How the federal utility MACT rule may affect US businesses

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The final standards for hazardous air pollutant (HAP) emissions from electric generating units (EGUs), one of the last industries to be regulated by MACT, was just published in the Federal Register on February 16 and officially goes into effect on April 16, 2012. The rule (“Utility MACT”) had been long awaited; the USEPA began developing it 11 years ago. According to federal NESHAP, affected facilities have 3 years from the effective date to comply, although the USEPA may add an additional year, if felt to be necessary. This MACT rule offers a cautionary tale of how economics is being and will likely be used in the future by the USEPA to determine rule effectiveness in other areas and industries, as well.

Upon the release of the final rule, there was a huge public outcry. Some pundits on TV cited this as proof that the USEPA is “out of control” given that this is probably the most expensive rule that the USEPA has ever promulgated (and a cost borne exclusively by the power industry). But what was not said was that the USEPA calculated that the rule’s financial benefits are much greater than its costs. Affected sources, mainly coal-fired power plants, must implement Maximum Achievable Control Technology (MACT) strategies to reduce HAP emissions. The main HAP being regulated (but not the only one) is mercury, a powerful neurotoxin that can cause reduced IQ and delayed development to those exposed to it, particularly the young. The avoided lost productivity of children through adult years, deaths, and medical costs are the main components of the benefits. Because the main exposure route of mercury is through accumulation in fish, it is not just a small population downwind of a coal-fired power plant that is at risk of adverse impacts, but a much wider swath of potential victims. This USEPA’s economic approach of analyzing health effects and its cost on US society is demonstrated here.

The Utility MACT rule, which the USEPA estimates will affect about 1,100 coal-fired power plants, would reduce mercury emissions by about 90% compared to uncontrolled plants, as well as large reductions in emissions of other HAPs, including other metals. The USEPA estimated that the cumulative annualized cost to comply with the rule will be about $9.4 billion in 2015, representing less than 3% of power company revenue. Costs are estimated to decline after that.

Like most MACT standards, this one contains emission limits (90% reduction in mercury emissions and similar reductions of other HAPs) to bring all existing applicable sources up to the standards of the top 12% of existing facilities. For mercury, the best solutions are scrubbing with lime or carbon injection, followed in either case with a fabric filter (baghouse) to capture the resulting slurry. The USEPA estimates that about 56% of applicable power plants already operate the control equipment (scrubbers and/or baghouse) needed to comply, although many may need to be incrementally upgraded to meet the new emission standards. These control technologies are not new or in any way experimental. They have worked to reduce mercury and other metal emissions not only in coal-fired power plants, but in other operations (i.e., waste incinerators), as well.

The controversy lies with many of the large majority of affected facilities with emissions that are well above the standards. The U.S. has many aging coal-fired power plants, and owners need to make an economic decision of whether they should invest perhaps millions of dollars in the technologies needed to comply while the operating equipment may be near the end of its useful life. Both the USEPA and industry groups agree that some coal-fired power plants will therefore shut down because of this rule, possibly leaving communities with limited sources of power. Predictably, they disagree on how many plants would be shut down and what regions, if any, may be at risk. The USEPA believes that the rule will ultimately lead to more jobs, mainly in building and installing control equipment, than would be lost by plant shutdowns. Industry groups disagree.

Another disagreement is on costs. The USEPA estimates that, on average nationally, electricity costs will rise just over 3% in 2015 because of the costs to comply with the Utility MACT, or around $3-4/month. That cost rise will drop in subsequent years. The effects will vary by state, being smallest in California where coal-fired power plants are already regulated and highest in the Plains states which tend to have older plants and have not been less regulated for air emissions. For readers not in the power industry, it is likely that the costs of MACT compliance will be passed through in electricity costs. Therefore, an energy conservation/efficiency program would be quite beneficial.

As discussed earlier, the Utility MACT’s final rule was just published in the Federal Register on Feb. 16, 2012 (77 FR 9304), with the rule officially going into effect on April 16, 2012. Facilities have 3 years from this date to comply, although the USEPA could add an additional year if deemed necessary. A number of industry sources say that 4 years is not enough to plan, decide on an approach, design, procure, install, and test the necessary technologies to reliably comply. Therefore, controversy about this rule will continue in the future and likely through the compliance years of 2015-16.

Customer comments

  1. By Christina Schwerdtfeger on

    Excellent summary. This is a real issue in many states where Hg contamination is pervasive. Some states have health warnings when you buy a fishing license to limit the number and type of species that can be consumed.

  2. By Robin Somerville on

    Our Patent 7,056,359 reduces both sulfur and metals emissions at coal fired power plants I would be happy to help Robin Somerville managing partner Solidiwaste L.P.

  3. By Robin Somerville on

    Our Patent 7,056,359 reduces both sulfur and metals emissions at coal fired power plants I would be happy to help Robin Somerville managing partner Solidiwaste L.P.