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US Supreme Court may leave power plants with no choice but to capture and store carbon onsite: lawyers

12 January 2022 Amena Saiyid

Coal-fired power plants may be forced to install carbon capture to meet President Joe Biden's goal of halving GHG emissions by 2030 if the US Supreme Court decides to constrain the US Environmental Protection Agency's (EPA) authority to curb these pollutants beyond facilities' fenceline, according to lawyers monitoring the case.

However, analysts and lawyers agree that carbon capture and storage (CCS) may not be the most economically feasible option for the electricity sector because storing CO2 requires geologically suitable locations and favorable market factors.

The Supreme Court will hold oral arguments 28 February to review a lower court ruling that a West Virginia-led coalition of states' claims gave EPA "unfettered access" to limit GHGs beyond the fenceline of coal-fired plants. The reason is that EPA allowed the power sector flexibility to switch away from coal-fired generation, the mainstay in states like West Virginia and Wyoming where mines are located, to relatively cleaner-burning natural gas to meet GHG reduction targets.

West Virginia Attorney General Patrick Morrisey is seeking the Supreme Court's opinion not just on the limits of EPA's authority but also on resurrecting federal power sector GHG regulation, the 2019 Affordable Clean Energy (ACE) rule, that the US Court of Appeals for the District of Columbia (DC Circuit) vacated a year ago.

"For West Virginia, this is particularly important, because what the EPA purports to do here is they want to unilaterally decarbonize our nation, and they want to do it without authority to accomplish their goals," Morrisey said at a 20 December press briefing.

The ruling that West Virginia seeks from the Supreme Court could potentially tie the federal agency's hands when it comes to allowing polluting facilities to reduce their GHGs through flexible programs that facilitate the continued use of fossil fuels. The power sector was allowed by EPA under the 2015 Clean Power Plan (CPP) to average reductions across coal-fired units, switch to renewables and fuels that lead to less emissions, such as natural gas, and trade carbon credits, but that flexibility was revoked by the federal agency when it promulgated the ACE rule.

The DC Circuit's decision vacated the ACE rule and reinstated the CPP. Then EPA sought to stay the decision, contending that it is in the process of writing a new rule.

EPA mandated to regulate GHGs

Meanwhile, the EPA remains under a mandate to regulate GHGs from all sectors under a 2007 Supreme Court ruling in Massachusetts vs. EPA, Vermont Law School Professor Patrick Parenteau noted.

"If the [Supreme] Court rules now that EPA's only option is to impose controls 'within the fenceline' then it will have to seriously consider carbon capture and sequestration technology at each plant and that could prove ruinously expensive for many, perhaps all, existing facilities," Parenteau told Net-Zero Business Daily.

By EPA's own calculations, the ACE rule would have reduced CO2 emissions by less than 1%, mostly through making power plants more efficient. In contrast, CPP would have required a 30% cut in carbon emissions.

Second-largest source of US GHG emissions

As a result, the electricity sector remains the second-largest source of GHG emissions in the US, contributing 1,648.11 short tons, or 25% of total GHGs in 2019.

Neither ACE nor CPP would sufficiently push the power sector to meet Biden's goal of halving the nation's GHG emissions, let alone decarbonize the power sector by 2035 or reach net-zero GHG levels by 2050, as he has also promised.

William Snape, director of the American University Washington College of Law Program on Energy and Environment, said West Virginia has complicated matters for electric utilities because the beyond the fence line mitigation measures provision was designed to "give power plants more flexibility."

"Morrisey played a gamble: instead of going for the compromise, he … is still going for the full blowout legal win," said Snape, who also serves as the senior counsel for the Center for Biological Diversity, which did not favor the idea of giving power plants more flexibility because it made the GHG standards "too weak and nebulous."

Expressing less concern is Jonathan Adler, director of the Case Western Reserve University School of Law Coleman P. Burke Center for Environmental Law, who sees room for a compromise by the court. "I do not think the [Supreme] Court is likely to do anything that will restrict the flexibility of power companies but might constrain the ability of the EPA to mandate the installation of such technologies," he said.

Snape isn't so sure, given the conservative makeup of the Supreme Court.

Can CCS be done inside the fenceline?

Lawyers and analysts say carbon can be captured within fencelines of coal-fired units, but the utilities may not be able to store it within those confines. The reason is sequestration requires suitable locations for underground injection of CO2 that may be miles away from the power plant itself.

EPA in the ACE and CPP rules stopped short of listing CCS as one of the best methods of emissions reduction, terming the technology too costly and too site specific, leaving it up to the states to decide whether they wanted to include it in their compliance plans.

Capturing and storing CO2 is neither as cheap nor as simple as retrofitting a coal-fired power plant with a control or two, as EPA has observed in its various rulemakings, and utilities have discovered the hard way.

It takes time to secure financing for various pieces of infrastructure as well as the requisite air and water permits and buy-in from local communities. And even then, there are market forces at play that may make the technology infeasible, given that coal-fired power already struggles to compete with renewables in many markets.

Also, CCS technology is not limited to a single device or structure and can be spread across a large area in contrast to pollution controls for other air pollutants, such as baghouses installed inside coal-fired power plants to capture air particle pollution.

No single operating CCS plant in the US

No CCS project is currently operating at a coal-fired power plant in the US, although six are currently in the design phase, and one has reached the financing stage, according to IHS Markit's Global Carbon Capture, Utilization and Storage project tracker.

A recent Government Accountability Office (GAO) report noted that CCS projects at coal-fired utilities have had more difficulty getting off the ground than CCS at ethanol or other industrial plants, due to the high cost of separating CO2 from the flue gas of a coal plant.

For instance, the GAO cited the one completed, $1-billion coal-fired power CCS project known as Petra Nova that suspended operations in May 2020 after running for three years. When oil prices dropped to $50/barrel, Petra Nova lost customers for the captured CO2, as oil drillers pulled back on operations.

The Petra Nova facility was designed to capture at least 90% of the CO2 emissions, or 1.4 million metric tons (mt)/year, from a 240-MW unit at the W.A. Parish Electric Generating Station in Thompsons, Texas. Given the sizeable volume of CO2 that was targeted for capture, NRG had to erect a 100-foot tower and a 320-foot tower to separate the CO2 from the flue gas.

Notably in the context of the Supreme Court lawsuit, the captured CO2 from this power plant was to be compressed and transported through an approximately 80-mile pipeline to an operating oil field and used for enhanced oil recovery. In other words, the captured CO2 was not going to be held onsite.

Carbon capture is costly

Based on large-scale CCS projects at coal-fired utilities operating across the globe in the past decade, IHS Markit estimates the cost of carbon capture to range from $65/mt to $100/mt, with about $20-$30/mt added for transportation and storage.

"The higher end of the capture cost range is due to the low utilization rate and limited experience for CCS facilities that make construction more expensive," said Paola Perez Pena, IHS Markit principal research analyst for clean energy technology.

She said CCS at coal-fired power plants is generally more expensive than from ethanol production because it requires more energy to extract CO2 from the flue gas and more capital to erect large towers to separate the CO2, as the Petra Nova facility demonstrated.

In the coming five years though, Perez Pena said projects will have a cost of around $50/mt of CO2 captured. If you factor in transportation, that takes the cost to a total of $70-$80/mt, she added.

Perez Pena said CCS costs have come down in the past few years mainly because the industry has more experience and they have learned lessons from previous projects, but these estimates do not reflect the recent increase in the cost of materials.

"The Biden administration's goal has definitely accelerated the announcement of new projects," she added.

Factoring in the cost of adding CCS within the fenceline could drive up the cost of electricity, Perez Pena said. And higher electricity costs from coal-fired generation is exactly what West Virginia wants to avoid as it wants more such generation since the state is reliant for most of its revenues on coal production.

And that's the big unknown about the lawsuit, Baker Botts environmental attorney Aileen Hooks said.

"It is unclear how the West Virginia position would increase the cost of CCS if used, unless the suggestion is the injection, not just the capture, would need to be in the fenceline," Hooks said. She added that there can be no guarantee that a site would be suitable for injection within the fenceline.

Ruling goes beyond power plants

What concerns some environmental lawyers like Parenteau and advocates is that a Supreme Court ruling in favor of West Virginia and other like-minded states could hurt the Biden administration's efforts to decarbonize the power sector through the use of CCS or co-firing with woody waste. It could also hurt the administration's attempts to regulate other industrial facilities.

Morrisey also has asked the Supreme Court to limit EPA's authority at other industrial facilities, which could mean the Biden administration may potentially lose a regulatory driver for securing GHG cuts.

The petition argues that the DC Circuit told EPA it has "'no limits' on the emission-related measures it can impose—on any economic sector or almost any actor."

Citing examples beyond the electricity sector where EPA can claim "new regulatory supremacy," Morrissey said any buildings that draw from or produce carbon-generating power—manufacturing plants, homes, hospitals, and otherwise—now fall under EPA's mandate.

"Depending on the Supreme Court's decision, it could affect the regulatory tools that the administration would have," Hooks said. "It doesn't mean the EPA would be without regulatory tools, but would be a potential limitation on what would be possible without legislation."

For instance, the ruling could inadvertently affect the transportation sector, which is the largest source of US GHGs at 29% in 2019, because the administration has identified blue hydrogen as one of the alternative fuels for driving down GHGs from producing steel and fueling cars. (Blue hydrogen refers to the gas produced along with CO2 from steam reformation of natural gas at oil and gas wells. The CO2 is then put in storage.)

"The very idea of undermining controls on carbon emissions could simultaneously be undermining the new greener technologies, such as blue hydrogen," Parenteau said.

However, Hooks noted that the industrial sector as a whole seems to have embraced CCS due to various market forces and tax incentives and in pursuit of carbon neutrality goals, even in the absence of specific regulatory drivers at this point.

However, Adler is sanguine about where the Supreme Court will draw the line on EPA's authority, noting that the West Virginia vs. EPA case only concerns what the EPA may impose or require of power producers.

Make the case go away

Both Parenteau and Snape agree that the complications arising as a result of a Supreme Court decision that is unfavorable to EPA would simply go away if the justices just heed what then-acting US Solicitor General Elizabeth Prelogar told them in August.

"But the question whether the Clean Power Plan was lawful has no continuing practical significance, since that Plan is no longer in effect and EPA does not intend to resurrect it," Prelogar wrote in August, adding that EPA intends to issue a new rule after accounting for electricity sector changes in the last several years.

She said further judicial clarity of EPA's Clean Air Act authority should take place once EPA has finalized that new rule. Until then, the courts would merely be speculating as to the regulatory approaches the agency might take, she said.

Parenteau said the Supreme Court should, after hearing the arguments, realize and recognize "there's nothing left to review."

The larger question of how power plant GHGs should be regulated could be resolved if EPA sets air quality standards for CO2 as it does for six other key pollutants: ground-level ozone, coarse and fine particles, carbon monoxide, oxides of sulfur and nitrogen, and lead.

The EPA in March 2021 decided to withdraw the Trump administration's denial of the Center for Biological Diversity's nearly 13-year-old petition to set air quality standards for CO2. However, Parenteau dismissed that notion, saying it would just open a "Pandora's box."

Parenteau said air quality standards require states to write implementation plans, a process that takes years, and the climate crisis is upon us. "We don't have that kind of time," he said. Besides, states need to show they are attaining standards. "How would they show they are attaining the standards?" Parenteau asked.

Yet another environmental law professor, Daniel Farber of University of California, Berkeley, has opined that the EPA can make the whole Supreme Court case go away by revoking the 2015 Clean Power Plan, which is what the Supreme Court in essence is reviewing.

Posted 12 January 2022 by Amena Saiyid, Senior Climate and Energy Research Analyst

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