Clean Air Act (Title 4) Acid Rain ©2002 Dr. B. C. Paul

Title 4 - Acid Rain This is the one that has caused havoc in the coal industry Environmentalists had insisted for years Acid Rain was destroying the environment –Study showed there was little acidification of lakes and forests and that many acid producing pollutants were fertilizing forests –Scientists were threatened if they didnt change study –Mike Riley held back report until after congress voted and had own Exec summary written

Acid Rain Precursors First pollutant focused on was Sulfur Dioxide CAA made two major directional shifts from earlier Clean Air Acts (Started in 1973) –Previous acts focused on reducing SO2 emissions new source performance standards that required all new power plants to install scrubbers

The Scrubber Debate Problem with previous laws was that much of the new power plant construction was in low sulfur coal areas - leaving major SOx emitter unaffected –One State Implementation Plan (Illinois) provided waivers for new plants and provided offsets by forcing fuel switching in northern part of the state units at Baldwin and Newton were installed without scrubbers

Scrubbers in New Law Clear that Technology that had been forced by earlier CAA was not being effectively deployed producing big bills small results Congress wanted deep cuts in SO2 emissions One proposal called for collecting a tax off of coal plants and using the proceeds to install scrubbers on highest SO2 plants

Scrubber Proposals Big problem with the scrubber fund was it was Socialistic - everyone pays and a few collect - not consistent with free enterprise spirit Second proposal was based on known fact that free markets always make wise and balanced long term decisions - Free Market proposal won in part defections Illinois reps

Emissions Allowances Law created a cap on total SO2 emissions and defined that tonnage by issuing tradable credit certificates –Anyone with a certificate had the right to dump a ton of SO2 into the atmosphere –Limited number of certificates would limit emissions –Companies could buy and sell credits so market forces would determine how SO2 was cut

Emissions Trading No one was sure whether there would be enough interest to get brokerages and markets to implement a trading system –EPA held back 2.8% of the credits to set up an EPA auction make sure that someone would go to the show Emissions trading was implemented in two steps Phase I starting in 1995 and Phase II starting in 2000 (real Y2K bug?)

Phase I Had a limited application - Congress invited 110 coal fired utility boilers by name to come to their party –If you did not get an invitation - you were not phase I effected –Only boilers invited to the party needed SO2 credits - also the only ones to receive credits

If Your Invited to the Party Take average number of BTUs fired by your invited boilers during 1985, 1986 and This is your base Divide number of BTUs by 1 million to get base number of million BTUs per year Multiply the number you get by 2.5 This is the base number of credits you get.

The Great Toga Party Subtract 2.8% of your credits as your voluntary (that you dont have a choice about) contribution to the EPA auction fund Next politicians added extra credits to a few large selected Midwestern Utilities that owned Congressmen needed for the vote Also earn extra credit for early compliance - if you get emissions down before the party you will get credits for reductions

What to Do With Your Funny Money Once you get one of your monopoly dollars you can –Hold it indefinitely (these little gems keep and stay fresh) –You can have fun putting SO2 into the air and give your certificate back to EPA to show you had their blessing –You can go to market and sell the thing like stock –You can go to market to buy more if you need them or want to speculate

Y2K Bug - Phase II All Utility Company Generators and anyone else who wants to request an invitation gets one Your base credits are calculated based on average MBTU/year * 1.2 If you were less than 1.2 in 85 to 87 then you get your previous emission rate plus extra 20% for load growth

The Ratchet Under Phase II only 10 million tons per year of new credits will be issued - EPA will make across the board cuts to ensure no more than 10 million tons of new issue credits –A more obscure clause tightens the total to 8.9 in 2010

Title 4 Program may become irrelevant except for history Dec 2003 Leavit proposed to govern Sox and Nox over most country with a clause about good neighbor SIPs under title I and using the opacity and vistas clauses for Great Smokey NP Takes states from Missouri and Texas east and puts them in a separate cap and trade for 3.9 million tons of Sox and 1.6 million tons of Nox by 2010 (remember old number was 8.9 million tons SO2)

The Leavit Proposal SO2 allocated based on Btu firings as percent of total –If you didnt have any have to buy credits NOx allocated based on Btu firings * 0.11 lbs/MMBTU Require States to retire extra Title 4 credits so they wont go to the west 2015 ratchet down to 2.7 million tons SO2, 1.3 million tons Nox

Compliance with Clean Air Act Original intent of Title 4 cap and trade was to allow industry to choose most economic way to get reduction –Could switch coals (about $45 to $112/kw – expect about $87/kw) Low sulfur PRB coal generally work with credits low enough –Could scrub (about $110/kw for wet, $90/kw for dry – costs about $90/ton to remove sulfur – credits sell for about $80 to $120/ton) –Could buy credits

More Compliance Options Ways to get Title 4 Reductions –Could switch from coal to gas (go from 70% marginal cost for fuel and $1.05/MMBTU to $3.25 to $6.50 with 90% of marginal cost for fuel – about $100 to $750/kw) –Could Repower such as changing to FBC or IGCC (about $750 to $1500/kw) –Could super clean the coal but costs about $300/ton SO2 and high sulfur coals would not clean down without risky chemical cleaning –Could buy Power Merchant Plants Coal by Wire Concept

Methods of Choice Fuel switch enough stations to buy and sell credits to rest Few power companies with experience went for scrubbers and could recoup their costs off of credit sales –Couple repowered to FBC Some (Commonwealth Edison) went out of generation business In general the watch word was minimize capital expenditures on new technology

The Nox Control Methods Nitrogen Oxides from two sources –Fuel based (nitrogen in fuel oxidizes most fuels have minimal nitrogen) –Atmospheric (nitrogen and oxygen in atmosphere will react at high temperature – up around 3,000 F) Agency had till 1997 to develop regulation –Most looked like a command and control method –Basis was prevention of Nox formation

Stoping Nox Big problem was hot spots in boiler –Low Nox burners for avoiding hot spots –Slight operating temperature reductions Does hurt both heat transfer and combustion efficiency Raises carbon in ash and hurts ash marketability –Maintaining reducing zones in boilers to break Nox (also things dont burn well in them) Gas reburn above coal fire Technologies got Nox down from 1.6 to 3 lbs/MMBTU to the 0.6 to 0.9 lbs/MMBTU range

Title I Non-Compliance Complications North East Complaints that non-compliance was from somewhere else –Nox a major ozone precurser –Local areas had seasonal Nox problems –Looked like some of this stuff could be associated with emerging PM 2.5 regs Need to actually destroy Nox in emissions –Selective Catalytic Reduction (SCR) Inject ammonia with a recycled catalyst –Selective Non-Catalytic Reduction Ammonia without catalyst

The SIP Call EPA tried to declare State Plans inadequate under good neighbor language –Tried developing a cap and trade plan for Nox –Challenged in Court – 1999 to 2002 for decision Leavits Cap and Trade Nox program of Dec 2003 –Will create a cap and trade zone across half country

Nox Compliance SCRs generally reduce into the 0.15 to.05 lb/MMBTU range –Agency set 0.11 as level for allocation –Allows deeper clean of larger plants without having to buy equipment for little minor plants The Illinois dilemma