Questions left unanswered by EPA’s transport rule

July 8, 2010

By now, most people in the power industry have formed an opinion about the transport rule from the Environmental Protection Agency (EPA) released on July 6. The new rule calls for reductions in sulfur dioxide (SO2) and nitrogen dioxide (NOx) emissions that would cross state lines.

2012? Really?
Industry opinions about the rule vary, but most folks say their biggest worry is meeting the 2012 compliance deadline. In order to cut emissions, plants will have to install new control equipment, switch to low sulfur coal, or use control equipment that they already have installed. But converting to a new type of coal isn’t as simple as ordering a book on Amazon and waiting for it to be delivered. Many companies have contracts with their current coal suppliers that may run until 2014. And if plants decide to go the route of installing new control equipment, such as NOx burners, Selective Catalytic Reduction, or scrubbers (Flue Gas Desulfurization), it will be a frantic race to do so before the 2012 deadline.

Melissa McHenry, spokesperson for American Electric Power (AEP), said one of AEP’s initial concerns is whether 2012 is a firm limit or not.

“You can’t replace a piece of generation that quickly or do a retrofit that quickly,” McHenry said.

What’s My Allowance?
Another question many in the industry are asking is what each state will do with their allocations. EPA has three approaches listed, and each has different strengths and weaknesses. The first approach – which is EPA’s preferred approach – allows intrastate trading and limited interstate trading among power plants but requires each state to meet its own emissions control obligations. The second approach allows for trading among power plants within a state. And in the third approach, EPA specifies the allowable emission limit for each power plant and allows some averaging of emission rates.

“The allowance market in the new rule will be interesting. If you get to the point where you’re just trading within the state, how big are the utilities going to be?” said Block Andrews, strategic environmental solutions associate with Burns & McDonnell.

At the time the court vacated the CAIR in July 2008, the allowance market eliminated the existence of NOx allowances because they were a creation of the CAIR rule. How will EPA refigure the new rule to allow for NOx allowances? It seems the allowance markets may be jostled until these questions are answered.

Do we have the people to make this happen?
One thing’s for certain – there are enough technologies available to implement the new boilers, burners or scrubbers in power plants needed to meet the new EPA guidelines. W. Randall Rawson, President and CEO of the American Boiler Manufacturers Association, wonders if the right people are in place to make the transition.

“It’s a caution as an industry we have to talk about. Times have changed to a certain extent. We don’t have the work force we used to, for a lot of reasons: mergers, retirement, consolidations.”

With that in mind, the question is whether or not the existing equipment can be put to use in a timely manner.

What questions are boggling your mind after the announcement of the new Transport Rule? Leave me a comment to continue this ongoing conversation.