Federal Court Ruling On Mercury Revives Gas-Electric Worries

June 2014, Vol. 241, No. 6

A federal court decision allowing the Environmental Protection Agency (EPA) to move forward with a rule limiting mercury emissions from power plants has heightened concerns in some quarters about interstate pipeline infrastructure inadequacy.

In mid-April, the U.S. Court of Appeals for the District of Columbia said 1,400 coal- and oil-fired electric generating units (EGUs) at 600 power plants must meet air emissions standards finalized in 2011. The plants have up to four years to comply with necessary reductions in emissions of mercury and other air toxics, but the 2011 final rule had been held in abeyance because of a legal challenge.

In September 2013 the EPA issued a proposed rule, which, if finalized, will force newly built power plants to meet stricter standards on emissions of carbon dioxide, a leading greenhouse gas. Taken together, these two EPA actions have persuaded some electric utilities to close coal-and oil-fired power plants, leading some officials at agencies such as the Federal Energy Regulatory Commission (FERC) to worry that natural gas pipelines will have a hard time supplying replacement power plants using natural gas, especially in tough weather such as last winter.

American Electric Power has said it will retire almost a quarter of its coal-fueled generating units in the next 14 months. That is 25% of its capacity. In PJM, 13,000 MW of additional capacity will be retired by mid-2015. “Unless the market structure changes, the capacity replacements for these assets may not provide the same level of reliability we have experienced historically,” says Nicholas Akins, chairman, president, and CEO, AEP. PJM is the Regional Transmission Organization (RTO) serving all or parts of the states of Illinois, Indiana, Michigan, Ohio, Kentucky, Tennessee, West Virginia, North Carolina, Virginia, Maryland, Delaware, Pennsylvania, New Jersey and the District of Columbia. AEP, Dominion and Exelon, among others, serve electricity customers within PJM, to name a few.

To the extent that EPA regulations drive some coal-fired generation plants out of business, pressure will be ramped up on pipelines to serve the gas-fired plants that take their place, if in fact gas-fired plants DO take their place. “Natural gas has proven to be the fuel of choice for new generation developing in our region,” states Michael Kormos, executive vice president of Operations for PJM Interconnection. “Over 64% of new resources in our queue are proposed gas-fired generation.”

A week before the federal court handed down its EPA/mercury ruling, the FERC’s unofficial “pipeline commissioner” told a Senate committee he preferred the EPA present better data before forcing electric utilities to close because of new environmental rules. Philip Moeller told the Senate Energy and Natural Resources Committee, which was meeting to consider issues related to grid reliability, “The sufficiency of our generating resources has been clouded by uncertainties arising from changing environmental regulation. I am not opposed to closing older and less environmentally-friendly power plants, but I am concerned that the compressed timeframe for compliance with the new environmental rules was not realistic given the amount of time it takes to construct new plants and energize transmission upgrades to mitigate plant closures.”

Gas/Oil Industry Unhappy With EPA Proposed Changes To GHG Rule
Gas industry sectors are unhappy with the EPA’s latest proposed changes to greenhouse gas (GHG) monitoring and reporting rules. In the proposed rule the agency issued in February, it said it wanted to foreclose use of BAMM in 2015. BAMM stands for best available monitoring methods which the EPA had previously said pipelines and producers could use until the start of 2015 in “unique or unusual circumstances.”
Allowing companies to use BAMM was a concession the EPA made when it issued the final Subpart W rules–the section of the GHG rules related to natural gas and petroleum sectors exclusively. That was in November 2010 and makes it easier for pipeline companies to estimate GHG emissions from compressors and other equipment. The BAMM concession has outlived its usefulness, the EPA says. The agency wants to make changes in GHG-related information companies can keep confidential.
In its proposed rule, the EPA says BAMM was approved as “a limited, transitional program to serve as a bridge to full compliance with the rule for cases where reporters faced reasonable impediments to compliance.” The problem is companies may have trouble coming up with GHG estimates without using BAMM since they will have to use prescribed monitoring and measuring formulas. In some cases the data inputs for those specified methods may be missing, either too burdensome to find, or what would be considered confidential business information (CBI).

Trade associations and pipeline companies want some flexibility where annual measurement may be impossible or impractical due to safety or operational concerns. Lisa Beal, vice president, Environment and Construction Policy, Interstate Natural Gas Association of America (INGAA), says, “For example, the transportation and storage segments must have alternative compliance methodologies when vent configuration precludes measurement. In addition, situations arise that prevent measurement due to safety concerns. Thus, the missing data provisions must address the void caused by eliminating BAMM, or BAMM sections must be retained.”

Karin Ritter, manager, Regulatory and Scientific Affairs, API, wants the EPA to provide a six-month period of “transitional BAMM” that would begin Jan.1, 2015 or the effective date of the rule, whichever is later. “This is necessary to allow API members adequate and sufficient lead time to read and digest the rule once it becomes final, to provide time for facilities to put systems into place, and to accommodate what appears to be greatly expanded measurement and reporting requirements in the proposed rule.”

The EPA says it is making concessions by giving companies flexibility where BAMM is infeasible. The agency points out that the sources with the most frequent BAMM requests included centrifugal compressors, reciprocating compressors, blowdown vent stacks, and combustion emissions. There, technical infeasibility was often cited as the reason for the need to use BAMM. For example, the most common concerns raised in BAMM requests associated with technical infeasibility included concerns related to having to shut down a facility to install access ports to conduct compressor measurements. To alleviate that concern, the EPA is making revisions that allow testing of a common vent and that clarify that operators do not have to shut a facility for the sole purpose to test a compressor in its non-operating mode, but that the measurement must be made at the next scheduled shutdown.

Thomas J. Bach, QEP, director, Environmental Services, Kinder Morgan Energy Partners, L.P., complains that the EPA proposed rule, if finalized, will force interstate pipelines to make competitive data public. In several instances, the EPA is changing classifications for data that it previously deemed CBI without justifying its decision to reclassify the data. Examples include the proposed confidentiality determinations for annual quantities of gas transported through a compressor station; gas injected into and withdrawn from underground natural gas storage, and LNG imported or exported.

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