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

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 didn’t 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 1987. 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 2.5This is the base number of credits you get.

The Great Toga Party

Subtract 2.8% of your credits as your voluntary (that you don’t 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 1985-1987 Btu firings as percent of total– If you didn’t have any have to buy credits

NOx allocated based on 1999-2002 Btu firings * 0.11 lbs/MMBTU

Require States to retire extra Title 4 credits so they won’t 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 don’t 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 regsNeed 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

decisionLeavit’s 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