EPA Coal Decision Levels Playing Field for Wind, Solar

Building an alt-energy power plant is risky and expensive, but thanks to a new ruling by an Environmental Protection Agency panel, building a coal plant may become riskier and more expensive.

The Environmental Appeals Board blocked the EPA from issuing a permit to a proposed coal plant addition near Vernal, Utah, about 150 miles east of Salt Lake City.

Perhaps more importantly, the quasi-independent board, composed of four highly regarded, experienced judges, ruled that the EPA needs to develop a single nationwide standard for dealing with carbon dioxide.

"I don't want to understate its significance. I think it's very significant," said Bob Graham, chair of Jenner & Block’s Environmental, Energy and Natural Resources Law Practice, a noted environmental law expert who was not involved with the case. "In the long run, it advances the ball on climate change issues and that's positive."

On Thursday, the EPA panel blocked the Bonanza Coal Power Plant's bid for a permit, reversing an earlier decision, and placing over 100 coal plants into regulatory limbo. The rulemaking process will likely yield greater CO2 emissions regulation and will take more than a year, say lawyers familiar with the EPA process. That puts prospective coal power-plant builders in a tough spot, especially with financing already in short supply thanks to the credit crunch. The ruling introduces more risk into the coal industry, which could drive away investors and their limited cash.

And that, said the Sierra Club's chief climate counsel, David Bookbinder, is good news for new clean tech companies.

"Where do you think that money is going to go? It's going to go to wind. It's going to go to solar. It's going to go to something that's going to get built," Bookbinder said. "This is incredibly good for green energy."

Following a landmark 2007 decision by the Supreme Court that carbon dioxide could be regulated as a pollutant under the 1970s-era Clean Air Act, environmental groups have been pushing the EPA to stop issuing permits to coal plants, which produce massive amounts of CO2. But under the Bush administration, the EPA had resisted taking action to reduce greenhouse gas emissions from industrial sources.

Still, the Sierra Club persisted, using a relatively small addition to Deseret Power Electric Cooperative's preexisting Bonanza Power Plant in Utah, to make a stand against the permitting process. They lost the first round, when the Denver regional EPA office issued a permit, saying they need not consider greenhouse emissions. On appeal, however, the Sierra Club appears to have won a much wider-reaching victory.

The Board did not actually side with the Sierra Club's interpretation of the Clean Air Act, but in deciding to send the decision back to the EPA with the instruction to come up with a nationwide plan for regulating greenhouse gases, the Sierra Club effectively stopped new coal plants in their tracks.

"It's punting in a technical, legal sense but what it does is give us everything we wanted," Bookbinder said. "This plant is dead and every other one is going to have to sit around."

The current EPA, for its part, was none too happy that they must reconsider their policies, even if it will ultimately give the organization wider powers.

"While we are disappointed that the issue was remanded, EPA looks forward to the opportunity to consider this issue on remand," the agency said in a statement. "EPA is firmly committed to taking sensible action to address the long-term challenge of global climate change."

The definition of "sensible action," however is likely to change under Barack Obama, who many policy watchers anticipate will grant the EPA far more leeway to deal with greenhouse gas regulation.

"Do I think that the Obama administration would pursue this further? Yes, I think they will," Graham said.

The American Petroleum Institute filed a brief opposing the Sierra Club, arguing that the Clean Air Act, a version of which first passed in 1963 long before climate change became an environmental issue, is the wrong vehicle for reducing carbon dioxide emissions.

"Overall, API does not support regulating greenhouse gases under the current Clean Air Act because it would be a mess," said Lee Hayden, the American Petroleum Institute's Washington, D.C., representative. " It's not designed for greenhouse gas emissions."

But the Appeals Board decision combined with the Supreme Court ruling makes it likely that the EPA will begin using the Clean Air Act in just that way, which will have implications that will reverberate through the economy.

The stricter the EPA limits on carbon dioxide, the more money coal plant operators will have to throw at technologies to reduce their CO2 emissions. That will eventually make coal power more expensive, which climate-change action advocates hope will make solar, wind, nuclear and other low-carbon technologies more competitive.

"I'm feeling pretty damn good today," said Bookbinder.