U.S. Environmental Protection Agency Office Air and Radiation Joseph Goffman October 22, 2010

1. Reducing Air Pollution from Power Plants U.S. Environmental Protection AgencyOffice Air and RadiationJoseph GoffmanOctober 22, 2010

2. The US Power Sector and Air Pollution • The US power sector is remarkable in many respects: • World-class reliability • Near universal provision of electricity • History of providing power at declining real costs. • But from and air quality perspective, the power sector is characterized by significant underinvestment • with a large percentage of plants remaining uncontrolled despite the availability of cost-effective control technology. • Many of the uncontrolled plants are old, small and have relatively low capacity factors. • EPA and others estimate that an uncontrolled coal-fired power plant can be responsible for scores of premature deaths and even more illnesses.

3. The US Power Sector and Air Pollution • Much of EPA’s clean air agenda over the past decade was declared inconsistent with the Clean Air Act, and so EPA must revisit those regulations. • We now must promulgate a series of regulations that will require that the electricity generating industry become much cleaner. • These rules present significant decision-making demands and high-leverage opportunities for plant operators and state regulators. • For example, whether it is wiser to make large investments in controls or choose alternative cleaner resource options. (e.g. new generation, energy efficiency, demand response.)

4. Power Sector Provides a Major Share of Our Air Emissions NOx Emissions, 2007 Hg Emissions, 2005 SO2 Emissions, 2007 Total: 12.9 Million Tons Total: 17.0 Million Tons Total: 102.7 Tons • Other Emissions include: • Trace metals (arsenic, nickel and • others) Trace organics • Acid gases PM10 Emissions, 2007 Carbon Dioxide, 2005 Other 59% Power Sector 41% Sources: SO2, NOX, PM10, and Hg are from NEI trends data; PM10 excludes condensibles and fugitive dust; CO2 is from EPA’s U.S. Greenhouse Gas Emissions and Sinks: 1990-2005“Other” sources include transportation, other mobile sources, and industrial sources Total: 2.2 Million Tons Total: 5.8 Billion Tons

5. U.S. Coal-Fired Power Plants Produce Most Air Emissions • Coal-fired power plants generate the vast majority of power sector air emissions. About: • 92% Hg • 98% SO2 • 93% of NOx • 83% of CO2 Source: EPA’s Data and Maps, Acid Rain Program 2008

6. Meeting the ChallengeThe Administrator's Principles As EPA implements its authorities, we are bound to adhere to the following principles • Common sense strategies to encourage investment in energy efficiency and updated technologies. • Clean technologies save lives. • Multi-pollutant multi-sector strategies. • Provide certainty and clarity for businesses and opportunities to reduce emissions at lower costs. • Clear achievable standards with flexibility in how they are achieved. • Allows innovation for lower cost high achieving technologies. • Enhances compatibility with state clean air programs. • Rules that reflect the input and wisdom and experience from as many groups as possible. • Citizens, industry, state, local, and tribal regulators all have valuable perspectives that can make our rules better • Focus on results – regulate where it makes sense to regulate. • We will regulate where we can get meaningful results – the significant polluters.

7. Upcoming EPA Clean Air Act Power Plant Rules • Interstate Pollution Transport Rule for existing PM and ozone NAAQS • Proposed rule unveiled in July, published August 2, 2010 • Final rule planned June 2011 • Utility MACT (section 112/hazardous air pollutants) • Propose March 2011, finalize November 2011 • Utility NSPS (section 111/criteria pollutants) • Same schedule as MACT • 2006 utility NSPS is under reconsideration and subject to pending litigation • Section 111(b) for new and modified/reconstructed sources • Interstate Pollution Transport Rule for 2010 reconsidered ozone NAAQS • Proposed rule in 2011, final rule in 2012 • Response to court remand on Utility NSPS (section 111) for greenhouse gases • EPA is considering substance and timing of its response.

8. Transport Rule Counties with Violating PM and/or Ozone Monitors (55) Counties with PM and/or Ozone Maintenance Problems (28) States covered by the Transport Rule (31 + DC) Counties with Monitors Projected to Have Ozone and/or PM2.5 Air Quality Problems in 2012 Without the Proposed Transport Rule • In 2012, EPA projects that: • Some communities will still not meet the air quality standards. • Millions of people will continue to breathe unhealthy air. • Many upwind states will still contribute significantly to downwind nonattainment areas. • The Transport Rule will affect power plants because their emission reductions are most cost-effective. • Other actions by EPA and the states must be taken before all areas will attain the current and future National Ambient Air Quality Standards (NAAQS). This analysis assumes that the Clean Air Interstate Rule is not in effect. It does reflect other federal and state requirements to reduce emissions contributing to ozone and fine particle pollution that were in place as of February 2009. 8

9. Four Separate Control Regions • Proposal includes separate requirements for: • NOx reductions (2012) • Ozone-season NOx reductions (2012) • Sets emissions budgets for each state • Proposal includes separate requirements for: • Annual SO2 reductions • Phase I (2012) and Phase II (2014) • Two Control Groups • Group 1 – 2012 cap lowers in 2014 • Group 2 – 2012 cap only • Sets emissions budgets for each state 9

10. EPA is proposing one approach and taking comment on two alternatives. All three approaches would cover the same states – 31 states and the District of Columbia, set a pollution limit (or budget) for each state and obtain the reductions from power plants. EPA’s preferred approach -- allows intrastate trading and limited interstate trading among power plants but assures that each state will meet its pollution control obligations. To meet this proposed rule, EPA anticipates power plants will: Operate already installed control equipment more frequently, Use lower sulfur coal, or Install pollution control equipment such as low NOX burners, Selective Catalytic Reduction, or scrubbers (Flue Gas Desulfurization). CAIR remains in place until this rule is finalized. Final rule is expected in late spring 2011. Transport Rule 10 10 10

11. Benefits Outweigh Costs • EPA estimates the annual benefits from the proposed Transport Rule range between $120-$290 billion (2006 $) in 2014. • Most of these benefits are public health-related. • $3.6 billion are attributable to visibility improvements in areas such as national parks and wilderness areas. • Other nonmonetized benefits include reductions in mercury contamination, acid rain, eutrophication of estuaries and coastal waters, and acidification of forest soils. • EPA estimates annual compliance costs at $2.8 billion in 2014. • Modest costs mean small effects on electricity generation. EPA estimates that in 2014: • Electricity prices increase less than 2 percent. • Natural gas prices increase less than 1 percent. • Coal use is reduced by less than 1 percent. 11 11

12. Utility MACT: Coal and Oil-Fired Power Plants Will likely drive significant investment in upgrading plants with modern pollution control. To be proposed March 2011 and finalized November 2011- per court order Will reduce emissions of mercury, other metals such as arsenic and lead, dioxin/furans, acid gases, etc. The standard: maximum reduction achievable for sources taking into consideration costs, energy requirements and non-air quality health and environmental impacts. Must be at least as stringent as: Existing sources: the average emissions reduction achieved by the top performing 12 percent of sources within the category New sources: the emissions reduction achieved by the best single performing source within the category Compliance: Existing: 3 years from final rule + 1 year allowable extension by State/EPA New: upon final rule

13. Utility MACT: Who Is Affected ? • Industry includes investor-owned, publicly-owned, and rural cooperatives • Approximately 1,200 coal-fired boilers at approximately 450 facilities in 44 States but especially concentrated in the Midwest and Southeastern US. • Many units are base-load with high capacity factors • Approximately 150 oil-fired boilers at approximately75 facilities, mostly in Northeast, Midwest, Florida, Hawaii, Guam, Puerto Rico • Many units are peaking units with low capacity factor utilization • Many co-fire with natural gas or use natural gas preferentially but must have oil capability for use during periods of natural gas curtailments to industry 13

14. Utility New Source Performance Standards Clean Air Act, Section 111, New Source Performance Standards (NSPS) Authority to set emissions performance standard for new and modified sources (EPA directly), and existing sources (through the states) Standards must reflect the emission limitation achievable through the application of the best system of emission reduction which the Administrator determines has been adequately demonstrated. Must consider: cost of achieving such reduction any non-air quality health and environmental impact, and energy requirements Standards are based on demonstrated performance andmay not require use of any particular technology. NSPS for Utility Boilers (NOx, SO2, PM) To be proposed with Utility MACT - March 2011 and finalized November 2011 NSPS for Utility Boilers (GHGs) EPA in receipt of letter (August 20) from lawsuit litigants NSPSs are to be reviewed at least every 8 years.

15. Transport Rule 2 • Will address CAA responsibility of upwind states to downwind state ozone problems • (1) Any emissions reductions needed for states contributing to nonattainment/interfering with maintenance of 1997 ozone standard in Baton Rouge, Houston, New York City • (2) Emissions reductions needed for all states in the nation contributing to nonattainment/interfering with maintenance of upcoming 2010 ozone standards • Will analyze both EGU and non-EGU sources for available controls • Transport Rule 1 provides framework for addressing transport under future standards such as the 2010 ozone standards 15

16. Benefits of Power Plant Rules Will Far Exceed Costs • We cannot predict the costs – or the benefits - with certainty before we have established the regulations themselves. But we know that… • Achieving a much cleaner power industry will impose costs to the industry and to rate payers. • The value of the benefits to the public will be much greater than the costs. • Expected benefits include tens of thousands of premature deaths avoided, and hundreds of thousands of episodes of respiratory illness avoided each year.

17. The Role of Energy Efficiency and Demand Response • Multiple benefits of supplementing our rules with actions to reduce electricity demand by improving energy efficiency would: • Substantially cut total costs to power sector of controlling conventional pollutants • Achieve reductions in CO2 through idling or retirement of inefficient fossil-fuel-fired generating stations that would no longer be needed or economic • Avoid or defer need for new generation • Reduce conventional air pollutant emissions, especially on high electricity demand days (which coincide with poor air quality) • Reduce concerns about reliability of electricity supply • Lower consumer bills • EPA can encourage but cannot mandate energy efficiency. We encourage state regulators, including PUCs and State energy offices, system transmission operators, and power companies themselves to take action to reduce demand for electricity.

18. Smart Compliance Strategies • Most plants will respond to these regulations by installing proven cost-effective control technologies. • But there are other options that deserve consideration: • Building new cleaner generation capacity. • Some companies have already announced retirements and new cleaner generation capacity is in the pipeline. • Greater use of unused existing capacity can help ease the transition. • Switching exiting capacity to cleaner fuels, and • Action to lower demand for electricity so inefficient uncontrolled plants can retire.

19. A Cleaner Power Sector • Air pollution from the power sector is still a major source of death and disease. • This is not acceptable in today’s world where the technology to control this pollution is readily available. • It has taken a long while to get to this point, but we are confident that within a few years we will see a cleaner, more efficient power sector.