Let Sleeping Dinosaurs Lie: An Analysis of the Affordable Clean Energy (ACE) rule

by Janet K. Redman

Coal is the decomposed remains of sea and land creatures that were buried and compressed by sediments over millions of years, which is where the term “fossil fuel” comes from. In this way, the coal industry is literally and figuratively a dinosaur. In the US, the push is on to replace fossil fuels with renewable energy technologies like solar, wind, and tidal sources. Across the country, individual states are embracing renewable energy to varying degrees. As of 2017, West Virginia and Wyoming remained steadfast supporters of coal (receiving 95% and 88% of their energy supply from it, respectively), while California, Idaho, New York, Rhode Island and Vermont are at the opposite end of the spectrum, with not one compressed T-Rex or trilobite being used to generate their heat or energy. While coal is being eased out in practical use, public policy (most notably from the Environmental Protection Agency) is unwilling to let sleeping dinosaurs lie. This is most apparent from their recent energy rule.

The Environmental Protection Agency (EPA) issued the Affordable Clean Energy (ACE) rule on Wednesday, June 19th, 2019. The rule is designed to provide existing coal-fired electric utility generating units (EGUs) with standards for reducing greenhouse gas (GHG) emissions that are both achievable and realistic. By this rule, the previous Obama-era Clean Power Plan (CPP) is repealed. Section 111 (d)(1) of the Clean Air Act is the focus of both the ACE and the CPP. It requires the EPA to prescribe regulations under which states submit individual Implementation Plans for existing sources of carbon dioxide (CO2) emissions. Section 111 (d) (1) in its entirety is as follows:

(d)Standards of performance for existing sources; remaining useful life of source

(1)

The Administrator shall prescribe regulations which shall establish a procedure similar to that provided by section 7410 of this title under which each State shall submit to the Administrator a plan which (A) establishes standards of performance for any existing source for any air pollutant (i) for which air quality criteria have not been issued or which is not included on a list published under section 7408(a) of this title or emitted from a source category which is regulated under section 7412 of this title but (ii) to which a standard of performance under this section would apply if such existing source were a new source, and (B) provides for the implementation and enforcement of such standards of performance. Regulations of the Administrator under this paragraph shall permit the State in applying a standard of performance to any particular source under a plan submitted under this paragraph to take into consideration, among other factors, the remaining useful life of the existing source to which such standard applies.

For background, we go back over fifty years to President Lyndon B. Johnson. Congress passed the Clean Air Act (CAA) in 1963, and Johnson signed it to “establish the Government’s obligation…to act forcefully against air pollution.” In a special message to Congress, Johnson cautioned that “air pollution is no longer confined to isolated places. This generation (which was part of the Industrial Revolution) has altered the composition of the atmosphere on a global scale through radioactive materials and a steady increase in carbon dioxide from the burning of fossil fuels.” He recommended the CAA in order to proactively identify and mitigate air pollution before it happened, “rather than having to wait until the damage occurs.”[i] The modern CAA was signed in 1970 by President Nixon and amended in 1977 and 1990. It includes forward-looking language authorizing the EPA Administrator to regulate air pollution “which may reasonably be anticipated to endanger public health or welfare.” As decades passed, scientific evidence was gathered about the dangers caused by an accumulation of greenhouse gases in the atmosphere. In 2003, the EPA denied a petition to regulate greenhouse gases emitted from motor vehicles, claiming that they were not “air pollutants” under the CAA. Environmental groups, states and municipalities challenged that decision and prevailed in the landmark 2007 Supreme Court ruling in Massachusetts v. EPA. By a 5-4 vote, the Court found that GHG’s fit easily into the CAA’s definition of “air pollutant” and noted that the Act defined “public health or welfare” similarly broadly to include effects on weather and climate. They held that the EPA had to limit GHG’s under the CAA if they are a threat to public health. In 2009, the EPA conducted a thorough examination of the scientific evidence of climate change and considered thousands of public comments. The result was the “Endangerment Finding”, which determined that GHG emissions (including CO2) from motor vehicles contributed to the dangerous atmospheric build-up of climate pollution.

The Clean Power Plan was proposed by the Obama administration to combat “anthropogenic” climate change. “Anthropogenic” is defined as “relating to the influence of human beings on nature”, and indeed our current subdivision of geologic time is already being referred to as the Anthropocene Epoch by some scientists who recommended this designation to the International Geological Congress in 2016.[ii] Obama unveiled the final version of the plan on August 3, 2015. After legal challenges, which I will describe below, the CPP was poised for repeal in October 2017. The replacement for it is the Affordable Clean Energy rule.

The critical detail lies in how the ACE rule intends to lower emissions compared to the CPP. In both versions, the EPA lays out a standard known as the “Best System of Emission Reduction” (BSER). In Obama’s CPP, standards of performance were initially issued at the state level, and the state emissions targets were based on a blending of coal and natural gas power plants. This effectually created a “state bubble” where all the power plants in a state were considered collectively with the goal of meeting the standards, not on a plant-by-plant basis. Under the CPP, states had flexibility in determining how they would meet the emission goal, using either a rate-based or mass-based target. A rate-based target put a limit on the emissions per unit of electricity generated, while a mass-based target simply put a cap on CO2 emissions as a whole (expressed in tons).  States making use of the same target would have been able to trade their CO2 allowances and credits. Switching to cleaner energy fuels and capturing CO2 emissions were encouraged under the CPP. The CPP required states to meet greenhouse gas emissions targets on power plants that were designed to reduce US power sector emissions 32% below 2005 levels by 2030. Legal opposition to the CPP happened immediately. The “state bubble” approach was challenged as being “outside the fence”, which held that the EPA has the authority to regulate the individual power plants only. Individual states claimed that their 10th Amendment Rights (which says that the federal government only has those powers specifically granted to it by the Constitution) were violated and that the EPA was asserting vast authority over states’ energy grids without Congressional approval. Many energy producers challenged the CPP for enacting stricter rules for existing power plants than for new ones. About the only thing both the CPP and ACE have in common is their advocacy of efficiency improvements at effected coal-fired power plants.

In introducing the new ACE rule, EPA Administrator Andrew Wheeler stood before an audience including coal miners in hard hats and criticized the CPP. In defining the BSER, Wheeler explained the one method ACE relies on, Heat Rate Improvement (HRI). Heat rate represents the amount of heat (and correspondingly, the amount of fuel combusted) that is required to generate a given unit of electricity. By reducing the amount of heat needed to produce a unit of electricity, EGUs can reduce the amount of fuel combusted and CO2 emitted as a function of the outputs. By employing a broad range of HRI techniques and technologies, EGUs should be more efficient. Wheeler stated that the EPA considered technical feasibility, cost, non-air quality health and environmental impacts, and energy requirements in formulating the BSER. ACE lists six HRI technologies that may be employed, as well as additional operating and maintenance practices. The six technologies are:

·      Neural network/Intelligent sootblowers

·      Boiler Feed Pumps

·      Air Heater and Duct Leakage Control

·      Variable Frequency Drives

·      Blade Path Upgrade (steam turbine)

·      Redesign/Replace Economizer[iii]

Approximately 600 coal-fired electric generating units at 300 facilities fall under this rule. The EPA has quantified the degree of emission reduction achievable as ranges of expected improvements and costs. With the ACE, as opposed to the CPP, each state establishes “standards of performance” on a power plant-by-power plant basis, not as a “state bubble.” States are encouraged to consider “the remaining useful life” of each individual power plant. The HRI technologies were chosen because they can be applied broadly and are not limited due to geography or fuel type. States are given much greater latitude under ACE, which recognizes that the EPA’s statutory role is to determine the BSER along with the degree of emission limitation possible while the states’ role is to establish and create State Implementation Plans (SIP’s) that include how the Plan will be enforced. The SIP’s must explain how the state applied BSER to each power plant along with any other factors it considered. The plans are due in three years, or approximately 6/19/22. The EPA believes the ACE’s interpretation more appropriately balances federal and state responsibilities as they are defined in the CAA.[iv]

Strengths of ACE:

·      It provides much needed regulatory certainty for the coal-fired power plant industry, potentially leading to stable electricity bills for end users.[v]

·      ACE properly reflects the scope and bounds of the CAA by recognizing the EPA’s statutory role to determine BSER based on measures that can be applied at the individual source level, or “inside the fence.”

·      The EPA acknowledges states’ authority to submit their own plans, tailoring them for efficiency and affordability, without dictating what the result must be.

·      ACE keeps federalism intact. In this system of government, power is divided between the national government and other governmental units, such as the states.

·      ACE includes an EPA proposal to revise certain requirements of the CAA’s New Source Review (NSR) program. The NSR program, as implemented by EPA’s enforcement arm, has been a source of regulatory uncertainty in the industry and has prevented the implementation of projects that could improve reliability, safety, and efficiency. Many coal power plant owners support EPA’s proposal to adopt an hourly emission increase test for what is a “modification” under the NSR program, independent of any action EPA may take with respect to adopting emission guidelines for existing EGUs.

·      ACE is appealing to any states, such as Kentucky, where much of the population lives and works in communities that depend heavily on coal. The rule is seen as a nod to the importance of smaller communities over large urban areas.[vi]

·      It is one of the first times that climate change is acknowledged by the Trump administration, even if it is indirect. ACE notes that coal power has declined economically in the US. It also states that the goals of the CPP would have been achieved ahead of time, even without the Plan going into effect.

Weaknesses of ACE:

·      EPA makes certain statements in the notice implying that it may not approve state plans if those plans contain more stringent measures than those identified by the EPA. It cautions against “measures that the EPA has no authority to approve or enforce as a matter of federal law.” If state plans are not approved, it would fall to the EPA to impose their own plan on the state.

·      The ACE Rule prevents states from adopting market-based or flexible compliance mechanisms to satisfy the standards. These aspects of the proposal appear to prevent states that have adopted a greenhouse gas (GHG) emissions trading program — such as the Regional Greenhouse Gas Initiative (RGGI) — from using compliance with that program as a standard under the ACE Rule. In certain instances, an EGU may face inconsistent or even contradictory requirements.

·      Most sources will not have to comply with the new rule for many years. First, they have 3 years to develop their SIP’s. If those are not approved, the EPA will step in with their own plan for the state. ACE gives states discretion to establish tailored compliance deadlines for sources, noting the compliance deadline may be up to 24 months from the date of state plan submittal. With the threat of climate change growing every day, this is not an acceptable timeframe.

·      The ACE Rule is limited to coal-fired power plants for now, applying only to coal-fired EGUs. EPA’s notice confirms that the final rule does not apply to integrated gasification combined cycle (IGCC) units, oil- or natural gas-fired utility boilers, or fossil fuel-fired stationary combustion turbines. The CPP was more expansive.

·      The CPP talked of “anthropogenic” climate change, making the clear link to CO2 and other GHG’s to global warming. The language of the ACE is nowhere near as direct. And as we have seen from the abdication of the US from the Paris Climate Accord and the current EPAs’ continual weakening of climate legislation, the US is heading in a different direction than the rest of the world.

·      The ACE rule will potentially allow more pollution causing climate change problems. Increased efficiency under ACE may lead coal-fired plants to use more coal rather than less. The power industry may choose to retrofit existing coal and natural gas plants rather than shifting resources to renewable energy. The CPP set a goal of reducing carbon pollution from the power sector by 32 percent overall by 2030. States had clear standards and flexible tools to reduce or offset carbon pollution and the energy industry had a predictable set of standards for making investment decisions. EPA’s own analysis shows that its ACE rule would result in more pollution, which is estimated to cause 1,630 more early deaths per year in 2030 compared to implementing the Clean Power Plan.[vii]

·      The ACE rule constrains economic growth and costs jobs. Cost-benefit analyses consistently showed that the CPP would result in a net gain for the economy. Replacing it with ACE won’t save the economically uncompetitive coal industry. Renewable energy is cheaper than coal, and Midwestern utilities, such as Consumers Energy and NIPSCO, are shifting to renewable energy such as wind and solar power. By contrast, coal plant pollution imposes higher health care and environmental remediation costs on consumers beyond just utility bills. Renewable energy jobs are booming across America and greatly exceed coal plant and mining jobs in most states.

·      The ACE rule is not “affordable,” because the costs of climate change are high and getting higher. Keeping large parts of the U.S. energy economy unduly chained to more costly coal plants means that our nation will fall behind the world’s growing green economy instead of leading with innovation. Allowing more old coal plants to keep polluting our air and water means people will pay more through higher healthcare costs and insurance rates.

·      Litigation will dominate the landscape for the foreseeable future. Already, the Attorneys General for NY and OR have announced their opposition to ACE.[viii] Petitions for judicial review of the ACE Rule, CPP repeal, and revisions to the 111(d) implementing regulations must be filed in the D.C. Circuit within 60 days of the final rules’ publication in the Federal Register. Litigation involving EPA approval of individual state plans is likely to follow.

Improving the ACE: 

·      ACE must be expanded beyond “existing coal-fired power plants.” The Energy Information Administration (EIA) notes that CO2 emissions from the US power sector have declined 28% from 2005. It has calculated that CO2 emissions from the electric power sector totaled 1,763 million metric tons in 2018, the lowest level since 1987. This decrease in CO2 emissions is due in part to public power utilities’ investment in low and non-emitting generation technologies, such as solar, wind, hydro, nuclear, and natural gas. [ix] The power sector needs to continue to reduce CO2 emissions from all sources to bend the GHG emissions curve in a way that is favorable to our planet.

·      Higher CO2 reductions are critical. While the EPA projects that ACE will lead to a reduction in CO2 emissions of 10 million tons and provide annual net benefits of $70-100 million annually, the CPP was expected to reduce emissions by 870 million tons.[x] As far as benefits go, it all depends how the social cost of carbon and whether other GHG reductions are considered. For example, particulate emissions have serious morbidity and mortality effects. The EPA isn’t making an apples-to-apples comparison of ACE to the CPP.

·      A more aggressive timeframe needs to be implemented. As discussed above, states may have anywhere from 3-5+ years to implement efficiencies. The timeframe should be shortened to 1-2 years.

·      Other financial incentives, such as the cap and trade program proposed in the CPP, should be implemented to encourage a market-driven response to energy generation and usage.

·      The ACE rule needs to be bolder and more in line with the EPA’s mission. The Clean Air Act requires EPA to adopt the “best system of emissions reduction” to reduce air pollution, including carbon emissions. The ACE rule does not meet that goal, it substantially weakens prior requirements for CO2 pollution reductions, and it does not include pollution reduction standards at all for existing natural gas plants. In short, the ACE rule abandons EPA’s responsibility to take effective actions to reduce carbon pollution from power plants even though scientific evidence demonstrates that CO2 pollution endangers public health.

·      A Carbon Capture and Storage (CCS) system can be deployed at the coal-fired facility. This process can capture 90% of a fossil-fuel burning plant’s CO2 emissions. The CO2 is transported in liquid form and permanently stored far below the earth’s surface, making it very similar to how nature has stored oil, gas, and CO2 for millions of years.[xi]

·      New uses and development of aging coal-fired facilities need to be introduced. Nearly 300 coal-fired power plants have been “retired” since 2010, according to the Sierra Club. Some were replaced with new natural gas power plants, which take up less space than the coal plants and produce almost three times the electricity. Renewable energy technologies can also be implemented and can make use of the existing power lines and transmission systems. Often, railroad tracks and access to municipal or river water are an additional asset. Environmental concerns must be addressed as there will be pollution from burning coal and storing ash. Sites may be unstable for housing development and would have limits on using the soil and groundwater. However, some industries can fill the old power plant spaces nicely. At the Shamokin Dam site in PA, a different kind of plant is taking over as a large medical marijuana cultivating facility is being developed. Other potential uses include a large computer data processing facility, a warehouse, or a wood waste recycling center.[xii]

Scope and Importance of Policy:

The scope of the ACE rule is not massive. According to U.S. Energy Information Administration (EIA) data, the United States has 742 operating coal units of 1 megawatt or larger, only approximately 600 of which will be affected. Over 50 coal plants have shut down since President Trump was sworn in, and that trend is forecast to continue. In its latest Short-Term Energy Outlook (STEO), EIA said it expects the share of U.S. total utility-scale electricity generation from coal will average 24% in 2019 and 23% in 2020, down from 27% in 2018. Meanwhile, natural gas-fired generation is forecast to rise from 35% in 2018 to 37% in 2019 and to 38% in 2020. EIA expects non-hydroelectric renewable energy resources such as solar and wind will be the fastest growing source of U.S. electricity generation for at least the next two years. EIA forecasts that electricity generation from utility-scale solar generating units will grow by 10% in 2019 and by 17% in 2020. According to the January STEO, wind generation will grow by 12% and 14% during the next two years. [xiii]

As with many policies, what isn’t said is often as important as what is said. While the scope of ACE on the number of affected power plants is limited, the importance of the ACE rule is large. It is an attempt to throw the struggling coal-fired power plant industry a lifeline, allowing them to continue operating aging plants. It is encouraging individual states to operate in energy silos, with little incentive for regional cooperation on energy production. It will most likely be stalled in litigation for years, or until another administration is elected with a greater respect for science and global trends. The ACE rule doesn’t address the global shift to renewable energy technologies and the use of market-driven forces to help identify and develop new energy sources. To me, the ACE rule feels like a paper fence attempting to stop a clean energy boulder from rolling down a hill.

As Lyndon B. Johnson remarked when signing the Air Quality Act of 1967, “Don’t we really risk our own damnation every day by destroying the air that gives us life? I think we do.”

[i] Johnson, Lyndon B. Remarks Upon Signing the Air Quality Act of 1967. Washington, DC.

[ii] Carrington, Damian. August 29, 2016. “The Anthropocene Epoch: Scientists Declare Dawn of Human-Influenced Age.” The Guardian. United Kingdom.

[iii] Fact Sheet: The Affordable Clean Energy Rule (ACE). June 19, 2019. Retrieved from www.epa.gov/stationary-sources-air-pollution.

[iv] Ibid.

[v] June 19, 2019. Retrieved from www.publicpower.org (representing community-owned utilities powering 2000 towns and covering 49 million consumers nationwide).

[vi] Klump, Edward and Northey, Hannah. July 1, 2019. “How Officials from 4 States View Trump’s New Carbon Rule”. Energy News Network. NY.

[vii] Dlouhy, Jennifer and Flavelle, Christopher. August 21, 2018. “Trump’s EPA Says More Americans Will Die Under It’s Power Plant Rollback”. Bloomberg News. NY.

[viii] Nawaguna, Elvina. June 21, 2019. “As EPA Finalizes New Carbon Emissions Rule, Blue States Gear Up for Legal Battle”. Retrieved from www.governing.com/topics/transportation-infrastructure/tns-trump-carbon-emissions-rule-legal-battle.html.

[ix] Retrieved from https://www.eia.gov/tools/faqs/faq.php?id=77&t=11.

[x] Jordan, Russell. June 21, 2019. “Goodbye, Clean Power Plan: Stanford Researchers Discuss the New Energy Rule”. Stanford News. Palo Alto, CA.

[xi] Retrieved from https://www.ccsassociation.org/what-is-ccs/.

[xii] Brady, Jeff. May 23, 2019. “Finding New Opportunities for Old Coal-Fired Power Plant Sites”. NPR Environment and Energy Collaborative. NY.

[xiii] Retrieved from faq.php?id=77&t=11.