Gaps in climate rule reveal ‘last-minute’ changes

Source: By Jean Chemnick, E&E News • Posted: Monday, May 22, 2023

A man bikes past the Scattergood Generating Station in El Segundo, Calif.

A man bikes past the Scattergood Generating Station in El Segundo, Calif. The gas-fired power plant operates in one of the communities most affected by pollution in California, according to state data. Mario Tama/Getty Images

EPA hurried to include existing gas power plants in its climate rule — and it shows.

The draft carbon regulations released this month omit the kind of detailed analysis for current gas facilities that ordinarily buttress major rules, according to experts. The absence contrasts sharply with other sections of the rule that offer hundreds of pages of analysis to back up the agency’s proposals for coal plants and future gas facilities.

Experts say the lack of information sheds light on the agency’s abrupt decision to extend the climate rule to include existing gas plants after facing pressure from the White House in a series of political moves that was first reported by E&E News.

“You could tell right away that it had been added at the last minute,” said Jeff Holmstead, a former EPA air chief and partner at Bracewell LLP.

White House officials asked EPA experts to expand the rule in the weeks before it was released to accelerate the timetable on coal plants and require many of the nation’s gas-fired electric facilities to reduce their greenhouse gas emissions. EPA rejected the coal suggestion, but it included the gas provision.

Additional details of those exchanges should become public next month when the draft rules are published in the Federal Register and the official dialogue between EPA and officials at the Office of Management and Budget is released. The rule would require the nation’s sprawling network of electricity-generating facilities to reduce their greenhouse gas emissions by installing carbon capture technology, blending their fuel with hydrogen or shutting down.

Signs of the eleventh-hour changes can be seen in the truncated justification that EPA offered in supporting documents to make the case for regulating existing gas plants.

Among the materials is a “spreadsheet-based” analysis of how the gas provision could affect the nation’s power mix, rather than more detailed economics modeling that EPA typically performs for power sector rules. The rule also includes an abbreviated projection of the provision’s costs and benefits.

EPA declined to answer questions about the rule’s lack of detail about current gas plants.

The regulatory impact analysis — a document that estimates how the rule could play out in the real world — is stocked with in-depth analysis for new gas and existing coal plants, unlike the section on existing gas plants.

EPA used a peer-reviewed energy economy model to look at how its proposals for new gas and old coal could interact with the grid and with a host of market and policy variables, including the climate law known as the Inflation Reduction Act. The result was a 182-page examination of compliance costs, emissions outcomes and energy impacts. It also looks at the potential effects on marginalized communities and labor.

The provision on existing gas plants is discussed briefly in the executive summary and in a 24-page section that includes an alternative proposal for new and existing gas plants based on burning hydrogen.

The proposals on coal and future gas plants were run through sophisticated models. The existing gas standard wasn’t.

EPA acknowledges the limitations of its analysis, which relies on “expert judgment” for projections about how utilities might comply with the rule or what it means for the power mix.

Without modeling it couldn’t project how the existing gas rule might influence compliance decisions under other parts of the rule. And EPA couldn’t estimate reductions in non-CO2 pollutants like smog and soot, and what that might mean for public health in communities adjacent to power plants.

EPA states in the proposal that it expects the existing gas rule to have “very little incremental impact on resource adequacy” because it covers only a “subset” of units.

Amanda Levin, director of policy analysis at the Natural Resources Defense Council, said baseload gas plants would likely reduce their carbon emissions or cut back on the amount of power they produce — as the rule requires. But it’s unclear which scenario is more likely.

“I do wish we could see that full interaction,” said Levin, referring to the lack of modeling.

She stressed that the rule could undergo changes before it’s finalized. EPA is taking comment on how it should regulate existing gas plants before the final rule is released next year.

NRDC estimates that about 7 percent of existing gas plants would be covered by EPA’s current proposal. The green group wants to strengthen the rule so it would include more plants.

The lack of detail about current gas plants pulls the curtain back on how the political process influenced the regulation. But it won’t necessarily undermine the rule in the eyes of the court system, which promises to play a heightened role as opponents challenge the rule. For one thing, EPA is expected to provide fuller analysis in next year’s final version of the rule. For another, critics say a lack of economics modeling is hardly its only challenge.

“I don’t think that’s their biggest legal problem,” Holmstead said.

Holmstead pointed to the rule’s standard that would require many of the nation’s power plants to install carbon capture and sequestration, or CCS, systems, if they don’t announce plans to retire.

“I just think the biggest legal problem they have is there is not a commercial-scale gas plant anywhere in the world that uses CCS,” Holmstead said.

That’s true for now, but a number of gas-fired power plants are developing carbon capture technologies in the U.S. and abroad.

All of them would be new facilities.

It could be harder for an existing gas plant to retrofit for CCS at a reasonable cost than for a new plant to be built to capture emissions. They may not be sited near CO2 pipelines or injection sites. And some cutting-edge carbon capture technologies only work on new builds.

To make its case that CCS retrofits are “adequately demonstrated” for existing gas plants — a mandatory legal threshold — EPA points to a coal plant retrofit project in Saskatchewan named Boundary Dam.

“The function, design, and operation of postcombustion CO2 capture equipment is similar, although not identical, for both steam generating units and combustion turbines,” EPA says in its proposal. “As a result, application of CO2 capture at existing coal-fired steam generating units helps show that it is adequately demonstrated for combustion turbines as well.”

Natural gas combustion produces a less concentrated stream of CO2 than coal combustion. Some experts say that raises technological challenges and makes tax credits for carbon capture less valuable in retrofitting gas.

Matt Leopold, a partner at Hunton Andrews Kurth LLP who served as EPA general counsel in the Trump administration, expressed skepticism that a standard based on CCS would pass legal muster.

“I think an important goal of EPA here is to try to send a market signal,” he said. “Because utilities, in particular, do long-range planning, and they make investments for decades at a time. And EPA is probably attempting to drive those investments towards renewables and away from fossil fuels altogether with this rule.”