MERCURY POLICIES: A VIEW FROM THE ELECTRIC POWER SECTOR

1. MERCURY POLICIES: A VIEW FROM THE ELECTRIC POWER SECTOR Michael T. Rossler Indiana Energy Conference September 16, 2004

2. Utility Industry Commitment • Substantial reductions in emissions already have been achieved • Substantial reductions will continue • EEI supports efficient and cost-effective actions to further reduce emissions • Undertaking substantial research on control technologies with DOE and other federal agencies • Multi-emission legislation is the best approach, but a well thought out regulatory program can work

3. Industry Recognizes Concerns Exist • EEI acknowledges that mercury in the human body, at high enough levels, can cause adverse neurological and developmental effects in fetuses and children • EEI and its members share the goal of protecting public health and are prepared to make reasonable additional reductions in power plant mercury emissions • We want to ensure that any actions we take that could raise the cost of electricity to consumers brings them commensurate health and environmental benefits

4. EPA Proposed Mercury Rule • Establishes separate emission limits for new and existing sources for both Hg and Ni emissions • Two alternative control plans for Hg: market-based cap-and-trade approach; technology-based (MACT) emission limits • If EPA opts for cap-and-trade approach, must revise the December 2000 regulatory finding • Integrated with proposed Clean Air Interstate Rule to achieve “co-benefits”

5. The Clean Air Act • Does NOT require that utilities be subject to a specific regulatory approach such as a MACT standard. • Does NOT require utilities to reduce emissions by any specific amount, e.g., 90 percent. • DOES give EPA broad discretion in crafting regulations to reduce power plant mercury emissions. • DOES require EPA “to develop and describe … alternative control strategies” for controlling emissions.

6. Cap-and-Trade Option • Comparable reductions to realistic MACT in near-term and greater reductions in long-term • Most cost-effective way of achieving substantial emission reductions • Promotes testing and deployment of new control technologies • EEI is committed to achieving 15-ton cap in 2018 • Will not produce “hot spots”

7. Mercury Emissions* Cut ~70% *Power plant Hg emissions are not regulated under the Clean Air Act. Approximately 75 tons of Hg currently exist in fuel used to generate electricity. Existing control equipment for SO2, NOx, and particulate matter, and fuel processing activities, reduce Hg emissions by approximately 40% to 48 tons. Source: Environmental Protection Agency (EPA)

8. National Utility Costs ($ billions, 1999$) Costs are incremental relative to a reference case of Title IV/SIP Call. Year IAQR MACT CT 2004 $0.8 $0.7 $0.7 2008 1.2 4.4 0.8 2010 2.1 4.4 2.5 2012 2.5 4.3 3.2 2015 3.3 5.0 4.0 2018 4.5 5.3 5.3 2020 7.0 6.8 8.1 NPV $17.7 $27.8 $19.7 Incremental NPV Cost of Adding Hg Provisionson top of IAQR $10 b $2 b

9. Mercury: State Considerations • Reduces patchwork of different programs and confusion/competition issues for regulated sources • Federal program minimizes interstate conflicts • Federal program takes pressure off state programs, enforcement and costs • Low-cost option for electric consumers (industry, small businesses and households) • Flexibility allows local and state needs to be considered (e.g., fuel choices, jobs and tax base)

10. State Mercury Activities • At least 25 states have adopted legislation or regulations for Hg products, use • 48 states have issued Hg advisories for fish and water • Several states issued proposals to regulate Hg emissions from coal-fired power plants (CT, NC, NJ, NH, WI) • MA finalized rule effective June 4, 2004 • Environmental Council of the States (ECOS) and Quicksilver Caucus, April 2004: • “urges EPA to… require the most aggressive mercury reductions achievable, in as early a timeframe possible in concert with the earliest of other air pollutant emission reduction schedules, and in such a way that would preclude the creation of localized, adverse health or environmental impacts.”

11. Status of Mercury Controls • Degree of control required and form of final rules will dictate technology used • No mercury-specific control technologies or continuous monitors are “commercially available” • Full-scale testing began in 2001/2002 • Effectiveness, economics of widespread controls are becoming clearer but still require extensive research

12. Key Scientific Findings • Recent and comprehensive research by CDC indicates that people in the U.S. are not being exposed to unsafe levels of Hg. • About 70% of U.S. Hg emissions do not deposit with the U.S., but are dispersed globally. • Model results reveal that most Hg depositing in the U.S. (about 75%) originates in other countries or from other continents. Global inventories show nearly half of the anthropogenic emissions to the atmosphere coming from Asia.

13. Key Scientific Findings • There is no scientific definition of a “hot spot.” • There is no rationale for “hot spots.” • For U.S. geographic locations defined as “utility-influenced” or “non-utility influenced” based on whether 50% or more of the Hg depositing there is emitted from utility stacks, the utility-influenced locations together make up only 0.4% of the U.S. land area, and essentially none of these areas are where the highest deposition occurs in the U.S.

14. Conclusions • Substantial reductions in emissions already have been achieved and substantial reductions will continue. • EEI and its members share the goal of protecting public health and are prepared to make reasonable additional reductions in power plant mercury emissions. • Any Hg control requirements must be scientifically based, provide verifiable public health benefits, and be technologically and economically reasonable. • Any Hg control requirements must not disrupt fuel diversity.

15. Conclusions • The costs of any Hg reduction program, whether cap-and-trade or MACT, would be significant; and on top of the cost of other emission controls. • Cap-and-trade is a proven option and EPA has authority to establish a cap-and-trade program under the CAA. • A 90% MACT option is unrealistic, unnecessary and unjustifiable. • A patchwork of federal, state, and local regulations will not protect public health and will impose unnecessary costs on American consumers. • The U.S. is a leader internationally in efforts to control mercury uses, releases and emissions.