Landmark EPA Clean Air Act Settlement with TVA
On April 14, 2011, the EPA announced the settlement of a twelve year dispute with Tennessee Valley Authority (TVA) over Clean Air Act violations. In the settlement, TVA agrees to permanently retire 2,700 MW of coal power from Alabama, Kentucky and Tennessee and invest an estimated $3 to $5 billion on new and upgraded state-of-the-art pollution controls on 11 coal fired plants. The EPA estimates that this action will prevent an estimated 1,200 to 3,000 premature deaths, 2,000 heart attacks and 21,000 cases of asthma attacks each year, resulting in up to $27 billion in annual health benefits.
The dispute stems from an administrative compliance order that EPA issued to TVA in November 1999, alleging that TVA modified a number of coal-fired units at nine of TVA's plants without first obtaining preconstruction permits and installing and operating state-of-the-art pollution control technology. Under the settlement agreement, TVA will upgrade 92% of its remaining coal fired fleet by either installing state-of-the-art selective catalytic reduction, flue gas desulfurization, or repowering the assets to burn renewable biomass. The settlement also requires TVA to spend $240 million on energy efficiency initiatives and to provide $1 million to the National Park Service and the National Forest Service to improve, protect, or rehabilitate forest and park lands that have been impacted by emissions from TVA’s plants, including Mammoth Cave National Park and Great Smoky Mountains National Park.
TVA, a corporation owned by the U.S. government, provides electricity for 9 million people in parts of seven southeastern states at prices below the national average. TVA, which receives no taxpayer money and makes no profits, developed an “Integrated Resource Plan,” detailing two portfolio standards, 2,500 MW or 3,500 MW of renewable energy by 2020. Notably, only 2 of TVA’s 7 states, North Carolina and Virginia, are subject to RPS standards.
This settlement is a major boost for the renewable energy industry. By 2012, TVA will have 1,625 MW of renewables in its portfolio. In addition to needing 1,000 – 2,000 MW of new renewable generation to fill its renewable energy portfolio, it now must offset its retired 2,700 MW coal power by 2018.
For more information:
EPA Press Release on Settlement: http://yosemite.epa.gov/opa/admpress.nsf/ab2d81eb088f4a7e85257359003f5339/45cbf1a4262af67b8525787200516dd7!OpenDocument
EPA’s Overview and Settlement with TVA:
http://www.epa.gov/compliance/resources/cases/civil/caa/tvacoal-fired.html
A Change in Direction: EPA Must Consider CO2 Emissions When Issuing Permits for New Power Plants
In case there was any doubt after the recent watershed election, the times they are a-changin’. The U.S. Environmental Protection Agency (“EPA”) Environmental Appeals Board’s (“EAB”) recent ruling, In Re Deseret Power Electric Cooperative, could pave the way for EPA-imposed CO2 emissions limits on power plants and other significant sources of CO2 emissions. In response to a lawsuit filed by the Sierra Club over the EPA’s issuance of a permit authorizing the construction of a new coal generating unit near Bonanza, Utah, the EAB has ruled that the EPA must consider CO2 emissions when determining whether to issue permits for new power plants.
Background
The Clean Air Act (“CAA”) requires EPA to issue a prevention of significant deterioration (“PSD”) permit whenever a new major source of air pollution is constructed or when major modifications are made to an existing source in certain areas in the U.S. Among other requirements, PSD permits must consider a best available control technology (“BACT”) emissions standard for every pollutant that is “subject to regulation” under the CAA. As the name suggests, BACT is an emissions limit based on the highest achievable degree of control.
In 2004, Deseret Power Electric Cooperative (“Deseret”) applied for a PSD permit to build a new waste-coal-fired generating unit at its existing Bonanza Power Plant. Prior to EPA’s issuance of the permit, the Sierra Club filed comments before the EPA suggesting that Massachusetts v. EPA, which was then pending before the U.S. Supreme Court, could ultimately require EPA to impose a BACT emissions limit on the Deseret plant’s CO2 emissions.
In its April 2007 decision in Massachusetts v. EPA, the Supreme Court held that CO2 is an “air pollutant” under the CAA. A few months later, EPA issued the PSD permit authorizing Deseret to build the waste-coal-fired generating unit and stating that Massachusetts v. EPA did not require it to cap CO2 emissions. Sierra Club filed a lawsuit arguing in part that EPA violated the CAA in issuing the permit because it did not require a BACT emissions limit for controlling CO2 emissions. EPA countered that based on a historical agency interpretation, it did not have to impose a CO2 BACT limit because CO2 was not subject to any rules or regulations requiring actual control over such emissions.
EAB Decision
The EAB explicitly stated that it did not determine that the CAA requires EPA to impose a BACT limit on CO2 emissions. However, it rejected EPA’s reason for not imposing a CO2 BACT limit as not supported by the record. As a result, it remanded the permit to EPA for it to “reconsider whether or not to impose a CO2 BACT limit and to develop an adequate record for its decision.” Thus, the EAB’s decision compels EPA to consider CO2 emissions when evaluating permits for power plants—both new and modified. Although EPA may ultimately decide not to impose a BACT limit, it must at the very least incorporate the BACT analysis into its permit deliberations.
Implications
In the short term, the EAB decision will add uncertainty to the certification process for new coal plants, given the high concentrations of CO2 in coal. This uncertainty is likely to continue until a national policy is adopted addressing CO2 emissions. As the EAB noted, “[i]n remanding this permit to [EPA] for reconsideration of the CO2 BACT issue, we recognize that the issue of whether CO2 is ‘subject to regulation’ under [the Clean Air] Act’ is an issue of national scope and that all parties would be better served by addressing it in the context of an action of nationwide scope rather than in the context of a specific permit proceeding.”
