Trading grandfathered air - A new, simpler approach

Harvard Environmental Law Review

Volumn 31, Issue 1, 2007, Pages 115-162

  Potts, Brian H ^a  

^a UNIVERSITY OF CALIFORNIA   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

ENVIRONMENTAL LEGISLATION; ENVIRONMENTAL POLICY; FOSSIL FUEL; POLLUTION CONTROL;

EID: 33947704645     PISSN: 01478257     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (367)

1. United States v. Cinergy Corp., 485 F.3d 705 (7th Cir., 2006) (upholding EPA' annual emissions increase test for NSR);
2. New York v. EPA, 443 F.3d 880, 883 (D.C. Cir. 2006) (invalidating Equipment Replacement Provision of the Routine Maintenance, Repair, and Replacement Exclusion, 68 Fed. Reg., 61,248 (Oct. 27, 2003) (final rule));
3. United States v. Duke Energy Corp., 411 F.3d 539, 550 (4th Cir. 2005) (invalidating the hourly/yearly distinction in NSR and the New Source Performance Standards ("NSPS"));
4. New York v. EPA, 413 F.3d 3, 10 (D.C. Cir. 2005) (upholding the majority of EPA's 2002 emissions increase rule).
5. United States v. Cinergy Corp., 384 F.Supp.2d 1272 (S.D. Ind. 2005) (upholding EPA's annual emissions increase test for NSR);
6. United States v. Ala. Power Co., 372 F.Supp.2d 1283 (N.D. Ala. 2005) (interpreting the routine maintenance provision and the emissions increase rule);
7. United States v. Ohio Edison Co., 276 F.Supp.2d 829 (S.D. Ohio 2003) (finding that EPA should look at the industry, as a whole, rather than to the specific source when determining what constitutes routine maintenance);
8. United States v. Duke Energy Corp., 278 F.Supp.2d 619, 647-49 (M.D.N.C. 2003) (applying the "actual-to-actual" emissions increase test and looking to what is routine at the source);
9. United States v. S. Ind. Gas & Elec. Co., 245 F.Supp.2d 994 (S.D. Ind. 2003) (finding that EPA's interpretation of the routine maintenance provision is reasonable).
10. Prevention of Significant Deterioration (PSD) and Nonattainment New Source Review (NSR): Debottlenecking, Aggregation, and Project Netting, 71 Fed. Reg. 54,235 (Sept. 16, 2006);
11. Prevention of Significant Deterioration, Nonattainment New Source Review, and New Source Performance Standards: Emissions Test for Electric Generating Units, 70 Fed. Reg. 61,081 (Oct. 20, 2005) (proposed rule);
12. Standards of Performance for New and Existing Stationary Sources: Electric Utility Steam Generating Units, 70 Fed. Reg. 28,606 (May 18, 2005) (final rule) (Clean Air Mercury Rule ("CAMR"));
13. x SIP Call, 70 Fed. Reg. 25,162 (May 12, 2005);
14. Equipment Replacement Provision of the Routine Maintenance, Repair and Replacement Exclusion, 68 Fed. Reg. 61,248 (Oct. 27, 2003) (final rule);
15. Prevention of Significant Deterioration (PSD) and Nonattainment New Source Review (NSR): Baseline Emissions Determination, Actual-to-Future-Actual Methodology, Plantwide Applicability Limitations, Clean Units, Pollution Control Projects, 67 Fed. Reg. 80,186 (Dec. 31, 2002) (final rule).
16. See James E. McCarthy, Clean Air Act Issues in the 108th Congress 6-8 (Cong. Research Serv., CRS Issue Brief for Congress Order Code IB10107, Nov. 30, 2004), available at http://www.ncseonline.org/NLE/CRSreports/ 04nov/IB10107.pdf (outlining all of the major Congressional proposals).
17. For further analysis of various portions of the rule and a discussion of the emissions increase portion of the modification rule, see Brian H. Potts, The U.S. Supreme Court's New Dukedom, the Hour and Year, or a Proposal Quite Near, 33 Ecology L.Q. (forthcoming 2006).
18. See also Robert A. Greco, P.E., When Is Routine Maintenance Really Routine? A Proposed Modification to the EPA's New Source Review Program, 88 Marq. L. Rev. 391, 391 (2004) (discussing the routine maintenance portion of the modification rule).
19. Hearing Before the Comm. on Environment and Public Works, Health Impacts of PM2.5 Associated with Power Plant Emissions, 107th Cong. 3 (2002).
20. For a more detailed discussion of these statistics, see infra Parts II, VI.
21. The MEBACT approach aims to limit the social welfare losses associated with the CAA's current trading regimes by forcing certain grandfathered facilities over time to install the most effective pollution control technology. See infra Part V for a more detailed discussion.
22. Robert N. Stavins, Res. for the Future, The Effects of Vintage-Differentiated Environmental Regulation 1 (2005), available at http://www.rff.org/Documents/RFF-DP-05-12.pdf.
23. Id.
24. See infra Part I.A.
25. See 40 C.F.R. §§ 60.42-44 (2006).
26. See Heidi Gorovitz Robertson, If Your Grandfather Could Pollute, So Can You: Environmental "Grandfather Clauses" and Their Role in Environmental Inequity, 45 Cath. U. L. Rev. 131, 131 (1995)
27. (citing Karen McGill Arrington, The Struggle to Gain the Right to Vote, in Voting Rights in America: Continuing the Quest for Full Participation 30 (Karen McGill Arrington & William L. Taylor eds., 1992)).
28. Grandfather Regulations, New Source Bias, and State Air Toxics Regulations
29. See id. at 299 n.1 ("These technological requirements include the corporate average fuel economy (CAFE) standards, as well as emissions limits that are met by installing catalytic converters. In both cases, the increasingly stringent standards apply only to new automobiles; used cars are exempt");
30. see also H. K. Gruenspecht, Differentiated Regulations: The Case of Auto Emissions Standards, 72 Amer. Econ. Rev. 328, 328-31 (1982).
31. See, e.g., Stavins, supra note 9, at 1;
32. Levinson, supra note 14, at 300.
33. Levinson, supra note 14, at 300.
34. Id.
35. Stavins, supra note 9, at 1.
36. Id. at 15.
37. Id. at 5.
38. There have, however, been empirical studies disputing the capital investment disincentive issue. See, e.g., Levinson, supra note 14, at 299 ("In general, there seem to be no statistically significant differences in capital vintage or investment between plants in states that grandfather new sources of pollution, plants in states that have no air toxics regulations, and plants in states that regulate both new and existing sources.").
39. John A. List et al., The Unintended Disincentive in the Clean Air Act, 4 Advances in Econ. Analysis & Pol'y 1 (2004), available at http://www.bepress.com/cgi/viewcontent.cgi?article=1204&context= bejeap.
40. See 42 U.S.C. §§ 7479(3), 7501(3) (2006) (providing that certain new or modified sources must meet stringent technology standards).
41. List et al., supra note 22, at 1.
42. There are currently a number of bills in Congress attempting to introduce marketable permit regimes for various pollutants. McCarthy, supra note 4, at 6-8.
43. See, e.g., 42 U.S.C. § 7410 (2006) (allowing states to create state implementation plans to meet National Ambient Air Quality Standards ("NAAQS")).
44. Id.
45. 42 U.S.C. §§ 7408-09 (2006);
46. Tom Tietenberg, Environmental Economics and Policy 265 (3d ed. 2001).
47. 42 U.S.C. § 7410.
48. Id.
49. "Compliance with NAAQS are determined primarily from monitoring data from sites within the area. If one monitoring site within an area is in noncompliance with NAAQS, the entire area is noncompliant for that pollutant." Arnold W. Reitze, Jr., Stationary Source Air Pollution Law 33 (2005).
50. 3), particulate matter (PM2.5), carbon monoxide (CO), and lead (Pb).
51. See 42 U.S.C. §§ 7408-09.
52. See 42 U.S.C. §§ 7475, 7503 (2006).
53. See id.
54. See Reitze, supra note 30, at 161.
55. 42 U.S.C. § 7661a(b)(5)(B) (2006).
56. See also Reitze, supra note 30, at 161.
57. 42 U.S.C. § 7411(d) (2006);
58. see also Reitze, supra note 30, at 161.
59. See 42 U.S.C. § 7411.
60. There are 69 source categories. See 40 C.F.R. § 60, Subpart C (2006).
61. 42 U.S.C. § 7411(a).
62. See 42 U.S.C. § 7411.
63. Id.
64. See Standards of Performance for Electric Utility Steam Generating Units for Which Construction Is Commenced After September 18, 1978, Standards of Performance for Industrial-Commercial-Institutional Steam Generating Units, and Standards of Performance for Small Industrial-Commercial-InstitutionaI Steam Generating Units, 70 Fed. Reg. 9706, 9708 (Feb. 28, 2005) (hereinafter Standards of Performance for Steam Generating Units).
65. See Reitze, supra note 30, at 163 ("NSPS regulations generally have not been updated in recent years while programs under the PSD and nonattainment provisions have become more important to industrial sources seeking to construct or modify facilities."). However, EPA has proposed recent revisions to various NSPS regulations.
66. See Standards of Performance for Steam Generating Units, 70 Fed. Reg. 9706 (Feb. 28, 2005).
67. See 40 C.F.R. §§ 60.42a-.44a (2006).
68. See id.;
69. Rietze, supra note 30, at 166.
70. 40 C.F.R. §§ 60.42a-.44a.
71. Id.
72. "EPA's emissions 'limits are based on the use of selective catalytic and selective noncatalytic reduction technologies, which the Agency predicted would cost about $1,500 per ton of nitrogen oxides removed."' Reitze, supra note 30, at 166
73. x Standard for New or Rebuilt Utility, Industrial Boilers, Daily Env't Rep. (BNA), at AA-1 (Sept. 8, 1998)).
74. Nonattainment areas are areas that do not meet the NAAQS. 42 U.S.C. § 7407(d), 7501(2) (2006).
75. PSD areas also include areas where there was insufficient information to evaluate whether the NAAQS have been met. See 42 U.S.C. §§ 7470-92 (2006).
76. See Reitze, supra note 30, at 162 ("NSPS apply to sources that are not major sources and usually are the minimum requirements for the more stringent NSR program that is applicable to major stationary sources").
77. See Standards of Performance for Steam Generating Units, supra note 43, at 9709 (Feb. 28, 2005) (pointing out that some steam generating electric facilities are subject to an NSPS and not NSR).
78. 42 U.S.C. §§ 7479(3), 7501(3).
79. An area is in attainment if it meets the primary or secondary NAAQS. 42 U.S.C. § 7407(d)(1)(A)(ii).
80. An area is unclassifiable if its air "cannot be classified on the basis of available information as meeting or not meeting the national primary or secondary ambient air quality standard for the pollutant." 42 U.S.C. § 7407(d)(1)(A)(iii).
81. 42 U.S.C. §§ 7479(3), 7501(3).
82. 42 U.S.C. § 7479(3) ("In no event shall application of [BACT] result in emissions of any pollutants which will exceed the emissions allowed by any applicable standard established pursuant to [the NSPS provisions].").
83. 42 U.S.C. § 7503(c) (2006).
84. Id. For example, a newly modified source in a nonattainment area that would have a fifty ton per year increase after the modification would have to obtain offsets from other facilities to mitigate this increase.
85. Compare, e.g., United States v. Duke Energy Corp., 411 F.3d 539 (4th Cit. 2005), cert. granted, 126 S.Ct. 2019 (U.S. May 15, 2006) (No. 05-848) (invalidating the hourly/yearly distinction in NSR and NSPS) with United States v. Cinergy Corp., 384 F.Supp.2d 1272 (S.D. Ind. 2005) (upholding the hourly/yearly distinction);
86. compare also United States v. Ohio Edison Co., 276 F.Supp.2d 829, 853 n.10 (S.D. Ohio 2003) with United States v. Duke Energy Corp., 278 F.Supp.2d 619, 630 (M.D.N.C. 2003).
87. See 42 U.S.C. §§ 7411(a)(4), 7479(1)(C) (2006).
88. See, e.g., Wis. Elec. Power Co. v. Reilly, 893 F.2d 901, 905 (7th Cir. 1990) ("[T]he most trivial activities - the replacement of leaky pipes, for example - may trigger the modification provisions if the change results in an increase in the emissions of a facility.").
89. See 40 C.F.R. § 60.14(e)(1) (2006).
90. Memorandum from Don R. Clay, Acting Assistant Adm'r for Air and Radiation, EPA, to David A. Kee, Dir. of Air and Radiation Div., Region V, EPA, Applicability of Prevention of Significant Deterioration (PSD) and New Source Performance Standards (NSPS) Requirements to the Wisconsin Electric Power Company (WEPCO) Port Washington Life Extension Project 3 (Sept. 9, 1988), available at http://www.epa.gov/ttn/nsr/psd1/ p4_37.html [hereinafter Clay Memorandum].
91. In a 2002 rulemaking, EPA attempted to broaden the routine maintenance exclusion to exclude replacements constituting less than twenty percent of the value of the process unit, but the D.C. Circuit invalidated the rule. New York v. EPA, 443 F.3d 880 (D.C. Cir. 2006) (invalidating Equipment Replacement Provision of the Routine Maintenance, Repair and Replacement Exclusion, 68 Fed. Reg. 61,248 (Oct. 27, 2003) (final rule)).
92. 40 C.F.R. § 52.21(b)(21)(ii) (2006).
93. 893 F.2d at 910-13. WEPCO is well known primarily because of its decision on the significant increase in emissions issue, not the routine maintenance issue.
94. Id.;
95. see also United States v. S. Ind. Gas & Elec. Co., 245 F.Supp.2d 994, 1017 (S.D. Ind. 2003) (WEPCO was an easy case on routine maintenance - the EPA and the Seventh Circuit quickly disposed of the defendant's arguments that it qualified for routine maintenance).
96. WEPCO, 893 F.2d at 910-12.
97. Id. at 910
98. (quoting Clay Memorandum, supra note 64).
99. Id. at 911.
100. Id.
101. Id. at 913.
102. For a more detailed discussion of the routine maintenance issue, see United States v. Ohio Edison Co., 276 F.Supp.2d 829, 853 n. 10, 859 (S.D. Ohio 2003).
103. See also In re Tennessee Valley Authority, 9 E.A.D. 357 (Envtl. App. Bd. Sept. 15, 2000).
104. This difference was recently held unconstitutional in the Fourth Circuit. However, it is still the rule in all other circuits. United States v. Duke Energy Corp., 411 F.3d 539 (4th Cir. 2005), cert. granted, 126 S.Ct. 2019 (U.S. May 15, 2006) (No. 05-848).
105. 40 C.F.R. § 60.14(b) (2006);
106. 40 C.F.R. § 52.21(a)(2)(iv)(c) (2006).
107. EPA has recently proposed changing the NSR measurement to an hourly test mirroring the NSPS rule. Prevention of Significant Deterioration, Nonattainment New Source Review, and New Source Performance Standards: Emissions Test for Electric Generating Units, 70 Fed. Reg. 61,081 (Oct. 20, 2005).
108. The previous rule before EPA's 2002 NSR reform was that the baseline was measured over the immediately preceding two years; however, there were circumstances where EPA might measure other years at their discretion. See New York v. EPA, 413 F.3d 3, 10 (D.C. Cir. 2005) (upholding EPA's new NSR baseline calculation rule, 40 C.F.R. § 52.21(b) (48)(ii)).
109. The period is five years for electric facilities (40 C.F.R. § 52.21(b)(48)(i)).
110. 40 C.F.R. § 51.166(b)(21)(ii) (2006).
111. 40 C.F.R. § 52.21 (a)(2)(iv)(c).
112. See United States v. Duke Energy Corp., 278 F.Supp.2d 619, 630 (M.D.N.C 2003).
113. 42 U.S.C. § 7475(a)(4) (2006).
114. Nonetheless, some states, like Wisconsin, use the BACT standard for listed hazardous air pollutants (HAPs) anyway. Wis. Admin. Code § NR 445.02(1m) (2006).
115. 42 U.S.C. § 7479(3) (2006)(emphasis added).
116. See also 40 C.F.R. § 51.166(b)(12) (2006) (containing the regulatory definition).
117. 42 U.S.C. § 7479(3);
118. Reitze, supra note 30, at 197.
119. 42 U.S.C. § 7503(a) (2006);
120. Reitze, supra note 30, at 203.
121. Compare 42 U.S.C. § 7501(3) (2006) (defining nonattainment LAER standard) with 42 U.S.C. § 7479(3) (defining BACT standard).
122. See also Reitze, supra note 30, at 204.
123. 42 U.S.C. § 7501(3).
124. 42 U.S.C. § 7651(a)-(o) (2006).
125. EPA, Acid Rain Program: Overview, http://www.epa.gov/airmarkt/arp/ overview.html (last visited Nov. 24, 2006) (on file with the Harvard Environmental Law Review).
126. x react in the atmosphere. Paul L. Joskow & Richard Schmalensee, The Political Economy of Market-Based Environmental Policy: The U.S. Acid Rain Program, 41 J.L. & Econ. 37, 40 (1998).
127. See 42 U.S.C. § 7651(a)-(o).
128. See, e.g., Alexander E. Farrell & Lester B. Lave, Emission Trading and Public Health, 25 Ann. Rev. Pub. Health 119, 124 (2004).
129. See id. at 124-125 ("Typically, the cap is set in mass units (e.g., tons), is lower than historical emissions, and declines over time.... The government [then] requires regulated facilities to surrender emission allowances that equal their emissions on a regular basis (sometimes called 'true up').").
130. See also Paul L. Joskow & Richard Schmalensee, The Political Economy of Market Based Environmental Policy: The U.S. Acid Rain Program, 41 J. L. & Econ. 37, 41 n.12 (1998) ("[T]hese allowances are like checking account deposits; they exist only as records in the EPA's computer-based allowance tracking system. This system contains accounts for all affected generating units and for any other parties that want to hold allowances. It can be used to transfer allowances from one account to another.").
131. Joskow & Schmalensee, supra note 91, at 42.
132. There was a small allowance auction held in the early years of the program. See Farrell & Lave, supra note 90 at 129;
133. Renee Rico, The U.S. Allowance Trading System for Sulfur Dioxide: An Update on Market Experience, 5 Envtl. & Resource Econ. 115, 125-26 (1995) (discussing in detail the allowance auction).
134. 42 U.S.C. § 7651b(b) (2006)
135. 2 Emissions Trading Program to Date 6 (1996), available at http://www.rff.org/ Documents/RFF-DP-95-30-REV.pdf.
136. See 42 U.S.C. § 7651k(a);
137. 40 C.F.R. § 51.165(a)(xxxi) (2006) (requiring facilities subject to Title IV to install CEMs).
138. 40 C.F.R. § 75.64 (2006).
139. H.R. 999, 108th Cong. § 410(a)(2)(D) (2003) (amending 42 U.S.C. § 7651(a)-(o) (2000)).
140. See Standards of Performance for New and Existing Stationary Sources: Electric Utility Steam Generating Units (CAMR), 70 Fed. Reg. 28, 606 (May 18, 2005);
141. x SIP Call, 70 Fed. Reg. 25, 162 (May 12, 2005).
142. See EPA, Fact Sheet, Clean Air Interstate Rule Basic Information; http://www.epa.gov/CAIR/basic.html (last visited Nov. 24, 2006) (on file with the Harvard Environmental Law Review).
143. Id.
144. Id.
145. EPA, Clean Air Interstate Rule, http://www.epa.gov/CAIR/index.html (last visited Nov. 24, 2006) (on file with the Harvard Environmental Law Review).
146. EPA, Fact Sheet, supra note 98.
147. A MACT standard, or "maximum achievable control technology" standard, is used only for CAA Section 112 listed hazardous air pollutants, of which there are 188. 42 U.S.C. § 7612(b) (2006).
148. The EPA issued MACT generally sets a strict source-specific emissions standard for all facilities, regardless of age. Id. at § 7612(d)(2). If EPA had not exempted power plants from the mercury MACT standards, they would have been subject to what is known as the "MACT floor," requiring them to meet or exceed the average emission limitations achieved by the top 12% of power plants for which EPA has data. According to one analysis, this would have called for a more than 90% reduction in mercury emissions from all affected power plants by 2008, a much greater reduction than under CAMR.
149. See Pamela D. Harvey & C. Mark Smith, The Mercury's Falling: The Massachusetts Approach to Reducing Mercury in the Environment, 30 Am. J.L. & Med. 245, 261 (2004) ("The top 12% of comparable sources, the traditional basis for determining MACT, was estimated to yield a 90% overall reduction in mercury emissions.").
150. See also David W. Rugh, Clearer, But Still Toxic Skies: A Comparison of the Clear Skies Act, Congressional Bills, and the Proposed Rule to Control Mercury Emissions from Coal-Fired Power Plants, 28 Vt. L. Rev. 201, 203 (2003) ("Conservative EPA estimates contend that once implemented, the operation of section 112 of the CAA will reduce mercury emissions to 15 tpy by 2008.").
151. EPA, Clean Air Mercury Rule Basic Information, http://www.epa.gov/air/ mercuryrule/basic.htm (last visited Nov. 24, 2006) (on file with the Harvard Environmental Law Review).
152. For example, President Bush's Clear Skies Initiative attempted to remove NSR under its proposed trading regimes. See H.R. 999, 108th Cong. § 483(a) (2003) (amending 42 § 7651-7651o) ("An affected unit shall not be considered a major emitting facility or major stationary source, or a part of a major emitting facility or major stationary source for purposes of compliance with the requirements of parts C and D of Title I").
153. This is not true under the CAMR rule because mercury, as a hazardous air pollutant, is not subject to NSR or NSPS regulations.
154. James G. Speight, The Chemistry and Technology of Coal 363 (2d ed. 1994).
155. Id.
156. Id.
157. 2 than other fuel sources.
158. EPA, Office of Compliace, EPA/310-R-97-007, Profile of the Fossil Fuel Electric Power Generation Industry 24 (1997), available at http://www.epa.gov/compliance/resources/publications/assistance/ sectors/notebooks/fossil.html;
159. see also Edward S. Rubin et al., Introduction to Engineering and the Environment 183-84 (2001) ("Steam turbines are the most prevalent method used worldwide for spinning the shaft of an electromechanical generator. By combining two of nature's most basic elements - fire and water - high-temperature steam can be generated to produce a hundredfold increase in the electrical output of a turbine generator compared to liquid water alone.").
160. See Yunus A. Cengel & Michael A. Boles, Thermodynamics: An Engineering Approach 243 (2001).
161. The cycle is named after a late nineteenth-century Scottish engineer named William Rankine, a pioneer in the thermodynamics field. See Rubin et al., supra note 111, at 187.
162. For a more complete description of the Rankine cycle, see Cengel & Boles, supra note 112, at 521-33.
163. For a discussion of state-of-the-art fossil-fuel power plant design see J. M. Beer, Combustion Technology Developments in Power Generation in Response to Environmental Challenges, 26 Progress in Energy Combustion Science 301, 301-27 (2000).
164. See United States v. Duke Energy Corp., 278 F.Supp.2d 619, 623 (M.D.N.C. 2003).
165. For a more comprehensive discussion see the Profile of the Fossil Fuel Electric Power Generation Industry, supra note 111.
166. See also Bruce G. Miller, Coal Energy Systems 204-08 (2005).
167. See Duke Energy Corp., 278 F. Supp. 2d at 623. The replacement of some or all of the various tube assemblies is the foundation for many of the current NSR lawsuits.
168. Miller, supra note 114, at 207. ("Coal is burned in three ways: (1) as large pieces in a fixed bed or on a grate, (2) as smaller or crushed pieces in a fluidized bed, or (3) as very fine particles in suspension.")
169. Duke Energy, 278 F. Supp. 2d at 623.
170. Id.
171. Id.
172. Id.
173. Speight, supra note 107, at 402.
174. Ohio Dep't of Natural Res., Div. of Geologcal Survey, GeoFacts No. 16: Coal and Electricity 1 (Mar. 2002), available at http://www.ohiodnr.com/ geosurvey/pdf/geof16.pdf.
175. Nat'l Research Council, Coal: Energy for the Future 138 (1995) [hereinafter NRC Report];
176. Miller, supra note 114, at 284.
177. On cold days, this statement is subject to exception. Thermal pollution (i.e., steam) is often the most visible form of emissions. In fact, under certain circumstances, the "vapor plume" emanating from the cooling tower can produce dense low-lying fog near the plant. Rubin et al., supra note 111, at 204.
178. Id.
179. Id.
180. -6 m. Karl B. Schnelle & Charles A. Brown, Air Pollution Control Technology Handbook § 19 (2002).
181. Id.
182. Id. This "lung damaging dust" is the most difficult to control because of its small but varying size.
183. Richard C. Staehle et al., The Past, Present and Future of Wet Electrostatic Precipitators in Power Plant Applications 1 (2003), available at http://www.babcock.com/pgg/tt/pdf/BR-1742.pdf (on file with the Harvard Environmental Law Review).
184. Dr. Cotrell invented the first WESP to remove a sulfuric acid mist plume from a copper smelter. Ralph Altman et al., Multi-Pollutant Control With Dry-Wet Hybrid ESP Technology 2, available at http://www.netl.doe.gov/ technologies/coalpower/ewr/mercury/control-tech/pubs/AQIV-Reynolds.pdf.
185. Staehle et al., supra note 130, at 1.
186. See id.
187. Altman et al., supra note 130.
188. Staehle et al., supra note 130, at 2.
189. Id.
190. Id.
191. Rubin, supra note 111, at 198.
192. Id. at 200.
193. Id.
194. Id.
195. See the Bagfilter/Baghouse description on the World Bank's website at http://www.worldbank.org/html/fpd/em/power/EA/mitigatn/aqpcbag.stm (last visited Nov. 24, 2006) (on file with the Harvard Environmental Law Review).
196. Id.
197. See also NRC Report, supra note 123, at 140. ("Current ESPs and fabric filters achieve emission levels of one-third to one-sixth NSPS levels at costs of about $50 to $75 per kW and about 2 to 4 mills per kWh in total electricity cost.").
198. See Wis. Dep't of Natural Res., Technical Advisory Group Issue Summary Control Technology and Options 1 (Apr. 29, 2002), available at http://www.dnr.state.wi.us/org/aw/air/reg/mercury/tag/ controltechandop.pdf (stating that average mercury reductions of 73% are possible for sub-bituminous coal and 89% for bituminous coal).
199. 2 - How sulfur dioxide affects the way we live & breathe (Nov. 2000), available at http://www.epa.gov/air/urbanair/so2/.
200. Rubin et al., supra note 111, at 200.
201. 2 emissions. III. Clean Coal Inst., Coal Questions and Answers, http://www.icci.org/q&a.html (last visited Nov. 24, 2006) (on file with the Harvard Environmental Law Review).
202. Coal's sulfur content can range from 0.5% to 4%. Rubin et al., supra note 111, at 165.
203. Low sulfur coal (sub-bituminous) is normally found in the western United States and parts of the Appalachian region, while higher sulfur coal (bituminous) is found in the East, Midwest and South. Miller, supra note 114, at 292. Given the high rail transportation costs typically associated with shipping coal over long distances, using low sulfur sub-bituminous coal is often impractical or even impossible in the Midwest. Moreover, a low sulfur content will only bring modest reductions and often sub-bituminous use can increase other problems such as mercury pollution because it has a lower heat value.
204. See Rubin et al., supra note 111, at 202;
205. see also Miller, supra note 114, at 286 ("As of 2000, 192 coal-fired generators were equipped with scrubbers and provided a total of nearly 90,000 MW generating capacity.");
206. Altman et al., supra note 130, at 1.
207. About 10% of the slurry-like solution is limestone (or lime). World Bank, Wet Flue Gas Desulfurization (FGD), http://www.worldbank.org/html/ fpd/em/power/EA/mitigatn/aqsowet.stm (last visited Nov. 24, 2006) (on file with the Harvard Environmental Law Review).
208. See Rubin et al., supra note 111, at 200.
209. 2 and gypsum, a material used to produce wallboard and other building materials. Id. at 200, 205.
210. Most power plants, however, usually just dispose of the gypsum as a solid waste, because natural gypsum is plentiful in the United States and transportation costs usually make it cheaper to simply dispose. Id. at 205.
211. Even so, some new wallboard manufacturing plants have been located near several U.S. power plants to utilize this FGD waste. Id. See Appendix A for Wet FGD Diagram.
212. Id. at 200.
213. Id. at 201;
214. Miller, supra note 114, at 306.
215. See also World Bank, supra note 151.
216. Limestone is preferred over lime because it is much less expensive. See Schnelle & Brown, supra note 127, at § 18 tbl. 18.1.
217. Energy Info. Admin., U.S. Dep't of Energy, Analysis of Alternative Mercury Control Strategies 6 (2005), available at http://www.eia.doe.gov/ oiaf/servicerpt/mercury/pdf/sroiaf(2005)01.pdf.
218. NRC Report, supra note 123, at 140.
219. See also World Bank, supra note 151.
220. Schnelle & Brown, supra note 127, at § 17 (2002).
221. Id.
222. Rubin et al., supra note 111, at 202;
223. Schnelle & Brown, supra note 127.
224. Schnelle & Brown, supra note 127, at § 17.2.
225. See Rubin et al., supra note 111, at 202;
226. x back to nitrogen and oxygen.");
227. x, changes are made to a generator to improve fuel atomization and modify the combustion space to enhance the mixing of air and fuel.").
228. See Rubin et al., supra note 111, at 202;
229. x concentration low, but hot enough to complete combustion.
230. See also Miller, supra note 114, at 325.
231. Miller, supra note 114, at 325;
232. see also NRC Report, supra note 123, at 140.
233. See Miller, supra note 114, at 329.
234. Id. at 333.
235. Miller, supra note 114, at 338;
236. see also Alaska Dep't of Envtl. Conservation v. EPA, 540 U.S. 461, 476 (2004) (providing an example in which SCR technology is the most effective).
237. See Miller, supra note 114, at 338.
238. Id. at 339.
239. Id.
240. See id.
241. While it is possible to locate the SCR further downstream, this is considerably more expensive and energy-intensive because the exhaust typically must be reheated before entering the SCR. Id. at 340.
242. Id. at 342.
243. See, e.g., Cal. Air Res. Bd., BACT Clearinghouse Database, http://www.arb.ca.gov/bact/category/boilers_coal.htm (last visited Nov. 24, 2006) (on file with the Environmental Law Review) (requiring various coal-fired retrofits to install these technologies).
244. Sanders Engineering & Analytical Services, Inc., BACT Analysis, at http://www.sandersengineering.com/bact.htm (last visited Nov. 24, 2006) (on file with the Environmental Law Review).
245. EPA, Technology Transfer Network Clean Air Technology Center RACT/BACT/ LAER Clearinghouse, http://cfpub1.epa.gov/rb1c/htm/b102.cfm (last visited Nov. 24, 2006) (on file with the Harvard Environmental Law Review).
246. 42 U.S.C. § 7503(d) (2006).
247. Reitze, supra note 30, at 204.
248. The CAMR is a trading regime aimed at curbing mercury emissions; however, mercury is not a NAAQS pollutant and therefore is not subject to NSR. See 40 C.F.R. §§ 50.4-50.12 (2006) (listing all of the NAAQS pollutants).
249. 2 and VOCs are also considered particulate matter.").
250. See supra Part I.D.
251. Thomas Crocker, The Structuring of Atmospheric Control Systems, in The Economics of Air Pollution 61 (H. Wolozin ed., 1966);
252. Barry D. Solomon, New Directions in Emissions Trading: the Potential Contribution of New Institutional Economics, 30 Ecol. Econ. 371, 371 (1999).
253. See, e.g., Bruce A. Ackerman & Richard B. Stewart, Reforming Environmental Law, 37 Stan. L. Rev. 1333, 1334-40 (1985) (arguing that command-and-control is not cost effective due to "variations among plants and industries in the cost of reducing pollution");
254. Cass R. Sunstein, Administrative Substance, 1991 Duke L.J. 607, 627-31 (pointing out the economic inefficiencies associated with command-and-control).
255. But see Howard Latin, Ideal Versus Real Regulatory Efficiency: Implementation of Uniform Standards and "Fine-Tuning" Regulatory Reforms, 37 Stan. L. Rev. 1267 (1985) (arguing in favor of command-and-control technology based standards).
256. See Tom Tietenberg, Environmental Economics and Policy 236 (2d ed. 1997).
257. See, e.g., Brian H. Potts, A Clearer Skies Proposal: the Multi-Category Ratio Approach, N.Y.U. Entl. L.J. 286, 296-302 (2004) (discussing proposed solutions to this problem);
258. Jonathan Remy Nash & Richard L. Revesz, Markets and Geography: Designing Marketable Permit Schemes to Control Local and Regional Pollutants, 28 Ecology L.Q. 569, 587-88 (2001);
259. James Salzman & J.B. Ruhl, Currencies and the Commodification of Environmental Law, 53 Stan. L. Rev. 607, 611-13 (2000);
260. Tom Tietenberg, Tradable Permits for Pollution Control When Emission Location Matters: What Have We Learned, 5 Envtl. & Resource Econ. 95, 97 (1995) ("Efficient instruments should be set so as to equate the marginal cost of control with the marginal damage caused by those emissions.").
261. See Salzman & Ruhl, supra note 184, at 611;
262. Potts, supra note 184, at 298 ("Th[e currency problem] is analogous to a tort regime in which the remedy for battery is a fixed amount, regardless of the physical or mental damage to the plaintiff... The industries are being charged by the punch and not for the effects of their punches on our health or our environment.").
263. See Potts, supra note 184, at 296-309 (outlining the major solutions to the currency problem and proposing an alternate solution).
264. See Jan Mazurek & Byron Swift, Cap 'n'Trade, Blueprint Mag., Jan. 22, 2002, available at http://www.ndol.org/ndol.ci.cfm?contentid= 250094&kaid=116&subid=155 ("Eliminating NSR provisions for new sources has the potential to actually boost cleaner energy technologies by spreading the economic burden for pollution control more evenly among all electricity generators, rather than just place it on new sources.").
265. See supra Part I.C.
266. Gregory Gotwald, Cap-and-Trade Systems, with or without New Source Review? An Analysis of Proper Statutory Framework for Future Electric Utility Air Pollution Regulation, 28 Vt. L. Rev. 423, 449-51 (2004) (arguing that NSR is necessary with trading systems because "the visibility levels in national parks and other Class I areas receive special protection under [NSR].").
267. Abatement costs are the costs to the facility to reduce emissions. ($60 * 20 tons) + ($70 * 10 tons) = $1,900.
268. Societal costs include abatement costs, health benefits, and environmental benefits. Here, societal costs are calculated by subtracting the benefits from the abatement cost. ($50 * 20) + ($30 * 10) = $1,300.
269. ($30 * 20) + ($40 * 10) = $ 1,000.
270. ($80 * 20) + ($60 * 10) = $2,200.
271. ($40 * 20) + ($30 * 10) = $ 1,100.
272. ($70 * 20) + ($60 * 10) = $2,000.
273. 2 hot spots did not occur because the cheapest facilities to abate also happened to be the ones with the greatest environmental and health effects (e.g., Midwestern facilities). See, e.g., Tietenberg, supra note 184, at 98 ("In the Sulfur Allowance Program the preimplementation modeling showed that the expected reductions from an unrestricted trading system would take place in precisely the areas that would be targeted for greater control by a more complicated [spatial] system.").
274. See Lee Ann Fennell, Revealing Options, 118 Harv. L. Rev. 1399, 1474 (2005) ("[I]n a tradable emissions scheme that allows open-ended trading, environmentally damaging 'hot spots' can develop.... [A]llowances can[not] provide reliable information about whether the value a particular polluter places on the ability to pollute exceeds the pollution's actual social cost, as it evolves pursuant to spatial and temporal developments.");
275. David M. Driesen, Free Lunch or Cheap Fix?: The Emissions Trading Idea and the Climate Change Convention, 26 B.C. Envtl. Aff. L. Rev. 1, 71 (1998) ("Most trading proponents recognize the need to avoid trading that creates hot spots, concentrations of pollutants with locally significant effects.");
276. 2 Hot Spots - Good News from the Acid Rain Program, 31 Env't Rep. (BNA) No. 19, at 954 (May 12, 2000).
277. David B. Spence, Coal-Fired Power in a Restructured Electricity Market, 15 Duke Envtl. L. & Pol'y F. 187, 217-18.
278. Shi-Ling Hsu, Fairness Versus Efficiency in Environmental Law, 31 Ecology L.Q. 303, 390 (2004).
279. x in the air. EPA, Greenbook Criteria Pollutants, http://www.epa.gov/air/oaqps/greenbk/o3co.html#Ozone (last visited Nov. 24, 2006) (on file with Harvard Environmental Law Review).
280. "An industry is a natural monopoly if the production of a particular good or service by a single firm minimizes cost. The typical example is production of a single commodity, where long-run average cost (LRAC) declines for all outputs." W. Kip Viscust et al., Economics of Regulation and Antitrust 401 (4th ed. 2005).
281. Id. at 430.
282. Id.
283. See also Joseph P. Tomain & Richard D. Cudahy, Energy Law 130-36 (2004) (discussing the general rate formula).
284. See Viscusi et al., supra note 201, at 433;
285. Harvey Averch & Leland L. Johnson, Behavior of the Firm Under Regulatory Constraint, 52 Am. Econ. Rev. 1052 (1962).
286. Viscusi et al., supra note 201, at 433.
287. There are currently nineteen states that have restructured their electricity industries, comprising mainly the Northeastern and Western states. See Seth A. Blumsack, Jay Apt & Lester B. Lave, Lessons from the Failure of U.S. Electricity Restructuring 12, available at http://web.mit.edu/ipc/sloan05/Electricity_Restructuring.pdf
288. Meredith Fowlie, Emissions Trading, Electricity Industry Restructuring, and Investment in Pollution Abatement 22 (Nov. 28, 2005), available at http://are.berkeley.edu/~fowlie/jobmarket.pdf.
289. See infra Part V.A.
290. Two approaches are currently not feasible for various reasons: the ambient permit system approach and the pollution offset market approach. Scott E. Atkinson & T. H. Tietenberg, The Empirical Properties of Two Classes of Designs for Transferable Discharge Permit Markets, 9 J. Envtl. Econ. & Mgmt. 101, 104-06 (1982) (explaining the ambient permit system approach);
291. Alan J. Krupnick et al., On Marketable Air-Pollution Permits: The Case for a System of Pollution Offsets, 10 J. Envtl. Econ. & Mgmt. 233, 238-42 (1983) (proposing the pollution offset market approach);
292. Nash & Revesz, supra note 184, at 619-23 (pointing out the flaws in both approaches).
293. Nash & Revesz, supra note 184, at 624-25.
294. Potts, supra note 184, at 302-05.
295. Alan J. Krupnick et al., supra note 209, at 238-42.
296. x per day out of high damage areas and into low damage areas where the pollution does less damage.") .
297. See C.-Y. Cynthia Lin et al., Trends in Exceedances of the Ozone Air Quality Standard in the Continental United States, 1980-1998, 35 Atmospheric Envt. 3217, 3227 (2001) (showing the spatial variations in the effect of the two different ozone standards);
298. 3 formation and exposure.").
299. Nash & Revesz, supra note 184, at 624-25.
300. Id. at 624-26.
301. Id. at 624-25 n.317.
302. Id. at 634-36.
303. Id.
304. Id. at 634.
305. Potts, supra note 184, at 302.
306. Id.
307. Id. at 302-05.
308. Id. at 303.
309. Id.
310. Id.
311. Id. at 319.
312. See Deepa Varadarajan, Billboards and Big Utilities: Borrowing Land-Use Concepts to Regulate "Nonconforming" Sources under the Clean Air Act, 112 Yale L.J. 2553, 2557 (2003) ("[T]he incorporation of amortization provisions into the Clean Air Act could provide a viable solution to the problem posed by old sources.").
313. Id. at 2577.
314. Id. at 2569.
315. State v. Joyner, 211 S.E.2d 320, 324 (N.C. 1975)
316. (quoting R. M. Anderson, American Law of Zoning, sec 6.65, 446-47 (1968)).
317. State v. Joyner, 211 S.E.2d at 324.
318. Varadarajan, supra note 227, at 2570
319. (citing 7 Patrick Rohan, Zoning and Land Use Controls, § 41.04[1], at 41-152) (1978).
320. Id.
321. Id.
322. Id.
323. Id. at 2578.
324. See id. at 2580: It has been the very promulgation of bifurcated control technology requirements that has extended the natural lives of these old plants, conferring upon them a false competitive advantage and creating within the owner expectations of the original investment that might not have been there originally, at the time a pre-1970 plant was built. This is all the more reason to adopt amortization periods that incorporate the notion that these plants became "nonconforming" in the truest (though not technical) sense of the word in 1970, the year the old-new divide was set in place.
325. Id.
326. See supra Part II.C.4.
327. See Varadarajan, supra note 227, at 2587 ("I support the justifications posed by the proponents of command-and-control approaches.").
328. This could also be termed the Most Effective Lowest Achievable Emissions Rate approach if LAER applies.
329. Congress could implement the MEBACT approach across all sectors; however, because control technologies and emissions vary across the many sectors, implementation would be more difficult.
330. The CAA requires all NSR or NSPS regulated sources to obtain an operating permit, which in practice is called a Title V permit. 42 U.S.C. § § 7661 (a)-(f) (2006).
331. Defining what constitutes a "significant effect" would obviously be a contentious issue; therefore, it should be clearly articulated in the rules. Generally speaking, the term "significant" here is not meant to create a broad exception. Instead, it is meant to exempt out sources that have minimal effects and whose costs in installing control technology greatly outweigh any potential benefits.
332. x emissions in the air are one of the largest sources of nitrogen pollution in the Chesapeake Bay.").
333. A Class I area is classified under the CAA as an international park, a national wilderness area greater than 5000 acres, a national memorial park greater than 5000 acres, or a national park greater than 6000 acres. 42 U.S.C. § 7472(a) (2006).
334. Congress should define the term "significantly contributing" in this Part. In the alternative, Congress could remove the word "significantly" because EPA could still exclude de minimis contributions. See State of New York v. EPA, 443 F.3d 880 (D.C. Cir. 2006) (interpreting "any physical change" to exclude de minimis changes in an EPA regulation exempting certain equipment replacements from NSR).
335. 2 or ozone.
336. The approach would virtually assure attainment within fifteen years because most facilities would have to install BACT for their worst two pollutants by this time assuming they go through the MEBACT process at their first Title V renewal (within five years of implementation) and their third renewal (ten years later).
337. 2 scrubbers at the first permit renewal, thereby helping to curb acid rain in the Northeast.
338. 2, and PM), over 75% of sources have PM controls (ESPs), and it is unlikely that one source would have to meet BACT for all three pollutants.
339. For a discussion of the likely cost to upgrade all plants, see supra Part VI.B.
340. See supra Part IV.D (discussing the variable capital incentives problem).
341. See infra Part VI.B (quantifying the cost of a nationwide upgrade of pollution control equipment).
342. U.S. Gen. Accounting Office, Report No. 02-709, Air Pollution Emissions From Older Electric-Generating Units 3 (June 2002), available at http://www.gao.gov/new.items/d02709.pdf [hereinafter GAO Report]. The data presented in this report include all fossil-fuel facilities with generating capacity greater than 15 MW.
343. Id. The older units emitted about the same amount of CO per MW produced.
344. Id.
345. Id. (noting that most of the additional emissions were released from units located in the mid-Atlantic, midwestern, and southeastern United States).
346. Id.
347. This assumes Selective Catalytic Reduction is added to every currently operating coal and natural gas facility. Miller, supra note 114, at 320-21
348. and World Bank, supra note 151.
349. This assumes a wet FGD is added to every coal-fired power plant and includes total operation and maintenance costs. Cost data is taken from Miller, supra note 114, at 320-21
350. and World Bank, supra note 151.
351. The eight states with the highest percentage of grandfathered power plants are, in order from highest to lowest: Pennsylvania, Ohio, West Virginia, Tennessee, Kentucky, Alabama, Indiana, and Illinois. The percentages were calculated using the GAO Report and total generation data from the U.S. Energy Information Administration website. Data on cost of electricity in all sectors was taken from the U.S. Energy Information Administration website. Energy Info. Admin., U.S. Dep't of Energy, The Electric Power Annual 2005, 5 tbl. 7.4 (2006), available at http://www.eia.doe.gov/cneaf/electricity/epa/epat7p4.html.
352. According to official energy statistics from the U.S. Government, the average retail price of electricity in 2004 was 7.61 cents per kWh. See Energy Info. Admin., supra note 262.
353. See Cost and Benefits of Clear Skies: EPA's Analysis of Multi-Pollutant Clean Air Bills *9 (Cong. Research Serv., CRS Issue Brief for Congress Order Code RL33165, Nov. 23, 2005), available at http://www.4cleainair.org/RL33165.pdf (estimating the benefits of Representative Carper's and Jeffords' Bills to have benefits of $19 billion and $66 billion annually by 2020).
354. See generally EPA, Technical Support Document for the Final Clean Air Interstate Rule, Boilermaker Labor Analysis and Installation Timing (March 2005). available at http://www.epa.gov/interstateairquality/pdfs/ finaltech05.pdf.
355. This is a typical coal-fired power plant without many environmental controls. This diagram was taken from the Tennessee Valley Authority's website at http://www.tva.gov/power/coalart.htm (last visited Nov. 24, 2006) (on file with the Harvard Environmental Law Review).
356. Chart taken from the World Bank's website at http://www.worldbank.org/ html/fpd/em/power/EA/mitigatn/aqsowet.stm (last visited Nov. 24, 2006) (on file with the Harvard Environmental Law Review).
357. Energy Info. Admin., U.S. Dep't of Energy, Official Energy Statistics From the U.S. Government (Oct. 4, 2006), available at http://www.eia.doe.gov/cneaf/electricity/epa/epat2p2.html.
358. Miller, supra note 114, at 286.
359. Miller, supra note 114, at 320-21.
360. Energy Info. Admin., supra note 268.
361. x SIP-Call is not related to the NSR rule change; in other words, the installation of these SCRs will continue regardless of whether EPA changes the rule.
362. Miller,, supra note 114, at 32.
363. This does not include operating and maintenance costs, which can vary from $1,500 to $5,800/MM Btu. Miller, supra note 114, at 346.
364. Energy Info. Admin., supra note 262.
365. This conclusion comports with the following study, Frank Ackerman et al., Grand-fathering and Coal Plant Emissions: The Cost of Cleaning up the Clean Air Act, 27 Energy Policy 929 (1999) (finding a 4.3% increase).
366. Energy Info. Admin., supra note 262.
367. Id.