The EPA Proposed Two Different Coal Ash Regulation Options, Just to Keep Us Guessing!

Right now, coal combustion residuals, or coal ash, are considered exempt wastes under an amendment to the Resource Conservation and Recovery Act (“RCRA”). Many are byproducts of the combustion of coal in power plants captured by pollution control technologies, like scrubbers. According to the American Coal Ash Association, nearly 110 million tons of coal ash was produced in the U.S. in 2012, and about 47 percent of that was re-used. The rest was deposited in landfills. Lately, pundits across the political spectrum have been writing about the coal ash regulations the Environmental Protection Agency (the “EPA”) is due to finalize any day. But what does that all mean?

First, a quick background. In 2008, a slurry spill from the Tennessee Valley Authority (the “TVA”) Kingston Fossil Plant in Kingston, Tennessee triggered numerous lawsuits against the TVA. The EPA considered the spill from the plant’s “surface impoundments” (ponds) to be an unpermitted discharge of a pollutant in violation of the Clean Water Act. The TVA and EPA entered an Agreed Order delineating the cleanup responsibilities and requiring the TVA to meet all federal and state environmental regulations in restoring the damaged areas. At this point, there were no federal regulations governing the handling of coal ash; instead, the EPA had allowed the states to enact their own rules and regulations. Various groups pressured the EPA to promulgate rules regarding the storing, handling, and disposal of coal ash

Fast-forward several years to 2013. Several environmental groups sued the EPA to push it to finalize regulations on the storage and disposal of coal ash. The result of that suit was a Consent Decree from the District Court for the District of Columbia setting a deadline of December 19, 2014 for an EPA rule.

On June 21, 2010, the EPA issued a Proposed Rule for the required public comment period. The Proposed Rule can be viewed here. The public comment period closed on November 19, 2010. Over 11,000 comments were received. The EPA issued numerous Notices of Data Availability over the next several years and invited further public comment.

The EPA has proposed two possible outcomes for the management of coal ash. Both options fall under RCRA. The first option is the “Subtitle C” option. Under this creatively-named option, the EPA would list coal ash as a “special waste” when destined for disposal in landfills or surface impoundments, subject to hazardous waste regulation under subtitle C of RCRA. The second option is referred to as the “Subtitle D” option because under it, you guessed it, the EPA would regulate coal ash under subtitle D of RCRA, the section for non-hazardous wastes. Environmental groups have lobbied for the former option, while industry representatives prefer the latter. The EPA sent its proposal to the White House Office of Management and Budget (the “OMB”) in October, 2014. This is the final review stage for the rule.

What does all of this mean for the industry? Option C would require state and federal enforcement, while Option D would leave federal enforcement to citizens’ suits (states would be considered citizens). Option C would require state and federal monitoring, but Option D is self-implementing. Importantly, under Option C, the rule would include a federal requirement for permit issuance by states. Option D would not. Option C includes requirements for storage, including containers and tanks. Option D does not.

A key provision involves those surface impoundments, or ponds. Option C would require existing impoundments to remove solids, meet land disposal restrictions, and retrofit the impoundment with a liner. Option D would require existing impoundments to remove solids and install a liner or stop accepting coal ash within five years. Option C requires new surface impoundments to meet land disposal restrictions and liner requirements. Option D also would require the installation of liners in new impoundments, but would not require them to meet land disposal restrictions. Option C essentially would phase out the use of existing and new surface impoundments. Even Option D, in practice, would make using new surface impoundments difficult.

Option C also includes financial assurance requirements. Option C includes requirements for generation, storage, transport, management, and disposal of coal ash, while Option D focuses on disposal. Under Option C, the effective date will vary by state, as each authorized state must adopt the rule individually, which could take one or two years. Option D would be effective six months after the final rule is promulgated for most provisions; certain provisions have a later date. Both proposals exempt “beneficial uses” from any regulation under RCRA. The definition of “beneficial uses” is still unclear, but may include agricultural soil amendments, use in capped structural fill such as road beds, and recycling coal ash into asphalt or concrete. The EPA has a handy chart that summarizes many of these differences here.

Several bills have been introduced in Congress to block the EPA from regulating coal ash; the most recent passed the House in July but didn't make much leeway in the Senate. We will find out in the next week whether the White House picks Option C or D, or, more likely than not, some combination of the two options. Rules do not come out of the OMB review in the same shape in which they went in. The OMB's role is, in theory, to allocate finite resources, ensure relevant agencies are sharing scientific information and cost data, and to make sure the final regulation takes the public comments into consideration. In practice, however, the OMB places the ultimate authority for rule-making in the hands of the OMB personnel, who may not be experts in the substantive areas of regulations and are not accountable to Congress or the electorate. With this wide leeway, and the intense lobbying from all sides, the best bet is that the White House OMB will authorize a blended approach, some where between Option C and Option D. As the wise philosopher Adam Levine once sang: "it's not always rainbows and butterflies, it's compromise that moves us along."

In any event, many in the industry already are preparing for the changes that either option will bring. Electricity-producers, waste management firms, and construction companies will be immediately affected by these regulations. Electricity-users (aka all of us) will also see an effect down the road as the changes are implemented.

President Obama & The Environment

I know that everyone was sick and tired of the media coverage leading up to the presidential election, so I thought I’d add a bit more discussion to the mix.  Seriously though, I thought I’d take a look at what President Obama’s second term has in store for environmental policy.  Interestingly, climate change was not mentioned once in the three presidential debates—the first time that has happened since 1984.  President Obama, however, did mention climate change in his acceptance speech, in which he stated: "We want our children to live in an America that isn't burdened by debt, that isn't weakened by inequality, that isn't threatened by the destructive power of a warming planet.”

On November 7, 2012, a day after President Obama was reelected, Audubon Magazine published the president’s answers to ten questions on the environment.  In the Audubon interview, President Obama called climate change "one of the biggest issues of this generation.”  Although most of the article dealt with what the president has done in his first term to address climate change, he did address some of his future plans.  The president proposes increasing limits on new fossil-fuel-fired power plants, limiting greenhouse gas emissions from automobiles, investing in renewable energy, and reaching emission limit agreements with other countries.  

                

One area where President Obama conflicts with environmentalists is on drilling in the Arctic.  The president believes that drilling in the Arctic must be a part of America’s “all-of-the-above energy strategy.”  He would, however, prevent drilling in the Arctic National Wildlife Refuge.  Another potential source of conflict with environmentalists is the Keystone oil pipeline.  The president’s administration is conducting a thorough assessment of the pluses and minuses of the proposed pipeline, while the Audubon interviewer stated that the pipeline “would transport what some consider to be the dirtiest oil in the world and cause destruction of boreal forest.”

                

The president does not believe that we have to choose between a clean environment and a thriving economy.  He believes that clean energy investment will lead to a $2.3 trillion global market.  Industry groups, however, disagree.   Industry groups fear that increased regulation of coal and other fossil fuels will hurt the economy and raise prices for consumers.  For more energy industry perspective, please click here. 

                

If you have questions about how new proposals, regulations, or laws will impact you or your business, please contact an environmental attorney.

Coal Mining, Economics, and Regulation

While I've been on vacation (stay classy, San Diego!) environmental law in Indiana has been making major news and raising interesting issues.  This story and this editorial from recent editions of the Indianapolis Star discuss the Bear Run Coal Mine in Sullivan County.  As production there ramps up, the mine is expected to become the largest coal mine in the eastern U.S.  The Indiana Department of Environmental Management (IDEM) is nonetheless regulating Bear Run under a general permit.  The federal EPA has urged IDEM to regulate Bear Run under a more restrictive individual permit, but IDEM has declined to do so. 

This cases raises several fascinating issues, including the environmental price of economic development, the dangers and benefits posed specifically by coal mining, and a host of others.  I want to focus on the one I found most interesting.

While IDEM claims it is following a less-stringent course at Bear Run for regulatory reasons (it doesn't consider Bear Run unique enough to require an individual permit), Bruce Jaffee, a professor of business economics at IU's Kelley School, points to other factors.  Specifically, he notes that the price of natural gas has plummetted lately.  This is due in large part to hydraulic fracturing, or "fracking," that makes getting at certain forms of natural gas much easier and cheaper than it used to be.  Unfortunately for Indiana, we have bet our energy future in significant part on the new coal gasification plant in Edwardsport.  So instead of making power from cheap natural gas, we're going to buy more expensive coal and create gas out of it for our power.  Jaffee thinks the less-expensive regulation at Bear Run is a way to try to keep utility costs in line by keeping down the price of coal that goes to Edwardsport.  (In a related note, from perhaps an opposite angle, see this NPR story on how the falling price of natural gas has made investments in solar power less attractive.)

Power plants take a long time to build.  What might look like a smart move at one point (betting on coal) may look less attractive when a new technocology, here fracking, comes along to upend the status quo.  But maybe things will change again as fracking comes under greater scrutiny (h/t Jeff Lorenzo at the Indiana Environmental Law Blog). 

I should add that I have no reason to disbelieve IDEM's claims that it is choosing a general permit at Bear Run over an individual permit for regulatory, not economic, reasons.  I just find the economic analysis interesting, and it gives me a reason to discuss energy prices and the different aspects of the market.  Betting on coal may prove to be more costly than it looked when the decision was made, and that cost could not necessarily have been predicted due to the emergence of new technologies.  I think that's fascinating.