Potentially costly guidelines, coupled with onerous Clean Air Act rules, will likely shutter some coal-fired facilities.

Background

On April 19, 2013, the US Environmental Protection Agency (EPA) announced proposed technology-based effluent limitation guidelines and standards for steam electric power generating units. The proposed national standards, which are based on data collected from industry, provide for a phased-in approach and the use of technologies already installed at a number of plants. EPA argues that this regulatory action is necessary to reduce the amount of toxic metals and other pollutants discharged to surface waters by power plants, in part because the development of new air pollution control technologies over the past 30 years has altered existing wastewater streams at many power plants, particularly those burning coal.

Overview

EPA’s proposal would set federal limits on the levels of toxic metals in wastewater discharged from seven waste streams: flue gas desulfurization (FGD) wastewater, fly ash transport water, bottom ash transport water, combustion residual leachate, non-chemical metal cleaning wastes, and wastewater from flue gas mercury control (FGMC) systems and gasification systems. To that end, EPA presents eight regulatory options for public comment, four of which are EPA’s preferred regulatory alternatives for existing sources. EPA also identifies one preferred alternative for the regulation of new sources. The regulatory options presented by EPA differ in terms of the number of waste streams covered, the size of the units controlled, and the stringency of the controls that would be imposed.

Summary of EPA’s Preferred Alternatives

Existing sources that discharge directly to surface water. For existing sources that discharge directly to surface water (other than oil-fired generating units and small generating units with a capacity of 50 megawatts (MW) or less) EPA proposes four preferred alternatives for Best Available Technology Economically Achievable (BAT) that establish varying limits on discharges from each waste stream. EPA projects different levels of pollution reduction and associated costs for each alternative.

The first preferred alternative would establish: a “zero discharge” effluent limit for all pollutants in fly ash transport water and wastewater from FGMC systems; numeric effluent limits for arsenic, mercury, selenium, and total dissolved solids (TDS) in discharges from gasification processes; numeric effluent limits for copper and iron in discharges of nonchemical metal cleaning wastes; and effluent limits for bottom ash transport water and combustion residual leachate from landfills and surface impoundments that are equal to the current Best Practicable Control Technology Currently Available (BPT) effluent limits now in effect.

EPA’s second and third preferred alternatives would impose identical requirements to the alternative outlined above, except that each would also establish numeric effluent limits for arsenic, mercury, selenium, and nitrate-nitrite in discharges of FGD wastewater from certain facilities. The second preferred alternative would impose effluent limits on discharges of FGD wastewater only on steam electric facilities with a total plant-level wet scrubber capacity of 2,000 MW or greater, and the third preferred alternative would impose them only on generating units with a capacity greater than 50 MW. A fourth and final preferred alternative for BAT for existing sources would impose the same requirements as the third preferred alternative, while also establishing a “zero discharge” effluent limit for all pollutants in bottom ash transport water for generating units with a capacity greater than 400 MW.

For oil-fired units and small generating units (i.e., units with a generating capacity of 50 MW or less), EPA proposes to establish BAT effluent limits equal to the current BPT effluent limits for the waste streams identified in the four preferred alternatives.

Existing sources that discharge to publicly owned treatment works. EPA proposes to establish pretreatment standards for existing sources (PSES) that discharge to publicly owned treatment works (POTWs), including any device or system owned by a state or municipality and used in the treatment of municipal sewage or industrial waste of a liquid nature. PSES are designed to prevent the discharge of pollutants that pass through, interfere with, or are otherwise incompatible with the operation of POTWs. EPA intends to establish PSES that are equal to the proposed BAT, except that: numeric standards for discharges of nonchemical metal cleaning wastes would be established only for copper; pretreatment standards for discharges of bottom ash transport water would not be set for all units under the first three preferred alternatives (and, under the fourth alternative, would not be set for units with a nameplate capacity of 400 MW or less); and pretreatment standards for discharges from existing oil-fired units and small generating units would be set only for nonchemical metal cleaning wastes.

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New sources that discharge directly to surface water. For all new sources that discharge directly to surface water, including oil-fired generating units and small generating units, EPA proposes New Source Performance Standards (NSPS) that include: numeric standards for arsenic, mercury, selenium, and nitrate-nitrite in discharges of FGD wastewater; a “zero discharge” standard for all pollutants in fly ash transport water; a “zero discharge” standard for all pollutants in bottom ash transport water and wastewater from FGMC systems; numeric standards for arsenic, mercury, selenium, and TDS in discharges of wastewater from gasification processes; numeric standards for arsenic and mercury in discharges of combustion residual leachate; and numeric standards for total suspended solids (TSS), oil and grease, copper, and iron in discharges of nonchemical metal cleaning wastes.

New sources that discharge to publicly owned treatment works. For all new sources that discharge to POTWs, EPA proposes pretreatment standards for new sources (PSNS) that are equal to the NSPS described above, except that the PSNS would also establish a “zero discharge” standard for all pollutants in fly ash transport water, and would not include numeric standards for TSS, oil and grease, or iron in discharges of nonchemical metal cleaning wastes.

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Additional proposed options. In addition to the proposed requirements discussed above, EPA is considering requiring, as part of this rulemaking, best management practices (BMP) applicable to surface impoundments that contain coal combustion residuals (CCR). EPA is also considering, as part of the BAT for existing sources, a voluntary program that would provide incentives to power plants that dewater and close their surface impoundments and/or eliminate all process wastewater discharges (other than cooling water discharges). Per EPA’s proposal, plants would be afforded more time to implement the proposed BAT requirements if they adopt certain additional process changes and controls. Specifically, plants would be provided two additional years to comply with the regulations if they elect to dewater, close and cap all CCR surface impoundments at the facility (excluding combustion residual leachate impoundments, but including surface impoundments located on non-adjoining properties that receive CCRs from the facility). Power plants could also receive five additional years if they eliminate discharges of all process wastewater to surface waters, with the exception of cooling water discharges, as noted above.

Timing

EPA proposes that certain limitations and standards being considered for existing sources will not apply until July 1, 2017 (approximately three years from the effective date of the rule). Where EPA proposes to establish standards equal to the current effluent limitations, the revised requirements would become applicable on the effective date of the final rule. The Agency is acting under a consent decree to take final action under its Clean Water Act authority by May 22, 2014. The public comment period on the proposed rule will be open for 60 days from the date the notice is published in the Federal Register.

Implications of EPA’s Proposal

EPA’s proposed rule is the latest in a series of aggressive rulemakings targeting coal-fired power. In connection with each rulemaking, EPA assesses the economic impact of the individual rule and makes some pronouncement regarding its projected effect, including whether any facilities will be forced to close as a result of the rulemaking. EPA believes compliance with this proposed regulation would be economically achievable – costing between $185 million and $954 million, depending on the alternative chosen – and does not project that it will force any coal-fired plants to close. In fact, EPA believes that fewer than half of all coal-fired power plants are estimated to incur costs under the proposal because most power plants already have in place the technology and procedures to meet the proposed pollution control standards.

Lacking from this analysis, however, are considerations of the cumulative effects of an avalanche of EPA rules affecting the coal-fired power industry. Since 2009, EPA has proposed at least five major rules that will significantly impact coal-fired power. (The other rules include the Cross-State Air Pollution Rule, which was vacated by the D.C. Circuit last summer; the coal combustion residuals rule; the cooling water intake structure (§ 316(b)) rule; and the Mercury and Air Toxics Standard.) In addition, EPA plans to issue greenhouse gas regulations for existing power plants (and has already proposed rules that would prevent new coal-fired power plants from being built without the installation of currently cost-prohibitive carbon capture and sequestration technology), and has imposed greenhouse gas permitting requirements on coal-fired power. EPA’s proposed effluent limitation guidelines will certainly impose significant costs on many facilities, and when coupled with the cost of EPA’s rules under the Clean Air Act, there can be little question that some coal-fired facilities will close as a result.

For all the talk of supporting “clean coal” in the 2008 Presidential election, there has been little “support” for the industry, which is in dire straits. To be sure, the significant drop in natural gas prices resulting from hydraulic fracturing and the cleaner emissions profile of natural gas have contributed to a historic shift away from coal and toward natural gas. But despite EPA’s statement to the contrary, the cost of complying with EPA’s rules – including its proposed effluent limitation guidelines – is the other significant driver of change.For all the talk of supporting “clean coal” in the 2008 Presidential election, there has been little “support” for the industry, which is in dire straits. To be sure, the significant drop in natural gas prices resulting from hydraulic fracturing and the cleaner emissions profile of natural gas have contributed to a historic shift away from coal and toward natural gas. But despite EPA’s statement to the contrary, the cost of complying with EPA’s rules – including its proposed effluent limitation guidelines – is the other significant driver of change.