Highlights from ERCC's Scott Segal’s Oral Statement at the May 24, 2012 EPA Public Hearing on the Proposed Carbon Pollution Standard for Future Power Plants

May 24, 2012

1. On behalf of the Electric Reliability Coordinating Council (ERCC), I am appearing today to discuss the so-called Carbon Pollution Standard for Future Power Plants.  ERCC is a group of power-generating companies that provide reliable and affordable power to millions of consumers in geographically diverse regions of the United States.  ERCC members have long supported commonsense interpretation of the Clean Air Act in order to ensure electric reliability, affordability, safety and environmental protection. 

2. The proposed rule has substantial legal shortcomings, like its treatment of gas-fired power as a “standard of performance” for  other fossil-fired facilities – instead of a completely distinct unit.  Or the creation of a new industrial source category that throws gas, coal and other fossil inputs together solely for the purpose of addressing climate change, and then teases them back out for regulation of traditional pollutants.

3. EPA has proposed standards that would require new coal-fired and certain other fossil power plants to use carbon capture and sequestration (CCS) technology.  Yet there is not any coal-fired or other fossil power plant in the world that has been able, even with substantial government subsidies, to use this technology on a commercial scale.  At this time, CCS is neither economically viable nor commercially available.  Moreover, because of the unusual structure of the NSPS program, even a proposed rule to require CCS would effectively ban the construction of new coal-fired power plants in the US.

4. EPA has made clear that a second tranche is coming for existing facilities.

5. When combined with the myriad of other regulations proposed, adopted, or currently planned by EPA, the GHG NSPS will present a near and present danger to the reliability of the electric grid and the nation’s economy.  The power sector is under severe pressure already from the myriad of rules and regulations coming from the EPA.  In addition to the GHG regulations, EPA has or will promulgate numerous new rules in 2010 – 2012.

6. As a result of EPA’s new regulations, including the proposed NSPS, the country may experience a shortage of electricity, and the reliability of our electricity grid will face substantial risks.  The downside impacts of reduced electric reliability are substantial and must be taken into account in any responsible analysis of applying NSPS to GHG emissions from power plants.

7. The proposed NSPS does not produce any tangible benefits, though it risks much in terms of energy reliability and affordability.  In one case – the Las Brisas project in Texas – the rule arguably endangers a state-of-the-art electricity generation facility proposed to recycle petroleum coke from neighboring refineries into a relatively clean source of energy.  If the EPA rule and the Agency’s general intransigence on permitting continue, it is likely that this pet coke will be used in facilities overseas, resulting in even greater carbon emissions due to its transport and less efficient end-users.  So, in cases like Las Brisas, the rule is likely to increase what the Agency now calls carbon pollution.

8. Further, by failing to hold the line on the price of electricity, the rule creates an incentive for energy-intensive manufacturing industries to seek locations overseas.  At the very time the United States appears bent on a coordinated regulatory strategy to marginalize coal and other fossil fuels, our strongest trading partners in both Asia and Europe intend to continue to pursue coal-fired capacity as an important element of their energy strategies.  A recent survey shows coal-fired power plants capacity to grow by 35 per cent in next 10 years overseas. World coal-fired power plant capacity will grow from 1,759,000 MW in 2010 to 2,384,000 MW in 2020. Some 80,000 MW will be replaced. So there will be 705,000 MW of new coal-fired boilers built. The annual new boiler sales will average 70,000 MW. The annual investment will be $140 billion.  See McIlvaine Company, Coal-fired Boilers: World Analysis and Forecast, cited in Power Engineer at http://www.engineerlive.com/Power-Engineer/Focus_on_Coal/Coal-fired_power_plants_capacity_to_grow_by_35_per_cent_in_next_10_years/21600/  

9. By contrast, increasing energy costs in the United States motivates closure of manufacturing assets and their transfer overseas.  As a recent report from the Maguire Energy Institute at the Southern Methodist University put it, “Numerous studies find that regulatory burdens of this sort imposed on energy prices and energy supply cause plant closures and maximize the potential that manufacturing jobs will move overseas. For each manufacturing job lost, many other dependent jobs will also exit the economy. One in eight private sector jobs rely upon our manufacturing base.”  See http://pressdocs.cox.smu.edu/maguire/SMU_Utility_MACT_Report.pdf  Beyond economic impact, such “leakage” has a direct effect on whether climate policy actually produces benefits.  The International Energy Agency has observed that such leakage can result in “the increase in emissions outside a region as a direct result of the policy to cap emission in this region. Carbon leakage means that the domestic climate mitigation policy is less effective and more costly in containing emission levels, a legitimate concern for policy-makers.” See J. Reinaud, IEA: Climate Policy and Carbon Leakage, Oct. 2008, at www.iea.org/papers/2008/Aluminium_EU_ETS.pdf

10. Much is at risk.  But as EPA says, it does “not anticipate any notable CO2 emissions changes resulting from the rule,” hence “there are no monetized climate benefits in terms of CO2 emission reductions associated with this rulemaking” (p. 202).