taken offline and/or retired. The surprise mainly stemmed from the fact that this same court when vacating CAIR in its order stated that it would “not tolerate any unnecessary delays”
While the timing and substance of the court’s ultimate ruling on CSAPR remains uncertain, all observers acknowledge that the EPA is legally required to address interstate emissions transport. Most of the folks running plants and responsible for corporate emissions compliance have told me their companies expect that CSAPR or something very like it will be in place next year at the latest, and are continuing along the same path before being surprised by the stay.
I agree with them that the rule will likely be re-instated in a form close to or identical to that which has been stayed, and that the courts ruling will embody some level of urgency with respect to the timing. Of course another uglier possibility would be given the difficulties in designing a rule that can legally deal with interstate emissions transport; the court avoids any emissions-trading program whatsoever. In this scenario, the only possible outcome would be a command-and-control regime more akin to the manner in which the CAA/CAAA Best Available Retrofit Technology (BART) requirements are being applied in states not covered by CSAPR or New Source Review (NSR) litigation which has and continues to be applied on a case-by-case basis in the Midwest and Southeast. But let’s save that topic for another blog…
In any case, this stay will buy power generators more time in the near term; however the future has never been so unclear for many. You will be hearing from me on the recently finalized Utility MACT rule shortly.
