By Valerie Volcovici
WASHINGTON (Reuters) - Faced with the Obama administration's new crackdown on power plant emissions, the coal and electric utility industry is honing a legal strategy it believes could derail the measures.
New rules governing the construction of fossil fuel power plants, unveiled by the Environmental Protection Agency on Friday, have closed one of the largest legal loopholes of the initial regulations put forward in 2012, by providing separate standards for gas- and coal-fired plants.
Now, opponents have another tactic in mind: challenging the idea that carbon capture and storage (CCS), a decades-old but commercially tenuous technology that will be a requisite for any company building a new coal-fired power plant, is a viable solution to curbing greenhouse gases.
Under the Clean Air Act, the basis for the newly proposed rule, the EPA is required to set pollution standards using the "best system of emission reduction" with technology that has been "adequately demonstrated."
That language is likely to sit at the core of any lawsuit that could be filed by industry lawyers at the end of what could be a months-long rulemaking process.
"They tried one approach that is legally flawed," said Jeff Holmstead, a lawyer representing coal industry groups for Bracewell & Giuliani, referring to the EPA. "They are doing something else that can be struck down in court."
The requirement to implement carbon CCS technology "does not in our view comport with the requirements of New Source Performance Standards under the Clean Air Act," the American Public Power Association, a group that represents electric utilities, said in a statement.
The EPA's new rule says any new coal plant built in the United States must be able to emit at a rate of no more than 1,100 lbs of carbon dioxide per megawatt hour. That is far below an estimated 1,700 to 1,900 lbs/MWh for the most efficient plants currently in operation anywhere.
A new plant that uses CCS would capture carbon from the smoke stack, inject it underground and either store it or use it in an oil recovery process.
Opponents of President Barack Obama's efforts to forge ahead with measures to reduce greenhouse gas emissions have had a mixed track record in challenging EPA rules in federal courts.
The D.C. circuit court, the second-most powerful in the country, upheld in 2012 the EPA's landmark greenhouse gas regulations, which underpin all future emission curbs.
But a coalition of business groups and Republican-leaning states has taken the fight against Obama administration climate change regulations to the U.S. Supreme Court.
The high court is expected to announce by October 1 whether it will accept any of their challenges.
The next battleground will be in Kemper County, Mississippi, home to a 524 MW power plant and the first commercial-scale CCS power project to start operation in the United States. The Kemper plant is expected to capture carbon at a rate of 65 percent when completed.
The EPA says Kemper, due to come online in 2014, shows that the technology is close to being commercially viable. Industry groups say the fact that its cost has risen by 40 percent to $2.8 billion, and has received Department of Energy financial support for nearly 10 percent of that, shows the opposite.
"The data doesn't exist to show that CCS is achievable and represents the best demonstrated technology for commercial-scale utility plants," said Peter Glaser, an attorney for law firm Troutman Sanders, which represents industry clients.
Glaser added that the project's location near oil fields enables that plant to use carbon to recover oil underground and is not something that can be replicated widely.
"Most of the country is not located next to an oil field and the infrastructure doesn't exist for transporting and storing the CO2. We would have to build out a network of CO2 pipelines and significant storage facilities," he said.
Joe Stanko, an attorney for Hunton & Williams who represents industry clients, said the fact that a project like Kemper needs so much federal support means that the technology does not meet the Clean Air Act's own requirements. It has received $270 million in financial support from the DOE.
"EPA's reliance on federally funded demonstration projects is illegal — it doesn't ‘adequately demonstrate' technology for normal use," he said. "NASA sent men to the moon with federal funds. That doesn't mean municipalities and companies can do it."
There are currently six large-scale carbon capture projects under way in the United States. [ID:nL2N0HG0FE] Five of those projects receive some percentage of DOE funding.
TRAILBLAZER OR HOUSE-BURNER
Supporters of the EPA action think that the government has confidence in the nascent CCS technology.
"Once Kemper is up and running, the technology will work. The transportation and storage points have been deployed and are considered commercially advanced today," said Patrick Falwell, a senior fellow at the Center for Climate and Energy Solutions.
The fact that the EPA changed its original emissions proposal to give plants seven years, rather than the 30 years proposed last year, to reach the new emissions targets suggests EPA has full confidence in CCS.
"We now have enough info and confidence to say that a CCS option with coal meets the test of being the best system of emission reduction," said David Doniger, policy director of the Natural Resources Defense Council's Climate and Clean Air Program told Reuters.
Some argued that the coal industry is at fault for the failure to develop CCS after having lobbied to prevent legislation that would have raised up to $60 billion to support the deployment of the technology by 2035.
The Waxman-Markey bill, which would have created an economy-wide carbon cap-and-trade system, would have set aside a certain portion of emission permits to fund CCS. The bill passed the House in 2009 but a companion died in the Senate in 2010.
"It's as if they intentionally burned down their house and then complain about being homeless," said Daniel Weiss, director of climate strategy at the liberal Center for American Progress.
(Editing by Ros Krasny and Matthew Lewis)