Proposal would ban new coal plants without carbon controls

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WASHINGTON -- New coal plants would need to install expensive equipment to limit climate-change emissions under a proposal the Environmental Protection Agency is close to issuing, according to people familiar with the plan.

The EPA agreed to revise a similar proposal from last year in response to opposition by utilities and coal producers, who said it would effectively kill coal as a power source. The new version will be structured differently, though it offers little solace to plant operators, according to people briefed by officials, who asked not to be identified before the public release.

The rules -- a focus of intense industry lobbying -- are under review by White House officials and could be reworked before the Sept. 20 scheduled release. The revised standard would retain a provision letting utilities phase in the capture technology over time, one person said. Relying on carbon capture to limit coal emissions is challenging, because the technology is unproven, and it's too expensive, according to the industry.

EPA spokeswoman Alisha Johnson declined to comment.

"They are going to have to be very artful, given the stage of development of the technology, it's apparent costs and the fact that the government is subsidizing it," said William Bumpers, a lawyer at Baker Botts in Washington, who deals with EPA rules. "That doesn't strike me as commercially viable." Mr. Bumpers said he didn't know what the EPA planned to do.

The administration was forced to rework the first rules on greenhouse-gas emissions from power plants after legal experts questioned its approach in setting one standard for coal and natural-gas plants. Coal emits about twice the carbon dioxide as natural gas when burned to make power.

Carbon-dioxide emissions since the Industrial Revolution have led to a warming of the Earth's temperature in the past 50 years, worsening forest fires, drought and coastal flooding, according to the U.S. Global Change Research Program.

To deal with the threat, President Barack Obama directed the EPA to cap carbon pollution from power plants, which account for 40 percent of U.S. emissions. The first step is for the agency to issue rules for new plants. The more contentious rules would govern emissions from existing plants, and those aren't scheduled to be issued until next year.

The EPA issued the new-plants proposal in 2012. It set the same standard for coal and natural gas plants of 1,000 pounds of carbon-dioxide per megawatt hour. A new, efficient natural gas plant can meet that standard, according to the EPA. A coal plant's emissions are at least 1,800 pounds per megawatt hour, and so would need equipment to capture the carbon. The EPA initially gave plants the option to average emissions over 30 years, so they would not have to employ the expensive capture process for the first decade of operation.

Lawyers for industry groups argued that the EPA violated legal precedent by lumping natural gas and coal together, and in response, the agency agreed to start again and issue a new proposal this month. The EPA is now pushing for separate standards for coal and natural gas, with both probably to be set at greater than 1,000 pounds. The coal standard would be significantly less than 1,800 pounds, the people familiar with the proposal said.

Lobbyists for coal producers such as Peabody Energy Corp. and Arch Coal Inc., and utilities such as American Electric Power Co., have visited the Office of Management and Budget, which is reviewing the EPA proposal, and made their case that requiring carbon capture -- known as CCS -- is a mistake. "Since CCS technology is not commercially available at this time, requiring the use of this technology would function as a complete ban on the development of new coal-fired generation," Scott Segal, a lawyer for utilities at the Electric Reliability Coordinating Council in Washington, wrote in an Aug. 23 letter to the OMB.

The American Public Power Association, in a Sept. 4 meeting with White House officials, urged it to set the standard for coal at 1,900 pounds, and revisit the commercial availability of carbon capture in eight years.

Environmental groups, meanwhile, urged the Obama administration to stick to its demand for carbon capture.



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