Regulation and Compliance in the US Power Generation Market · Session 201601 Regulation and...

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Session 201601 Regulation and Compliance in the US Power Generation Market Daniel L. Chartier Vice President, Government Affairs Corn Refiners Association ABB Automation & Power World March 3, 2015 Houston, Texas

Transcript of Regulation and Compliance in the US Power Generation Market · Session 201601 Regulation and...

Page 1: Regulation and Compliance in the US Power Generation Market · Session 201601 Regulation and Compliance in the US Power Generation Market Daniel L. Chartier Vice President, Government

Session 201601

Regulation and

Compliance in the US

Power Generation

Market

Daniel L. Chartier

Vice President, Government Affairs

Corn Refiners Association

ABB Automation & Power World

March 3, 2015

Houston, Texas

Page 2: Regulation and Compliance in the US Power Generation Market · Session 201601 Regulation and Compliance in the US Power Generation Market Daniel L. Chartier Vice President, Government

The Corn Refiners Association

CRA has represented the corn refining

industry of the United States since 1913

Corn refiners manufacture sweeteners,

ethanol, starch, bioproducts, corn oil and

feed products from corn components such as

starch, oil, protein and fiber

See more at: www.corn.org

Producers and users of electricity and steam

Impacted by each of the rules discussed

today

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Page 3: Regulation and Compliance in the US Power Generation Market · Session 201601 Regulation and Compliance in the US Power Generation Market Daniel L. Chartier Vice President, Government

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Air

Water

Climate

Waste

Page 4: Regulation and Compliance in the US Power Generation Market · Session 201601 Regulation and Compliance in the US Power Generation Market Daniel L. Chartier Vice President, Government

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Air•Cross-State Air

Pollution Rule (CSAPR)

•National Ambient Air Quality Standard (NAAQS) for Ozone

•Mercury & Air Toxics Rule (MATS)

Page 5: Regulation and Compliance in the US Power Generation Market · Session 201601 Regulation and Compliance in the US Power Generation Market Daniel L. Chartier Vice President, Government

Cross-state Air Pollution Rule (CSAPR)

August 2011 – CASPR published

Affects power companies in 27 eastern states

through budgets for NOX and/or SO2 (both for

most states) to meet 1997 ozone standard

August 2012, D.C. Circuit vacates rule; Clean

Air Interstate Rule (CAIR) remains in place

April 2014, Supreme Court reverses D.C.

circuit and remands case

October 2014, D.C. Circuit lifts stay, moves

compliance deadlines

Phase I: 2015/2016; Phase 2: 2017

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Page 6: Regulation and Compliance in the US Power Generation Market · Session 201601 Regulation and Compliance in the US Power Generation Market Daniel L. Chartier Vice President, Government

CSAPR - Geography

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Page 7: Regulation and Compliance in the US Power Generation Market · Session 201601 Regulation and Compliance in the US Power Generation Market Daniel L. Chartier Vice President, Government

CSAPR - Litigation continues

Industry

Allegations of over control; Challenges to modeling

Requested remedy: Vacate ozone season requirements in

14 states; Remand emission budgets to correct errors

States

Deficiencies with EPA’s disapproval of SIPs ; Over-control in

Texas; Notice and comment deficiencies

Requested remedy: Complete vacatur; Vacatur of rule as it

relates to Texas

Briefing complete; Oral arguments held

February 25, 2015

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Page 8: Regulation and Compliance in the US Power Generation Market · Session 201601 Regulation and Compliance in the US Power Generation Market Daniel L. Chartier Vice President, Government

Ozone NAAQS

NAAQS are supposed to be reviewed every

5 years; In Jan. 2010, EPA proposed revising

the std. in the range of 60 to 70 ppb.

In September 2011, President Obama

instructed EPA to withdraw the revised

proposal, keeping the primary standard at 75

ppb.

New standards proposed November 2014

Current primary standard, 75 ppb

Proposed primary standard range, 65-70 ppb

Comment requested on standard as low as 60 ppb

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Page 9: Regulation and Compliance in the US Power Generation Market · Session 201601 Regulation and Compliance in the US Power Generation Market Daniel L. Chartier Vice President, Government

Ozone Nonattainment Areas Under

the Current (2008) Standard of 75 ppb

9Source: EPA; http://www.epa.gov/groundlevelozone/designations/2008standards/final/finalmap.htm

Page 10: Regulation and Compliance in the US Power Generation Market · Session 201601 Regulation and Compliance in the US Power Generation Market Daniel L. Chartier Vice President, Government

EPA’s Projection of Nonattainment

Areas Under the Proposed Standard

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Page 11: Regulation and Compliance in the US Power Generation Market · Session 201601 Regulation and Compliance in the US Power Generation Market Daniel L. Chartier Vice President, Government

API’s Nonattainment Projection

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Page 12: Regulation and Compliance in the US Power Generation Market · Session 201601 Regulation and Compliance in the US Power Generation Market Daniel L. Chartier Vice President, Government

Mercury & Air Toxics Rule (MATS)

Rule published April 16, 2012

Metals, including mercury, arsenic, chromium &

nickel

Acid gases including hydrogen chloride &

hydrogen fluoride

Particulate matter

EPA granted reconsideration of certain new

source issues

Petitions for review consolidated under

White Stallion Energy Center LLC v. EPA

Rule upheld by DC Circuit April 15, 2014

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Page 13: Regulation and Compliance in the US Power Generation Market · Session 201601 Regulation and Compliance in the US Power Generation Market Daniel L. Chartier Vice President, Government

MATS Timeline

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Page 14: Regulation and Compliance in the US Power Generation Market · Session 201601 Regulation and Compliance in the US Power Generation Market Daniel L. Chartier Vice President, Government

There’s moreimpacting air…

Regional visibility requirements for Class I

areas

Updates to additional National Ambient Air

Quality Standards

More “transport” rules

Standards to be used during Start-up,

Shutdown and Malfunction (SSM)

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Page 15: Regulation and Compliance in the US Power Generation Market · Session 201601 Regulation and Compliance in the US Power Generation Market Daniel L. Chartier Vice President, Government

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Water•Cooling Water Intake

Structures – 316(b)

•Thermal Discharge –316(a)

•Effluent Limitations Guidelines (ELGs)

•Waters of the United States

Page 16: Regulation and Compliance in the US Power Generation Market · Session 201601 Regulation and Compliance in the US Power Generation Market Daniel L. Chartier Vice President, Government

Cooling Water Intake Structures – 316(b)

August 2014 final rule published establishing

rules for cooling water intake structures to

“reduce injury and death of fish and other

aquatic life”

Three main components at existing facilities

Flow > 2 MGD to install Best Technology Available

(BTA) for “impingement”

Flow >125 MGD to conduct studies to determine

if controls are needed for “entrainment”

New units at existing facilities must meet

entrainment levels commensurate with closed-

cycle cooling or meet technology standard16

Page 17: Regulation and Compliance in the US Power Generation Market · Session 201601 Regulation and Compliance in the US Power Generation Market Daniel L. Chartier Vice President, Government

Cooling Water Intake Structures-cont’d

17Graphic courtesy of the Edison Electric Institute

Page 18: Regulation and Compliance in the US Power Generation Market · Session 201601 Regulation and Compliance in the US Power Generation Market Daniel L. Chartier Vice President, Government

Cooling Water Intake Structures-cont’d

Rule is being challenged in court

Riverkeeper and other ENGOs

Assert that facilities are given too much flexibility and

should be required to utilize closed-cycle cooling where

achievable

Industry

Whether the 2 MGD applicability limit set is too low

Whether EPA unreasonably included/failed to revise a

provision that allows BPJ section 316(b) requirements

to be imposed on intake structures where less than 25%

of the water is used for cooling purposes

Whether the Final Rule is unambiguous and is consistent

with statements in the preamble and the economic

impact analysis18

Page 19: Regulation and Compliance in the US Power Generation Market · Session 201601 Regulation and Compliance in the US Power Generation Market Daniel L. Chartier Vice President, Government

Thermal Discharges – 316(a)

Thermal effluents are regulated because

heat is identified as a pollutant under CWA

Section 502(6)

46 states issue NPDES permits (EPA has not

granted this authority in 4 states and the

District of Columbia)

In general, permit restrictions for thermal

effluents are based upon the receiving water

body’s ability to assimilate heat

Closed-cycle cooling may be the answer

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Page 20: Regulation and Compliance in the US Power Generation Market · Session 201601 Regulation and Compliance in the US Power Generation Market Daniel L. Chartier Vice President, Government

Effluent Limitations Guidelines (ELGs)

EPA published a proposed rule in June 2013

to amend the Steam Electric effluent

guidelines and standards

Coal, oil, gas and nuclear facilities affected

(~1,200 facilities)

Sets new Best Available Technology (BAT) limits

on 7 important waste streams (including fly ash

and bottom ash)

8 options; 4 preferred

Zero liquid discharge a part of all but 2 options

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Page 21: Regulation and Compliance in the US Power Generation Market · Session 201601 Regulation and Compliance in the US Power Generation Market Daniel L. Chartier Vice President, Government

Waters of the United States (WOTUS)

33 U.S.C. § 1362 states: "The term 'navigable

waters' means the waters of the United

States, including territorial seas.”

Confusion caused by Supreme Court

decisions in ‘85, ’01 and ’06

Rule proposed April 21, 2014 replaces the

definitions of “navigable waters” and

“waters of the United States” for all CWA

programs

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Page 22: Regulation and Compliance in the US Power Generation Market · Session 201601 Regulation and Compliance in the US Power Generation Market Daniel L. Chartier Vice President, Government

Why the WOTUS Definition Matters

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Page 23: Regulation and Compliance in the US Power Generation Market · Session 201601 Regulation and Compliance in the US Power Generation Market Daniel L. Chartier Vice President, Government

What’s potentially being added to

WOTUS

Concerns over expansion of traditional

WOTUS definition/jurisdiction by adding:

All tributaries

All adjacent waters, including wetlands;

And on a case-specific basis, other waters,

including wetlands, that alone or in combination

with other similarly situated waters in the region

have a significant nexus

EPA asserts its changes only clarify and do

not expand jurisdiction

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Page 24: Regulation and Compliance in the US Power Generation Market · Session 201601 Regulation and Compliance in the US Power Generation Market Daniel L. Chartier Vice President, Government

Included

or not?

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Page 25: Regulation and Compliance in the US Power Generation Market · Session 201601 Regulation and Compliance in the US Power Generation Market Daniel L. Chartier Vice President, Government

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Climate

•Power Sector Rules for New and Existing Power Plants

• International Negotiations

Page 26: Regulation and Compliance in the US Power Generation Market · Session 201601 Regulation and Compliance in the US Power Generation Market Daniel L. Chartier Vice President, Government

Proposed GHG Regulations for New and

Existing Power Plants Plants

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Performance Standards for GHG Emissions from New Power Plants – Section

111(b)

• New Coal-Fired Power Plants:

• Limit set at 1,100 pounds of CO2 / Megawatt Hour

• New Natural Gas-Fired Power Plants:

• Limit set at 1,000 pounds of CO2 / MWh (1,100 lb limit for smaller plants determined by heat rating)

Performance Standards for GHG Emissions from

Existing Power Plants –Section 111(d)

• The EPA’s proposal for existing power plants was announced in June 2014 with a goal of a 30% reduction of 2005 GHG levels by 2030.

• The rule establishes individual reduction requirements per state based on EPA’s “best system of emissions reduction” (BSER).

Page 27: Regulation and Compliance in the US Power Generation Market · Session 201601 Regulation and Compliance in the US Power Generation Market Daniel L. Chartier Vice President, Government

EPA’s Best System of Emissions Reduction

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Block #1

Heat rate improvements at coal-fired electric generating units (EGUs) to reduce carbon

intensity

Replacing coal-based electricity with increased

generation at existing natural gas combined cycle

EGUs

Maintaining and increasing nuclear generation capacity,

and increasing renewable EGU capacity

Reducing generation through demand-side energy efficiency

improvements

The EPA developed state-specific goals using four building

blocksBlock #4

Block #2

Block #3

Page 28: Regulation and Compliance in the US Power Generation Market · Session 201601 Regulation and Compliance in the US Power Generation Market Daniel L. Chartier Vice President, Government

Who controls the reductions?

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Inside the fence line

Outside the fence line

Page 29: Regulation and Compliance in the US Power Generation Market · Session 201601 Regulation and Compliance in the US Power Generation Market Daniel L. Chartier Vice President, Government

Single State Compliance Example

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Current (2012) Emissions

1,453 lb/MWh

EPA takes action

on state plans EPA assumes all in-state coal-based generation will be

replaced by other generation resources by 2020

EPA Interim Goal(2020-2029 Average)

735 lb/MWhEPA 2030 Goal

702 lb/MWh

Arizona

State plans due

Annual progress reportsCorrective measures

Page 30: Regulation and Compliance in the US Power Generation Market · Session 201601 Regulation and Compliance in the US Power Generation Market Daniel L. Chartier Vice President, Government

Litigation Outlook

Litigation on final 111(d) guidelines is

certain

Court decisions not likely until end of

decade

Even if parts of guidelines overturned, state

plans will already have been submitted, and

progress and investments being made

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Page 31: Regulation and Compliance in the US Power Generation Market · Session 201601 Regulation and Compliance in the US Power Generation Market Daniel L. Chartier Vice President, Government

The Road to a New International

Agreement on Climate Change

Lima Climate Summit, COP-20, Dec. 2014

Lima Call for Climate Action (4 pages, 22 paras.)

Annex – “Elements of a Negotiating Text” (38

pages, 103 paras., with numerous options)

ADP Meeting, Feb. 8-13, Geneva

Annex grows to 86 pages

Becomes the official negotiating text

Next negotiating meeting in June 2015

Goal: Final agreement at COP-21 Paris, Nov.

30-Dec 11, 2015

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Page 32: Regulation and Compliance in the US Power Generation Market · Session 201601 Regulation and Compliance in the US Power Generation Market Daniel L. Chartier Vice President, Government

US - China Announcement on Climate

US to cut net greenhouse gas emissions by

26-28% below 2005 levels by 2025

Keeps the US on the trajectory to achieve

reductions of 80% by 2050

China to “peak” CO2 emissions “around

2030” and increase the non-fossil fuel share

of all energy to “around 20%” by 2030

Additional agreements regarding research

and development, carbon capture,

hydrofluorocarbons cooperation, and trade

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Page 33: Regulation and Compliance in the US Power Generation Market · Session 201601 Regulation and Compliance in the US Power Generation Market Daniel L. Chartier Vice President, Government

Obama’s $3 Billion Climate Fund

Commitment

Fund intended to help poor nations boost

renewable energy and counter effects of

global warming by luring private sector

investment

$10 billion goal achieved prior to Lima

conference

US Congressional approval is needed,

depends on source of funding

Seeks $500 million in latest Presidential budget

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Page 34: Regulation and Compliance in the US Power Generation Market · Session 201601 Regulation and Compliance in the US Power Generation Market Daniel L. Chartier Vice President, Government

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Waste

•Ash Disposal Rule

Page 35: Regulation and Compliance in the US Power Generation Market · Session 201601 Regulation and Compliance in the US Power Generation Market Daniel L. Chartier Vice President, Government

Ash Disposal Rules

EPA Administrator McCarthy signed the

Disposal of Coal Combustion Residuals (CCR)

from Electric Utilities final rule on December

19, 2014 – not yet published

Driven by the coal ash spill at TVA’s Kingston

facility in 2008

Final rule covers disposal under Subtitle D of

RCRA

The proposed rule had contemplated treatment

as hazardous wastes under Subtitle C of RCRA

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Page 36: Regulation and Compliance in the US Power Generation Market · Session 201601 Regulation and Compliance in the US Power Generation Market Daniel L. Chartier Vice President, Government

Ash Disposal Rules-continued

Structural Integrity requirements starting 6 months

to 2 years after publication

Groundwater Monitoring and Corrective Action

starting 30 months after publication

Location Restrictions starting 18 months after

publication

Liner Design Criteria documentation required 18

months after publication

Operating Criteria requirements starting 6 months

after publication

Record Keeping, Notification, and Internet Posting

requirements 6 months after publication

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Page 37: Regulation and Compliance in the US Power Generation Market · Session 201601 Regulation and Compliance in the US Power Generation Market Daniel L. Chartier Vice President, Government

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Bringing it all together•What will this all

cost?

• Is there a risk to grid reliability?

•Can we expect relief from Congress?

Page 38: Regulation and Compliance in the US Power Generation Market · Session 201601 Regulation and Compliance in the US Power Generation Market Daniel L. Chartier Vice President, Government

Bringing it all together:

What will this cost?

CSAPR - $800 million in annual costs, plus $1.6

billion in annual capital due to CAIR

$120 to $280 billion in annual health and environmental

benefits

Ozone - $3.9 billion for a standard of 70 ppb, or

$15 billion for a standard of 65 ppb

Health benefits of $6.4 to $13 billion for a standard of 70

ppb, or $19 to $38 billion for a standard of 65 ppb

MATS – Annual costs of $9.6 billion (2007$)

Health benefits of $37 to $90 billion annually

38Source: All cost and benefit values are from EPA documentation for the respective rule

Page 39: Regulation and Compliance in the US Power Generation Market · Session 201601 Regulation and Compliance in the US Power Generation Market Daniel L. Chartier Vice President, Government

Bringing it all together:

What will this cost?

316(b)- Annual costs of $275-$297 million

Annual benefits of $29-33 million

WOTUS – Mitigation costs of $162-$278 million

per year

Public benefits estimated at $388 million to $514 million

annually

ELGs– Compliance cost of $185-$954 million

annually

Pollutant discharges reduced by 470 million to 2.62 billion

pounds and water use reduced by 50 billion to 103 billion

gallons per year at affected steam electric power plants

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Page 40: Regulation and Compliance in the US Power Generation Market · Session 201601 Regulation and Compliance in the US Power Generation Market Daniel L. Chartier Vice President, Government

Bringing it all together:

What will this cost?

Clean Power Plan GHG Rule -Estimated annual

compliance cost of $3.0 to $4.6 billion in 2025

for Block 1 and Block 2 if compliance is

managed on a regional basis

Estimated global benefit of CO2 reductions from

Block 1 and Block 2 ranges from $3.9 to $39 billion in

2025 depending on the discount rate applied to the

Social Cost of Carbon if compliance is managed on a

regional basis

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Source: http://www2.epa.gov/sites/production/files/2014-05/documents/20140602tsd-

memo-buildingblocks-costs-benefits.pdf

Page 41: Regulation and Compliance in the US Power Generation Market · Session 201601 Regulation and Compliance in the US Power Generation Market Daniel L. Chartier Vice President, Government

Bringing it all together:

Is there a risk to grid reliability?

NERC: Potential Reliability Impacts of EPA’s

Proposed Compliance Plan. Nov. 2014, 27 pages

Brattle Group: EPA’s Clean Power Plan and

Reliability: Assessing NERC’s Initial Reliability

Review. Feb. 2015, 68 pages

Analysis Group: Electric System Reliability and

EPA’s Clean Power Plan: Tools and Practices.

Feb. 2015, 51 pages

FERC: Series of three technical conferences to

discuss implications of compliance with EPA’s Clean

Power Plan

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Page 42: Regulation and Compliance in the US Power Generation Market · Session 201601 Regulation and Compliance in the US Power Generation Market Daniel L. Chartier Vice President, Government

Bringing it all together:

Can we expect relief from Congress?

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1. The Clean Power Plan (GHG rules)

2. Endangered Species Act

3. Ground-level Ozone Standards

4. Methane Regulations on Oil and Gas Ops

5. Renewable-Fuel Standard

6. Fracking on Public

Lands

7. Waters of the

United States

8. Coal Ash Disposal

Rule

9. Stream Buffer Zone

Rule

10.Social Cost of

Carbonhttp://www.nationaljournal.com/energy/10-

environmental-regulations-the-republican-congress-

wants-to-kill-20150205 Feb. 5, 2015.

10 Regulations the R’s Want to Kill*

*

Page 43: Regulation and Compliance in the US Power Generation Market · Session 201601 Regulation and Compliance in the US Power Generation Market Daniel L. Chartier Vice President, Government

Thank you!

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Daniel L. ChartierVice President, Government Affairs

1701 Pennsylvania Avenue, N.W.

Suite 950

Washington, DC 20006

Direct: (202) 534-3498

Cell: (202) 731-5888

e-mail: [email protected]