Supreme Court ruling opens door to carbon capture

Source: By Benjamin Storrow, E&E News • Posted: Tuesday, July 5, 2022

Then U.S. Secretary of Energy Rick Perry (right) joins NRG Energy CEO Mauricio Gutierrez (left) on a 2017 tour of the Petra Nova carbon capture and enhanced oil recovery system.

Then-Energy Secretary Rick Perry (right) joins NRG Energy CEO Mauricio Gutierrez on a 2017 tour of the Petra Nova carbon capture and enhanced oil recovery system. Business Wire

The Supreme Court’s recent climate ruling means carbon capture will likely form the backbone of any new EPA regulations targeting carbon dioxide emissions from power plants, energy experts and legal analysts said.

It’s an approach that could prove awkward for both the coal industry and the Biden administration.

Environmentalists long have been skeptical of carbon capture and storage over concerns about its costs and environmental impact.

They point to a series of failed and expensive CCS projects as a sign of the risks that could prevent the technology from delivering deep emission reductions. Many would capture carbon dioxide from power plants and pump it into aging oil fields to stimulate more crude production.

Yet the technology is one of the few that has the potential to survive Supreme Court scrutiny.

Coal companies and mining states long have pushed CCS as a way to keep coal in the fuel mix — and they’ve secured bipartisan support in Congress for carbon capture research and tax credits. But adding carbon capture and storage to existing coal plants is an expensive proposition, and making the technology the industry standard likely would prompt many plants to close altogether.

“If EPA promulgates a new rule that has CCS as the best system of emission reduction, it is a near certainty that we will see that,” said Michael Burger, executive director of the Sabin Center for Climate Change Law at Columbia Law School. “They want it to stay alive, but they don’t want it to serve as the basis of a standard that they actually have to meet.”

EPA’s likely focus on CCS is a byproduct of the Supreme Court’s ruling in West Virginia vs. EPA last week (see related story).

In handing down a 6-3 decision, the high court ruled EPA could not employ strategies like the Clean Power Plan, an Obama administration proposal which sought to use emission trading and generation shifting to slash CO2 from existing power plants (Climatewire, July 1).

Instead, the court found that the agency should rely on its traditional approach of regulating pollution at the source. In practical terms, that has meant bolting pollution control equipment onto power plants to lower emissions.

The challenge is that there are relatively few avenues for reducing CO2 at coal and gas plants.

Efficiency improvements can produce marginal emission reductions. Both the Obama and Trump administrations included so-called heat rate improvements in their respective carbon regulations for power plants. The difference was that the plan under former President Barack Obama also called for emission trading and generation shifting where the strategy under former President Donald Trump largely rested on efficiency.

Utilities also could choose to blend fuels, with power plants mixing lower carbon alternatives with their traditional fuel, said John Larsen, an analyst who tracks the power sector at the Rhodium Group. Coal plants, for instance, could also burn gas.

Whether that approach would run afoul of the Supreme Court’s dislike of generation shifting is unclear.

“The list is pretty short when it comes to fossil fuel fired power plants. Carbon capture is one of the technologies that has the potential for the biggest reductions,” Larsen said. ”Heat rate improvements do almost nothing.”

To adopt CCS as the best form of emission reduction, EPA would need to conclude carbon capture is demonstrated technology. Whether that determination would survive judicial scrutiny is an open question.

Some argue it could. In 2021, there were 27 commercial carbon capture facilities in operation around the globe and another 108 in various stages of development, according to the Global CCS Institute. That includes two CCS facilities at power plants in North America: one in Canada and one in Texas.

Congress has sought to spur the development of CCS in recent years by enhancing a tax credit for carbon capture facilities and providing $2.5 billion as part of the infrastructure law to develop a series of CCS projects. The law requires the money be spent at two coal plants, two gas plants and two industrial facilities.

Yet CCS projects at power plants have a long history of failure in the United States.

Southern Co. pulled the plug on a carbon capture and storage project at its Kemper County Energy Facility in 2017 after the project’s price tag ballooned to $7.5 billion (Greenwire, June 23, 2017). FutureGen, a CCS project in Illinois that received $1 billion in federal financing, was similarly canceled (Climatewire, Feb. 4, 2015).

The lone CCS success at a power plant in the United States had been at Petra Nova, a CCS project installed on a generating unit at a massive coal plant near Houston. The project piped captured CO2 to a nearby oil field, but it was shuttered in 2020 during a period of low oil prices (Energywire, Sept. 22, 2020). Petra Nova since has been damaged in a fire.

“If I were the owner of a coal plant and you told me you have to put CCS on your plant, I would absolutely challenge that it has been adequately demonstrated. But if I were arguing for the rule, I would argue it has been adequately demonstrated,” said Emily Grubert, a professor of sustainable energy policy at the University of Notre Dame who recently finished a stint in the Department of Energy’s Office of Fossil Energy and Carbon Management. “This is one of those areas where reasonable people can disagree.”

The problem is that by the time that disagreement is sorted out in court, the window of time when it makes sense to install CCS at existing power plants may have passed. Many coal plants in the United States are already old. Others simply lack the space for a carbon capture unit, she said.

“The universe of plants this could apply to is not as big as other countries” with younger coal fleets, Grubert said.

EPA has turned to carbon capture before. During the Obama administration, the agency implemented a rule effectively requiring CCS at new coal plants. That rule has been less controversial because utilities have had little appetite for building new coal plants. Outside of a tiny coal plant in Alaska, the last coal plant built in the United States was a medium sized facility in North Dakota in 2014 that later converted to gas.

Yet CCS use for new plants doesn’t necessarily mean it can be adopted as the standard for existing ones, said Sean Hecht, co-executive director of the Emmett Institute on Climate Change and the Environment at the UCLA School of Law.

“The technology of CCS may be in a different state of development and deployment for retrofitting existing plants, as opposed to building new plants,” he wrote in an email.

The standard for existing plants is also different “since that section requires that EPA allow states to develop their own plans for meeting the standards,” Hecht said.

He added that “it’s really not possible for me to prejudge whether any degree of CCS for existing plants might be ‘adequately demonstrated.’”

EPA has likely been weighing such factors for months. Many analysts have long said the agency would avoid resurrecting the Clean Power Plan for fear of stoking the ire of the Supreme Court, which stayed the regulation in 2016. Last week’s ruling merely removed what little ambiguity there was left about the court’s posture.

In legal terms, the biggest question is whether the Supreme Court would view a CCS-based emission rule as a legitimate use of EPA’s authority or a disguised attempt to end coal burning.

The court left intact the agency’s authority to regulate greenhouse gases and signaled it wanted to see EPA return to its traditional approach of emission regulation, Burger noted.

In theory, a technology-based standard like CCS should satisfy the court’s wish, even if it drives up the cost of coal generation and prompts plants to retire, he said.

“You have to hope that judges aren’t going to strike down a regulation with indirect effects. The problem that the court had with the Clean Power Plan — the core problem — was its perception that the Clean Power Plan was designed to do away with coal,” Burger said. “That said, there were snippets of language that indicate that the court will look closely at any rule that will have the effect of eliminating coal from the energy mix.”