The EPA's Catastrophic Coal Rules

 | May 07, 2012 | 3:30 PM EDT
  • Comment
  • Print Print
  • Print
Stock quotes in this article:


















The EPA recently issued two final rules and they plan to issue three more rules that will effectively prohibit all new coal plants and shut down many existing facilities.

The EPA's rules will also ban many new conventional gas turbines. The nation is left with only three options to power the economy: renewable energy, advanced combined cycle gas turbines and nuclear power. None is cheap.

Two rules already finalized are the Cross State Air Pollution Rule (CSAPR) and the Mercury and Air Toxics Standards (MATS). These change the EPA's existing emission policies by ratcheting up emission requirements at existing power plants. It is retroactive rulemaking.

The third rule, Coal Combustion Residuals Rule, is currently at the proposal stage. According to the EPA, they plan to regulate coal ash generated by power plants. The EPA is considering two options and both fall under the Resource Conservation and Recovery Act (RCRA). Under the first proposal, it would list residuals as special wastes subject to regulation under subtitle C of RCRA, when destined for disposal in landfills or surface impoundments. Under the second proposal, EPA would regulate coal ash under subtitle D of RCRA, the section for non-hazardous wastes. Either way, power plant owners are in for a rough ride.

The fourth rule, Cooling Water Intake Structures Rule, targets all thermal power plants. According to the EPA, this rule covers roughly 1,260 existing facilities that withdraw 2 million gallons per day of cooling water or more. They estimate that approximately 590 are manufacturers and the remaining 670 are power plants. The technologies required under the rule have been in use for several decades and have already been implemented at a number number of facilities. Nevertheless, other regulators under the Federal Energy Regulatory Commission are concerned that these tighter rules will cause more coal plants to retire early.

The EPA's fifth rule is the proposed carbon rule and it is a doozy. The Carbon Pollution Standard for New Power Plants requires new fossil‐fuel‐fired power plants to meet an output‐based standard of 1,000 pounds of carbon dioxide per megawatt‐hour. The EPA claims the average emission rate from coal-fired generation is 2,249 pounds of carbon dioxide per megawatt‐hour.

In case anyone wonders how a new coal-fired power plant could ever be built, the EPA has a simple answer: Carbon Capture and Storage (CCS). The problem for utilities is CCS technology doesn't really exist.

It's not for trying. FuturGen was supposed to be the nation's demonstration project for CCS technology. The project, originally announced by President Bush in 2003, was supposed to be a public-private partnership between Department of Energy (DOE) and an alliance of private-sector companies.

The original alliance included Southern Company (SO), PPL (PPL), Luminant, American Electric Power (AEP), Peabody Energy (BTU), CONSOL Energy (CNX), Caterpillar (CAT), Rio Tinto (RIO), China Huaneng Group and number of other foreign companies.

For years, the project struggled to define scope, schedule and cost. Frustrated, the DOE announced it was pulling its funding in 2008. It cited technical risks and unacceptable cost overruns. At the time, costs were exceeding $1.8 billion or $6.5 million a megawatt. FutureGen became more expensive than a new nuclear power plant and it was far more costly to operate. Why bother.

With a new administration and a mandate for clean coal, DOE announced the restart of the FutureGen project called FutureGen 2.0. All four American utilities dropped out. Now FutureGen 2.0 is mired in similar controversies experienced in the previous administration. It's crystal clear. CCS technology is not ready.

Apparently, the EPA is not talking to the DOE. Incredibly, it believes CCS technology is ready and will be the applicable standard for the industry. The EPA plans to force new coal plants to use CCS technology, ignoring reason and distorting outcomes in the attempt to promulgate a difficult rule.

When the industry combines all five rules, and it must, it will find two incredibly stunning outcomes. First, the industry will conclude it impossible to continue operating tens of thousands of megawatts of existing generation. Second, it will find it impossible to build all manner of new power plants, including simple gas turbines.

The only thermal power plant that can be built under EPA's new rules is an advanced combined cycle gas turbine. They are about a $1 billion a copy and are currently available from General Electric (GE) and Siemens (SI).

EPA boxed in America. They've removed important options. They've forced outcomes using unavailable technologies.

Columnist Conversations

today is a good day to lighten the load and take some positions off the table. SOLD WB OCT 85 CALL AT 11 (i...
I reached out last week to my close friend Ken Shreve, who is a prominent writer for the IBD.  I asked Ke...
I reached out last week to my close friend Ken Shreve, who is a prominent writer for the IBD.  I asked Ke...



News Breaks

Powered by


Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.