Cross State Air Pollution Rule (CSAPR) Halted – Moral Hazard
Though I may not always agree in the merit of the various environmental regulations, I do believe the courts halt of CSAPR rule was out of line. The rationale of the court and the plaintiff was the regulation was going to wreak havoc on the economy and the reliability of the system. I contend the stay may result in greater havoc for our economy. The utilities arguing for this under the merit of timing are somewhat disingenuous.
The EPA attorneys should note CSAPR is a modified Clean Air Interstate Rule (CAIR). CAIR was issued on March 10, 2005. CAIR was then vacated/remanded in late 2008. The irony is the vacature came from the environmentalist. The environmentalist did not like the fact trading could result in creating hot spots of emissions and could result in no change in downwind states emissions. EPA had to go back and modified the rule so there would be limits on trading, so downwind states will actually see reductions regardless of trading. Utilities expecting CAIR to disappear when it was vacated would have been very foolish. In fact, that is not what occurred. Over the last few years, we saw significant changes to the coal fleet with significant control equipment installation. As noted in AEP sustainability report – “Since 2004, AEP invested more than $5 billion to install state-of-the-art environmental controls that have resulted in significant reductions in regulated emissions from our power plants” I can tell you AEP did not do this for the press release or the sustainability report, but for preparing for CAIR and MACT /MATS along with NSR settlement. The excuse of not having enough time cannot be legitimately used given when CAIR was issued and the fact CSAPR allows significant trading for the first two years. Given a well-designed trading strategy even those ill-prepared plants such as Monticello can continue to run.
There are many assets that have threatened to retire. I would like to call the bluff on many of those. In fact many coal plants, I suspect the owners have financial concerns versus implementation concerns. The best bet for those owners would be to place those assets for sale and / or develop a very aggressive emissions trading program versus retiring, but the threat of retiring allows them to sustain the status quo.
In terms of reliability concern, I would have really liked the courts to have waited for real proof. If they observed brown outs in January or in any other time period, I would have no issue for the court to stay the decision. This premature stay is not conducive for the economy. The court has created a moral hazard. They are making our economy to be reactive not proactive. Those who moved forward and thought ahead and planned are now being punished. Those who waited and did nothing are being rewarded. I understand policies and regulation will likely never be perfect, but if we cannot implement and learn we will never progress.
I have evaluated every environmental program to hit the power sector over the last 10 years. Please do keep All Energy Consulting in mind for your consulting needs. Let us write you a proposal.
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