EPA Rules Scenario Development

1. EPA Rules Scenario Development Joe Chaisson Clean Air Task Force December 7, 2010 www.catf.us

2. Assessing upcoming EPA rule impacts • CATF is assessing potential impacts from the upcoming group of EPA rules • We are using several analytic tools in our assessment work including a unit dispatch model, EPA’s version of the IPM model and other methods • Central to this process is developing plausible scenarios bounding final rule outcomes • This presentation will review key scenario factors for each rule

3. Key EPA rules • Clean Air Transport Rule (CATR) • Power plant hazardous air pollutants (MACT) • Clean Water Act § 316(b) cooling water intake structures • NSPS? • Coal ash? • Other?? Slide 2

4. Process – develop scenarios to model • Develop parameters for each key EPA rule that influence the boundaries (mild vs. aggressive) of plausible final rule outcomes • What questions/issues are important to defining rule outcomes? • Define other key factors – • Natural gas prices • Compliance technology costs • Model the plausible final rule outcomes to assess potential results, for example • Unit retirements • Emissions reductions • Costs, electricity rate impacts, etc.

5. CATR • Relatively straightforward scenario options • EPA’s proposed rule • CATF’ proposed alternative (contained in rule comments by CATF and five other environmental groups) – • Reduces SO2 emissions by 29% and NOx emissions 16% by 2015 • Compliance technology costs may not be a significant factor as EPA’s proposed CATRprimarily locks in existing commitments made to comply with the final CAIR rule • EPA’s proposal requires 14 GW of additional FGDs • CATF’s proposal increases the need for additional FGD’s to 30 GW Slide 4

6. HAPS/MACT • Little EPA legal flexibility • Clear statutory and case law requirements bound setting emissions rates (“floors”) • “hard” compliance deadlines, etc. • Key scenario factors: • MACT “floors” • As proposed for industrial coal boilers? • Alternative floors based on review of complete and quality controlled ICR data (when available)? • Availability/applicability of dry sorbent injection? • Wet flue gas desulfurization (FGD) costs • Reflect recent “systems” installations costs?; or • 30-40% higher in anticipation of substantial, near-term market demand?

7. CWA § 316(b) • EPA has broad flexibility in setting rule provisions • Key scenario questions: • Availability of reliable and complete information on existing power plant cooling systems and cooling water use? • Design withdrawal threshold for rule applicability? • Design withdrawal threshold for meeting a cooling water performance standard? • 50 MGD? • Higher design withdrawal flow?

8. CWA § 316(b) – continued • Criteria for alternative compliance methods of meeting a performance standard? • Alternative compliance path requirements – • Variable speed pumps plus operating practices? • Screens, etc? • Compliance technology costs – • NERC cooling tower cost assumptions? • Upcoming EPRI study? • Variance/exemption provisions?

9. CWA § 316(b) - summary • Developing plausible “bounding” final § 316(b) rule outcome scenarios before EPA issues a proposed rule may not be practical given EPA’s flexibility • EPA’s § 316(b) rule flexibility suggests that provisions to address any potential reliability issues could probably be included in a final rule.

10. GHG NSPS • Given the NSPS process and EPA’s considerable flexibility in setting both new and existing source GHG NSPS standards, it will be challenging to develop plausible final rule boundaries

11. Summary • Rule impacts can probably best be understood today by exploring the plausible boundaries of potential outcomes (where this is practical), rather than simply analyzing “worst case” outcomes • Key analysis factors include – • Plausible final rule requirements • Compliance technology costs • Future natural gas prices • Given EPA’s broad rulemaking flexibility under § 316b and GHG NSPS, “plausible boundary” scenarios are difficult to develop before EPA issues proposed rules