Clearing the air: Clear Skies and competing multi-pollutant legislation

Paul Farber & Tim Krause, Sargent & Lundy LLC

Shortly before this article went to press, another multi-pollutant bill was introduced by Sen. Tom Carper of Delaware. This bill (S3135) has attracted some initial support because it is perceived as more stringent than the Clear Skies Bill but less extreme than the Jeffords-Lieberman Bill. The Carper Bill is not discussed in this article, but its provisions generally fall somewhere between the Clear Skies Bill and the Jeffords-Lieberman Bill.

Competing legislation that would require multi-pollutant emission reductions from power plants has been introduced in Congress. The most prominent legislative proposals are the Bush administration’s Clear Skies Bill (S2815 and HR 5266) and the Jeffords-Lieberman Clean Power Act (S556). Both bills seek to reduce SO2, NOX, and mercury emissions, and Jeffords-Lieberman also seeks reductions in CO2 emissions. However, the extent of the reductions, the way emission allowances are determined and traded, and the provisions for future implementation of existing regulatory programs differ greatly between the bills.

At this point, it is far from certain that either bill will become law. However, it does seem likely that some form of multi-pollutant legislation will be enacted within the next few years, and the legislation that eventually emerges may represent a compromise between the bills that have been proposed. This article compares the most important features of the competing multi-pollutant bills and discusses their potential impacts on the power industry.

Basic provisions

Both the Clear Skies Bill and the Jeffords-Lieberman Bill would regulate pollution emissions from both new and existing power plants. As shown in Table 1, both bills would establish an annual emission cap (a limit on the total tons/year that power plants could emit) for SO2, NOX, and mercury. The Jeffords-Lieberman Bill would establish a similar cap on CO2 emissions.

The table shows the proposed tons/year limit for each pollutant and the approximate emission reduction this limit represents, expressed as a percentage of actual recent emissions. It also shows the year in which the emission limits would first become effective. As can be seen, the Clear Skies Bill would require emission reductions in two phases; the Jeffords-Lieberman Bill has just one phase, but the emission limits are more stringent and would become effective earlier.

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Generally, both bills would allocate emission allowances to existing power plants based on their individual heat inputs as a proportion of the total heat input for all power plants. These emission allowances could then be banked, sold, or traded in whatever manner is most advantageous for each plant. New plants generally would have to buy emission allowances from existing plants or at public auctions (at least initially). However, the bills have significant differences regarding how allowances would be allocated, how they could be traded, and how existing emission trading programs would be affected. A detailed discussion of the differences is beyond the scope of this article, but some noteworthy issues are discussed below.

SO2 and NOX emissions

Power plants currently receive SO2 emission allowances under the Acid Rain Program, and by 2004 power plants in most Eastern and Midwestern states will receive NOX emission allowances under the NOX SIP Call program. Under both of the proposed multi-pollutant bills, these existing programs would continue until the new legislation comes into effect. Under Jeffords-Lieberman, any SO2 and NOX allowances that were banked prior to enactment would be considered equivalent to one-quarter of a new allowance. Under Clear Skies, banked SO2 and NOX allowances could be used under regulations to be promulgated by the U.S. Environmental Protection Agency (EPA), but their value presumably would be adjusted down in proportion to the new emission caps.

SO2 allowances under Clear Skies would be allocated on a national basis (with some special provisions for plants in the Western Regional Air Partnership area). The Jeffords Lieberman Bill would divide SO2 allowances between an eastern region (with 1,975,000 tons/year) and a western region (with 275,000 tons/year), and allowances could only be traded within the region where they were issued.

NOX allowances under Jeffords-Lieberman would be allocated on a national basis, whereas the Clear Skies Bill would divide NOX allowances between an eastern region (with 1,560,000 tons/year in 2010) and a western region (with 538,000 tons/year in 2010). Again, allowances could only be traded within the region where they were issued. Not surprisingly, the bills also define the eastern region and western region differently.

Mercury emissions & New Source requirements

The Clear Skies Bill would allocate mercury emission allowances based on a plant’s annual heat rate adjusted according to the type of coal that is used. Jeffords-Lieberman makes no differentiation for fuel type. Additionally, Clear Skies would allow national trading of mercury allowances under a cap-and-trade program similar to that used for other pollutants, but Jeffords-Lieberman would not allow any trading of mercury allowances. The combination of no trading provisions and no adjustment for fuels means that some individual plants would be required to make very large percentage reductions in mercury emissions.

The Jeffords-Lieberman Bill also would require EPA to ensure that any mercury that is captured or recovered would not be re-released into the environment. EPA would be specifically required to formulate regulations addressing the disposal and marketing of solid by-products produced in the capture of mercury, including the manufacture of wallboard and cement. The Clear Skies Bill does not have similar provisions.

The Jeffords-Lieberman Bill would require existing power plants to comply with New Source Performance Standards (NSPS) and New Source Review (NSR) requirements by 2013 or 40 years after beginning operation, whichever is later. The Clear Skies Bill would make changes to the NSPS and NSR programs, apparently intended to alleviate the confusion that currently surrounds the application of new source requirements to existing power plants.

Farber is a chemical/environmental engineer with more than 25 years of experience in emission control systems and regulations. He is currently a project associate in Sargent & Lundy’s Environmental Services Division. He can be reached at 312-269-2261 or at paul.s.farber@sargentlundy.com.

Krause is an environmental biologist with more than 25 years of experience in the power industry. He currently supervises Sargent & Lundy’s environmental permitting group. He can be reached at 312-269-6616 or at timothy.p.krause@sargentlundy.com.

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