The Obama administration plans to block the construction of new
coal-fired power plants unless they are built with novel and expensive
technology to capture greenhouse-gas emissions, according to people familiar
with a draft proposal.
The administration's rule on emissions from new power plants--long-awaited
measure that is one of the capstones of the administration's climate-change
agenda-- is set to be formally proposed by the end of next week. While the new
rule isn't final yet and is likely to face a legal challenge, it would be
another blow to a coal industry already buffeted by a bonanza of cheap natural
gas and increasing regulation.
The Environmental Protection Agency first proposed a stringent standard for
coal-fired plants last year, prompting an election-year debate about whether
President Barack Obama was waging what Republicans called a "war on
coal." Mr. Obama has said he supports clean-coal technology but also sees
an urgent need to tackle the release of greenhouse gases blamed for climate
change. Power-plant emissions account for about a third of
U.S.
greenhouse-gas emissions.
After the resistance last year, many observers had expected the administration
to tone down its rule and possibly create a path for new coal plants using
existing technology.
But a person who has seen a recent version of the revised rule said it would
propose an emissions limit of 1,100 pounds of carbon dioxide per megawatt hour
for coal plants and 1,000 pounds per megawatt hour for large gas-fired plants. Last
year's version was only slightly different, setting a 1,000-pound limit for
both types of plants. The person cautioned that the EPA could still tweak the
numbers before it releases them.
The person and others briefed on the rule said such stringent limits would ban
new coal plants, which generally release about twice as much carbon dioxide as
the proposed limits. Even the newest, most advanced coal-fired power plants in
the world would fall far short of that revised standard, they said.
The only way coal plants could comply is to capture carbon-dioxide emissions
and stick them underground--a costly process that hasn't been demonstrated at
commercial scale before.
"This shows the administration discounts and does not appreciate the value
of coal and how it can serve the country. You're impairing the backbone of the
power grid," said Hal Quinn, chief executive of the National Mining
Association, an industry trade group.
Environmentalists praised the EPA's plan as a way to meet national
climate-change goals. The Obama administration has set a target of cutting
emissions 17% by 2020, compared with 2005 levels.
Sen. Ed Markey (D., Mass.), a backer of tighter emissions curbs, said:
"Natural gas and renewables are showing the cheaper, cleaner way to cut
emissions. Coal-mining companies and coal-burning utilities managed to put
themselves in this situation, and these new rules might just provide the
impetus for them to innovate their way out."
Tackling greenhouse-gas emissions from power plants is at the heart of the
climate plan that Mr. Obama announced in June, but it is politically
controversial because coal remains the top fuel for power generation in the
U.S.
About
39% of electricity in the
U.S.
came
from coal-fired plants in the first half of 2013.
EPA spokeswoman Alisha Johnson declined to comment on the specific numbers. She
said the agency was working on its revised rule "in light of important
comments received by the agency and in a way that considers the viewpoints of
all stakeholders." She said the agency was on track to complete the rules
by the Sept. 20 deadline set by Mr. Obama.
By essentially banning the construction of new coal plants, the revised
rule--assuming it survives challenges--will further accelerate the trend toward
greater reliance on natural-gas-fired electricity generation.
The rule is also a crucial stepping-stone for the Obama administration's next
big environmental project, emissions standards for the fleet of existing power
plants. Mr. Obama has told the EPA to produce those standards by June 2014.
The coal-mining industry and coal-fired power is already under siege because of
a glut of domestically produced natural gas that is cheap and cleaner than
coal. While
U.S.
coal
exports have risen in recent years and hit a record in 2012, thanks in part to
European demand, exports still make up a small fraction of
U.S.
production and long-term demand overseas is uncertain. That means the domestic
power market remains critical for
U.S.
coal
producers.
Utilities and manufacturers also worry the new rules could lead to an
electricity supply crunch or rising prices for consumers. "For the first
time ever, EPA is becoming a regulator of energy. The rule they're putting out
there is going to force choices as to which energy you use, and that's a very
disturbing concept for manufacturers, for businesses, for anybody that has to
comply with these laws," said Ross Eisenberg, the vice president for
energy policy at the National Association of Manufacturers, a trade group.
Opponents of the revised rule have at least two chances to change it. The
administration will open the proposal up to a fresh round of public comments
before deciding whether to make the standard final, a decision that could come
early next year. However, the comments are unlikely to alter the
administration's view significantly since it already considered the clashing
views of industry and environmental groups when shaping the revised rule coming
out this month.
The other chance to overturn the rule would come in the courts, and if the rule
is made final next year, a lawsuit would likely follow.
EPA regulation of greenhouse gases, which is governed by the Clean Air Act, has
to be achievable based on technology that has been successfully proven. Power
plants with carbon capture and storage--known as CCS--have been demonstrated at
small scales, but never at full commercial scale in the U.S.
The EPA believes the technology is proven based on the Kemper plant, a
state-of-the-art, coal-fired plant that Southern Co. (SO) is building in
Mississippi, according to people familiar with the agency's position.
The Kemper plant will use cutting-edge gasification technology to capture
two-thirds of the plant's emissions and make it nearly as clean as a
natural-gas plant, but the project has cost more to complete than expected. Furthermore,
the Kemper plant benefits from an oil field nearby where it can pump the
captured carbon dioxide and store it. It is also optimized to use low-grade,
local lignite.
"It's the perfect storm of non-replicability" for other power plants,
said Jeff Holmstead, a former EPA official under President George W. Bush who
is now a partner at Bracewell & Giuliani law firm in Washington, D.C.
"If the EPA finalizes a rule like this, there will certainly be legal
challenges," he said.
Big utilities also said it would be unfair to force new coal plants to have the
carbon-capture technology. "We firmly believe CCS is not a demonstrated
technology that meets the requirements of the Clean Air Act," said Melissa
McHenry, a spokeswoman for AEP Inc. (AEP), one of the biggest U.S. utilities.