The Environmental Protection Agency (EPA) enjoyed a victory this week as the Supreme Court ruled 6-2 in favor of allowing the agency to regulate power plant emissions that cross state lines.
It’s been a long time coming, since the EPA first spread the so-called “good neighbor” idea back on October of 1998. For the first time, a coal-fired power plant in one state is liable for damages caused by sulfur dioxide and nitrogen oxide that are found in another state.
The ruling upholds the EPA’s 2011 Cross State Air Pollution Rule (CSAPR) that has run a gauntlet of contradictory interpretations of the Clean Air Act by the D.C. Circuit Court.
The Clean Air Act’s “good neighbor” plan of action addresses interstate pollution by holding those states accountable for emitted air pollution that can significantly worsen the downwind air quality of neighboring states. With new standards, power plants will be required to cut their sulfur dioxide and nitrogen oxide pollution, the key ingredients in acid rain and smog that can travel hundreds of miles beyond state lines.
While the EPA might be riding high, you can bet your bottom dollar that power utility companies aren’t celebrating about this. After many years of keeping the EPA off their backs and resisting greater regulations, Monday’s Supreme Court ruling gave a jolt to the coal biz.
This ruling will have little new effect on the U.S. coal-fired industry as a whole. These plants have been planning for this week for years, and knew the day would come when they would face tougher regulations. Planned upgrades and the eventual shutdown of certain plants in order to meet required standards were set in motion long ago.
Only in states like Texas and Missouri are emissions standards likely to fall short of the CSAPR standards. But even there, both states would simply need to invest in sulfur scrubbing technology and nitrous oxide control systems, something that should have been done long before Monday’s ruling.
Texas Gov. Rick Perry has insisted that the EPA could become the arch nemesis for the Texas economy, where oil production has tripled since 2007.
The governor's assessment is grounded in the fact that Texas is number one for ozone pollution and many of its metropolitan areas constantly exceed the federal limits on ozone pollution standards.
Because of this ramped up oil production, Texas has also become the top coal-importing state in the US, spending $1.85 billion last year on out-of-state coal, according to the Union of Concerned Scientists. Texas led the charge against the new EPA rule.
There are roughly 28 states that have been affected by the “good neighbor” plan already.
More telling of Monday’s ruling is the fact that the EPA could continue to push even harder, becoming more aggressive in imposing future sanctions and regulations.
A key test will come in June, when the EPA is expected to propose restrictions on power plant emissions of CO2.
The bottom line: it’s expensive to run clean energy.
The 28 states affected by the good neighbor act, along with many utility companies, have opposed the EPA along the way. Some have given up and gotten on board, under growing public pressure to do so. It’s probably also no surprise that when 14 states officially opposed a similar ruling in 2012, the governors and attorneys general of these states received a combined $4.5 million in campaign contributions from big utilities and coal companies.
These same states represent half of the nation’s sulfur dioxide and nitrogen oxide air pollution. It could end up costing an arm and a leg to get on board with the EPA and be a “good neighbor”.
At the End of the Day
This whole thing doesn’t mean we’re seeing the end days for coal – far from it – coal is still responsible for 20 percent of the U.S. energy supply, according to Forbes. That’s 8 times more than the total from both wind and solar power combined.
However, with tighter regulation on coal-fired power plants, alternative power sources and new power plant designs are the norm for growth.
Southern Co. (SO: US) is building a large-scale coal power plant in central Mississippi that is designed to turn coal into gas, capture carbon dioxide offgassing, and pump it underground. It is the only clean coal power plant being built in the United States with Dept. of Energy money today.
Still, it is going to be very difficult to put the Good Neighbor rule into practice. As Justice Ruth Bader Ginsberg pointed out, most “upwind states” contribute to pollution to multiple downwind states in varying amounts. Figuring out who's to blame for which pollution is going to be difficult indeed.
Trillions will be spent to secure the world's energy supply over the next two decades... and all sources are on the table.
Oil, Natural Gas, Solar, Wind. There will be money made.
By signing up, you'll also get our latest report, Six Oil & Gas Steals.