Trend from Coal-to-Gas Overshadows this Month’s Regulatory and Legal Developments

by | Sep 16, 2016

epa_logoThis September is a big month for the coal industry. Early in the month, the US Environmental Protection Agency released its final version of a modified Cross-State Air Pollution Rule that seeks to cut emissions from power plants tied to smog. And, at the end of the month, a federal circuit court will begin hearing arguments over the Clean Power Plan that aims to cut carbon emissions.

The plan to cut nitrogen oxide emissions that cause respiratory illness will no doubt get another challenge in court. Even if it could win such a case, the trend toward retiring older coal-fired plants is well underway. And it’s no doubt getting sped up by the Clean Power Plan, which aims to cut carbon emissions by 32 percent by 2030, from a 2005 baseline. The US Court of Appeals for the District of Columbia is to hear the case, again. 

Regardless of the environmental case, though, the coal industry’s strategy is to confront the environmental movement in the courts, a course that is long and unknown.

For what it is worth, the last few high profile cases — Cross-State Air Pollution Rule and the mercury rule — have not really gone industry’s way. That’s not to say that the courts have not tapered EPA’s desires, which may be the best that coal companies can hope for. But, in the end, tougher emissions rules are likely to take effect.

Unless the courts step in, the rules to cut smog will go into effect in May 2017 and affect 2,800 generating stations at 886 coal and natural gas plants. As far as the Clean Power Plan goes, the coal sector and its backers in big business believe they are in the legal right.

“EPA has no authority to require regulations that apply to the state as a whole,” says Jeff Holmstead, partner in the law firm of Bracewell & Giuliani, in a previous interview with this writer.

“What it can do is to require states to submit a plan that establishes a ‘standard of performance’ for any existing power plant in a state – as long as EPA gives the state the flexibility in setting the standard based on the age of the facility and other economic factors,” he adds.

“This standard must be based on the ‘best system of emission reduction’ that could be applied to that type of plant.”

But Harvard Law Professors Jody Freeman and Richard Lazarus explain that EPA’s rule gives states several alternative options to comply, such as replacing their coal-fired generation with plants that run on cleaner natural gas, or with green energies. States with a lot of coal, for instance, have less stringent requirements.

With that, Freeman and Lazarus point out that coal plants in this country are on average 42-years-old and pollute a lot more than newer plants. Still, coal is expected to supply 30 percent of the nation’s energy mix by 2030, which negates the argument that the plan is nothing more than a “power grab.”

As one analyst recently told this writer, the coal industry is suffering a slow death — by a “thousand cuts.” And if the insiders are correct, the DC circuit court will affirm EPA’s ability to curb carbon emissions, as it has done in the past. While that ruling may get appealed again to the US Supreme Court, it would probably get upheld, given that the court is now split 4-4; a tie vote keeps the lower court ruling in place.

The attack on carbon, mercury and nitrogen oxide are just too much for the utilities that burn coal. With natural gas so cheap and abundant, it is easier and less costly to retire older coal plants and to build combined cycle natural gas facilities. That’s why the regulatory and legal developments this month are really overshadowed by the ongoing trend.

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