American Electric Power Co., Duke Energy Corp., and others say they can’t recoup money they spent to meet requirements to cut mercury and other air toxics from their facilities and therefore want the EPA to retain the rule as is.
The Environmental Protection Agency may decide after a review to change or even revoke the current 2012 Mercury and Air Toxics Standards or MATS, which required most power plants to comply by April 2016. Though the power sector opposes the regulation, it has had no choice but to install expensive pollution controls or shutter aging power plants. Now that it has complied, the power sector wants the rule to stay
“Although we disagreed with provisions of the rule when it was being promulgated, our controls are in place and compliance is being achieved,” Melissa McHenry, a spokeswoman for American Electric Power in Columbus, Ohio, told Bloomberg Environment. “We believe a disruption in the MATS program at this point is not needed.”
The EPA’s review stalled a legal challenge in the U.S. District Court for the District of Columbia of the agency’s supplemental findings supporting the 2012 regulation. These findings followed the U.S. Supreme Court 2015 ruling in Michigan v. EPA that said the EPA erred in failing to determine whether the health benefits of the regulation justified its costs.
Public utility commissions charged with setting electricity rates for consumers require power companies to make sure that any compliance costs passed onto customers are “prudent.”
If the EPA decides to change the MATS rule or revoke it in any form after its review, “then the companies could be whipsawed, because they spent their money to meet the federal controls and the state utility commissions may see the costs as imprudent because the rule is not even in effect,” Lee Hoffman, an attorney with Hartford, Conn.-based Pullman & Comley LLC, told Bloomberg Environment.
Billions in Investment
American Electric Power, or AEP, which ranks among the nation’s largest electric utilities, has invested $8.8 billion since 2000 in retrofitting its coal-fueled power plants with environmental equipment that McHenry said “contributes to or directly provides compliance with the MATS requirements” and retired more than 7,200 megawatts of generation from 2011 through 2016.
AEP has worked with state regulatory commissions to recover its costs associated with compliance. But many other private and public companies have not, as national groups representing public and power companies—including the Edison Electric Institute, American Public Power Association and the National Rural Electric Cooperative Association—said in a July 10 letter to Bill Wehrum, EPA assistant administrator for air and radiation.
More importantly, “the industry already has invested significant capital—estimated at more than $18 billion—in addition to these operating costs, and states are relying on the operation of these controls for their air quality plans,” the groups told Wehrum.
Between January 2015 and April 2016, about 87.4 gigawatts, or 29 percent of 2014 coal capacity had installed pollution controls to reduce mercury and other related toxic gases, and nearly 20 GW of capacity was retired, according to a 2017 estimate by the Energy Information Administration.
Silent on Top Priority
Taking another look at the Obama-era MATs regulation is one of Wehrum’s priorities. He has repeatedly said he is aware of the power sector’s investment in meeting the rule but has not disclosed details about the agency’s plans.
At a recent gathering of lawyers, engineers, and consultants at the annual Air & Waste Management Association Meeting in late June, Wehrum reiterated that the EPA is trying to iron out the consequences of its finding that such a rule for the power sector was “appropriate and necessary.”
The national groups representing the power industry want Wehrum to conduct a risk and technology review of the 2012 regulation and to “leave the underlying MATS rule in place and effective.”
The Clean Air Act requires the EPA to conduct a risk review eight years after a hazardous air pollutant standard is put in place.
At most, they say the EPA should make minor revisions to the 2012 regulations, such as requiring fewer technology performance tests if the units are not as running as frequently.
“The industry wants the EPA to move forward on that technical review so they can demonstrate to the public that there is no risk from mercury given off by power plants, or at least they hope,” Gale Hoffnagle, senior vice president and technical director at TRC Environmental Corp., a Connecticut-based engineering and consulting firm, told Bloomberg Environment.
Environmental groups such as the Natural Resources Defense Council are skeptical of the industry’s motives. They say its letter is driven by its need to recover costs, not compliance, which the power sector has opposed from the inception of the rulemaking.
“It is all about the $$$ in Washington,” John Walke, NRDC’s senior attorney and clean air programs director, told Bloomberg Environment in an email.
However, a demonstration showing the extent to which emissions have been reduced would be a “public relations coup” for the industry, Hoffnagle said.
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(Corrects the second paragraph to reflect the rule is in effect)