EPA promulgates Cross-State Air Pollution Rule
On July 7, 2011, EPA issued the Cross-State Air Pollution Rule (CSAPR) to reduce emissions of sulfur dioxide (SO2) and nitrogen oxides (NOx) from fossil fuel-fired electric generating units (EGUs) in 27 eastern states. The CSAPR was known as the Clean Air Transport Rule when it was proposed on July 6, 2010. The CSAPR replaces the Clean Air Interstate Rule (CAIR), which was enacted under the Bush Administration and was subsequently successfully challenged in litigation before the D.C. Circuit Court of Appeals in 2008. Pursuant to that court’s ruling, CAIR remains in effect until the replacement rule is promulgated.
The CSAPR establishes a trading program and state emission budgets for SO2 and NOx with the budgets allocated among existing fossil fuel-fired EGUs in 27 states. Under the rule, annual emission budgets are established for 2012 and 2014 for SO2 and NOx. NOx budgets are also established for the 2012 and 2014 ozone season. EPA has established allocations for EGUs in Kentucky under each of these budget categories.
The proposed rule would have applied in 31 eastern states and the District of Columbia. The final rule removes Delaware, Connecticut, Massachusetts, and the District of Columbia from the program. EPA has also proposed to expand participation by EGUs in six additional states, including Iowa, Kansas, Michigan, Missouri, Oklahoma, and Wisconsin. The expansion of those states’ participation in the rule is the subject of a parallel proposal issued July 7.
The goal of the CSAPR is to reduce SO2 and NOx emissions that contribute to cross-state transport of pollutants that lead to ozone and PM2.5 NAAQS nonattainment in downwind states. The budgets were based upon emission reduction efforts deemed necessary to meet the current NAAQS. EPA has noted that it will evaluate what additional reductions in air pollution transport will be required under the revised ozone standard expected to be issued in 2011. Accordingly, emission budgets and allocations established under the rule may be reduced in the future.
To meet the requirements of the rule, EPA anticipates that fossil fuel-fired EGUs will: (1) maximize use of existing SO2 and NOx pollution control equipment (e.g., scrubbers and selective catalytic reduction); (2) install or upgrade SO2 and NOx pollution control equipment; and/or (3) use lower sulfur coal or make other fuel switches. Older coal-fired units may also be shut down by utilities in order to remain within their allocations. CAIR will remain in place through the 2011 compliance period until the 2012 emission budgets must be met. (The CSAPR Phase I annual SO2 and NOx trading programs commence January 1, 2012, and the ozone season NOx trading program commences May 1, 2012 with the ozone season ending September 30.) Additional reductions will be required in order to comply with the 2014 SO2 and NOx budgets. The CSAPR establishes new allowances for EGUs. There is no carry-over of allowances from the acid rain program, NOx SIP call, or CAIR.
The CSAPR utilized a new approach for allocating SO2 and NOx emission allowances for the state emission budgets. Each regulated EGU is required to hold an allowance for each ton of SO2 and NOx emitted by the EGU during the relevant budget period. Allowances may be banked for future use or trades, and interstate trading is allowed within the same program and within state groupings as long as certain assurance provisions are met. In the proposed rule, EPA would have allocated allowances based upon an EGU’s historic emissions. However, in the final rule, EPA based the allocation system upon an EGU’s historic heat input with a cap based upon each unit’s maximum historic emissions of SO2 and NOx. This approach was considered by EPA to be fairer to utilities that had already taken steps to reduce SO2 and NOx emissions.
EPA contends that by 2014, the CSAPR will result in an average monthly household electricity bill increase of one percent. EPA also projects that natural gas prices will increase less than one percent due to the requirements of the rule. EPA also found that implementation of the rule will result in very small changes in power generation capacity. These findings are being criticized by industry and many members of Congress. Moreover, they fail to take into account the effect of the CSAPR in conjunction with other EPA rulemakings that will establish significant additional regulatory burdens on coal-fired EGUs.
On July 20, 2011, EPA published a final rule disapproving Kentucky’s 2009 SIP submittal that addressed the emission reductions to meet the prior CAIR provisions for the 2006 PM2.5 NAAQS.
To view a complete PDF of the Second Quarter 2011 issue of the Air Quality Letter, click HERE.