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Clean Air Developments

Washington Energy Report
03.28.08

A number of Clean Air Act (“CAA”) developments occurred this week potentially affecting power generators. 

CAIR Oral Arguments Raise Concerns Over Program’s Viability

On Tuesday, the United States Court of Appeals for the D.C. Circuit heard oral argument on challenges to EPA’s Clean Air Interstate Rule (“CAIR”), a rule that EPA and environmental groups agree is the most aggressive emission reduction rule in years.  In fact, no environmental group challenged the rule, the only challengers being North Carolina which has a concern that the rule is not strong enough in requiring reductions from nearby out-of-state generators and certain industry groups which had targeted problems with pieces of the rule’s sulfur dioxide and nitrogen oxide cap and trade programs.  Although the challenges were relatively limited, the questions from two of the judges on the three-judge panel indicate that they may have problems with the validity of using a cap and trade program to address the effect of an upwind state’s emissions on a downwind state’s ability to meet air quality standards.  A decision limiting or eliminating EPA’s ability to use a cap and trade approach could lead to the agency using much more cumbersome and expensive plant-by-plant pollution control requirements.

CAMR Vacatur Appealed

Earlier this week, EPA and the Utility Air Regulatory Group petitioned the full D.C. Circuit to overturn a three-judge panel’s vacatur of the Clean Air Mercury Rule (“CAMR”).  In February, the D.C. Circuit panel agreed with assertions by a number of states and environmental interest groups that the Clean Air Act requires EPA to regulate mercury by applying Maximum Achievable Control Technology (“MACT”) standards to every source, rather than by establishing the cap and trade program envisioned under CAMR.  Although CAMR would have achieved a 70% reduction in mercury emissions from power plants over the next decade, the D.C. Circuit’s ruling may send EPA back to the drawing board on mercury emissions unless EPA and industry are successful in their appeals.

Environmentalists Appeal Permit for North Carolina Coal Plant; Industry, Conservative Interest Groups Argue CO2 Issues to EPA Environmental Appeals Board

This week, several environmental groups filed appeals challenging a permit issued to Duke Energy’s Cliffside Stream Station, located about 50 miles west of Charlotte.  The permit would authorize the construction of a proposed 800 MW coal-fired unit that would replace four of the five older units currently in operation at the plant.  Although the new unit would contain a full suite of the latest control technologies, the environmental groups claim that the permit fails to require adequate controls for CO2 and mercury.  The appeal is the latest in a series of challenges by environmentalists to air quality permits for new coal-fired electric generation on the grounds that the permit does not include CO2 controls and imposes insufficient mercury controls in light of the D.C. Circuit’s vacatur of EPA’s CAMR rule (see above).  Also this week, industry and conservative interest groups filed amicus briefs with EPA’s Environmental Appeals Board in what is expected to be the leading case on whether air quality permits for coal-fired generators must include CO2 controls.

EPA Region 5 Issues NOV to Duke Energy for SCR

EPA issued a Notice of Violation, or “NOV,” to Duke Energy on March 10, 2008, alleging that its Zimmer Generating Station was in violation the Clean Air Act.  The NOV is particularly notable in that it claims that Duke violated the Clean Air Act by failing to obtain a permit prior to installing a Selective Catalytic Reduction system, or “SCR.”  SCRs are pollution control devices that are designed to remove nitrogen oxides from power plant emissions, but also have the potential to increase the amount of sulfuric acid mist generated as well.  In its NOV, Region 5 claims that the increase in sulfuric acid mist from the SCR installed at Zimmer station triggered permitting requirements under the Prevention of Significant Deterioration or “PSD” program.   This claim is surprising in that the EPA rules in place at the time Duke installed the SCR in 2004 included a “pollution control project” or “PCP” exclusion, which allowed sources to install environmentally beneficial projects without triggering onerous permitting requirements.  Even though the United States Court of Appeals for the D.C. Circuit vacated the PCP exclusion in 2005, EPA has until recently assured sources that it would not take retroactive enforcement action against plants that relied on the PCP exclusion while it was on the books.  At least at Region 5, that policy appears to have changed.

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