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Adopted Part 246, Mercury Reduction Program for Coal-Fired Electric Utility Steam Generating Units - Revised Regulatory Impact Statement Summary

6 NYCRR Part 246, Mercury Reduction Program for Coal-Fired Electric Utility Steam Generating Units and 6 NYCRR Part 200.9, Referenced Material

Statutory Authority

The statutory authority for this amendment is the Environmental Conservation Law (ECL) Sections 1-0101, 3-0301, 19-0103, 19-0105, 19-0301, 19-0303, 19-0305, and 19-0311. Section 1-0101 outlines the policy declaration for the Department of Environmental Conservation (Department) regarding the protection of New York State's environment and natural resources.

Legislative Objectives

Article 19 of the ECL was enacted for the purpose of safeguarding the air resources of New York from pollution, to ensure the protection of the public health and welfare, the natural resources of the State, physical property, and industrial development. It is the stated policy of the State to require the use of all available practical and reasonable methods to prevent and control air pollution in New York. To facilitate this policy objective, the Legislature bestowed specific powers and duties on the Department, including the power to adopt and promulgate regulations for preventing, controlling and prohibiting air pollution. This authority specifically includes promulgating standards for the coordination of State and Federal pollution reduction programs.

On March 15, 2005 EPA announced the final Clean Air Mercury Rule (CAMR). CAMR limits mercury emissions from new and existing coal-fired electric steam generating units, and creates a market-based cap-and-trade program that will permanently cap utility mercury emissions nationwide in two phases: the first phase cap is 38 tons beginning in 2010; the second phase cap set at 15 tons beginning in 2018. EPA believes these mandatory declining caps will ensure that mercury reduction requirements are achieved and sustained. On May 18, 2005, EPA promulgated Emission Guidelines and Compliance Times for Coal-Fired Electric Steam Generating Units. (70FR 28606-28700) Pursuant to 40 CFR 60.4141, all States are required to submit to the Administrator their designated mercury allowances for each coal-fired electric steam generating unit by November 15, 2006. Regardless if a State is adopting the federal program or creating its own State control plan, all States must require applicable sources to limit mercury emissions at or below levels which meet the allocations designated in 40 CFR 60.4140. For New York State, these distributions equal 786 pounds per year of allowable mercury emissions in 2010-2017 and 310 pounds per year in 2018 and beyond.

The Department is proposing to adopt a mercury regulation which incorporates the Phase I emission cap established in the federal rule for the years 2010-2014 and beginning in 2015 establishes a facility wide average emission limit for each applicable unit. Phase I of the proposed State regulation, 6 NYCRR Part 246, will impose annual facility-wide mercury emission limitations, based upon the state mercury budget distributed to New York State by EPA. Applicable facilities will not be permitted to generate and trade mercury reductions with other facilities or other States. The annual facility-wide emission limitations will be in effect from 2010 to 2014. Starting in 2015, Phase II, in conjunction with other electric sector regulations such as the Regional Greenhouse Gas Initiative (RGGI) and the second phase of the Clean Air Interstate Rule (CAIR), the State mercury regulation will establish a unit-based emission limit for each applicable unit. The Department will submit Part 246 to EPA for approval in lieu of New York State accepting the model rule requirements CAMR.

Needs and Benefits

Mercury is a toxic metal that persists and cycles in the environment as a result of natural and human activities. When mercury is released into the air, it is transported and eventually deposited back onto the earth. The distance of this transport and eventual deposition depends on the chemical and physical form of the mercury emitted. In aquatic ecosystems, inorganic mercury is transformed into an extremely toxic organic form of mercury, methylmercury. Methylmercury bioaccumulates up the food chain as humans and animals consume mercury-contaminated organisms, particularly fish. Two conditions common in the Northeast, acidified water bodies and elevated ozone levels, are thought to promote the deposition of mercury into the environment.

The term "hot-spot" has been used by the EPA and environmental organizations to describe a particular area vulnerable to sustained mercury deposition based upon different regulatory scenarios. One of the shortcomings of CAMR is that the federal cap-and-trade strategy will not mitigate the current "hot-spots" created by localized deposition from coal-fired electric utilities who buy allowances rather than installing pollution control to reduce emissions. The Department believes,¹ that the Adirondacks or the Northeast region is a "hot-spot" due in part to persistent deposition of mercury from the coal-fired electric utility sector. Consequently, the Department has opposed the trading of mercury allowances. Recent research in Ohio and Massachusetts has addressed the issue of localized deposition at near-by receptors from coal-fired electric utilities and municipal waste combustors respectively. New York State has implemented regulations² that are stricter than the federal National Emission Standard for Hazardous Air Pollutants for Municipal Waste Combustors to minimize localized deposition impacts, and anticipates that reductions achieved from the proposed Part 246 will do the same for the coal-fired electric utilities located in New York State.

The electric utility industry, along with municipal solid waste combustors and the Portland cement manufacturing sector comprise the largest point source categories of mercury emissions in New York State. Since 1999, New York State has reduced emissions from the municipal solid waste combustor sector by approximately 90 percent. New York State is currently examining technology to reduce emissions in the Portland cement manufacturing sector following the EPA's promulgation of a National Emission Standard for Hazardous Air Pollutants (NESHAP) which did not control mercury from this source category.³ With the proposed reductions targeted for 2015, the statewide reduction in mercury from 1999 levels will equate to 75 percent⁴ statewide for all point sources comprising of fuel burning equipment, incineration and manufacturing.

The Department has determined that federal cap-and-trade program would prolong the existence of "hot spots" in the Catskill and Adirondack region until 2020 and beyond. Allowing the banking and sale of mercury emissions to be sold to New York applicable facilities or to facilities in regions where westward winds prevail would not reduce the unacceptable mercury concentrations in fish and wildlife in New York's lakes, streams and estuaries. Regional concentrations will be reduced sooner through implementation of a New York State rule which controls unit-level mercury emissions five years earlier and to a greater extent than the federal rule.

Costs

Costs to Regulated Utilities

New York currently has thirteen coal-fired electric utility steam generating stations, two of which, AES Hickling and AES Jennison, have been on cold standby since 2001. The thirteen stations have electric generation capacities per plant ranging from 50 MW to 800 MW. There are two cogeneration facilities, Trigen Energy-Syracuse and WPS Niagara Generating Facility, generating steam for both electric production and process use. At this time, only those units which meet the federal definition of electric utility steam generating unit, including the thirteen coal-fired steam generating stations and the two co-generation units, will be subject to Part 246.

The future actual costs of regulating mercury emissions from the electric utility steam generating sector are directly related to any additional control device(s) required on a plant-by-plant basis, in addition to the volume and cost of reagent required, which in most cases consists of a powdered activated carbon or a carbon enhanced with a halogen such as bromine. The incremental cost of generation for New York coal-fired units implementing a standard or enhanced powdered activated carbon system will be in the range of 0.37 to 1.66 mills/kWh⁵,⁶. A mill is defined as one-tenth of a cent. This is approximately a one to eight percent increase on the 20 to 30 mills/kWh ($0.02/kWh to $0.03/kWh) most coal-fired power plants currently incur to produce electricity. For comparison, in the day ahead market during a summer month a kWh is sold by a generator for approximately $0.08 upstate and $0.15 downstate⁷. Monitoring, record keeping and reporting are being incorporated into Part 246 from CAMR and regulated facilities will incur the same costs with the Department's program or the federal CAMR. Costs of monitoring, record keeping, and reporting are going to be fixed as adoption of EPA's model rule is required for national reporting. Currently, mercury CEMS cost in the range of $130,000 to $200,000 installed with an approximate testing, maintenance, and operation cost of $89,500 per year⁸.

Most facilities in New York will need to install activated carbon injection systems to work in conjunction with existing cold-side ESPs, especially those facilities burning western sub-bituminous coals. Some facilities may need to install pulse jet fabric filter baghouse systems for particulate collection to achieve the higher rates of mercury capture proposed for 2015 than could be realized through operation of a cold-side ESP alone. For those facilities combusting sub-bituminous coals, high percentage sub-bituminous coal blends, or facilities with existing fabric filter baghouses, total capital requirements include the purchase and installation of dosing and storage equipment related to the powdered activated carbon injection (PACI) system. The PACI will be a nearly fixed cost of $984,000 (year 2003 dollars). Annualized over 20 years at an interest rate of approximately 10 percent this translates to a cost of $117,460 per year⁹.

A Department and the New York State Energy and Research Authority (NYSERDA) analysis compared a reference or business-as-usual case (absent either CAIR or mercury) to each of three policy cases: New York's proposed approach for implementing both CAIR and mercury, CAIR only, and mercury only. CAIR and Mercury policies (implemented together, as proposed) could increase wholesale electricity prices by an average of 1.7 percent or $1.14 per MWh over the 2010 to 2020 timeframe. For a typical residential customer (using 750 Kwh per month), this translates into a monthly retail bill increase of $0.86. Model runs assuming CAIR only (i.e., without a mercury control program) and mercury only control program (i.e., without CAIR) indicate that virtually the entire incremental electricity price impact of implementing CAIR and a mercury rule together is due to CAIR. There is virtually no incremental electricity price impact due to mercury control in conjunction with the sulfur and NO_x CAIR program.¹⁰

Costs to the State

The costs to the Department for promulgating Part 246 will include additional Central Office staff and Regional Office staff to modify permits and create monitoring conditions in the permitting database to assure uniformity from Region to Region. Approximately 15 Title V facility permits will have to be modified to incorporate Part 246 requirements. Department staff will be responsible to review stack test protocols, field witness the required stack tests, review final reports and CEM relative accuracy tests. Implementation of the federal or state rule requires quarterly submittals of compliance documentation which will need to be reviewed, tracked and acted upon if necessary.

The modification of a Title V permits require trained environmental engineers with knowledge of utility combustion systems, sulfur and particle control devices and knowledge of CEM documentation and stack testing. At the current staffing levels, the addition of new staff will be needed to continue some of the routine permitting and compliance work currently being performed by more experienced staff.

These costs however would be incurred whether the Department adopted Part 246 or implemented the federal rule as written. Indeed, the federal cap and trade program would likely entail more significant administrative costs since the Department would have to approve and keep track of trading allowances. Under Part 246, facilities in New York will not be allowed to trade mercury allowances.

Source of Information upon which the cost analysis is based.

The information used to determine the costs to the affected industries is based upon the Department of Energy's National Energy Technology Laboratory (DOE/NETL). DOE/NETL continues to conduct pilot studies involving slip stream tests and full scale tests involving many innovative technologies to determine mercury control¹¹ from applicable CAMR facilities.

Local Government Mandates

The future actual costs of regulating mercury emissions from the electric generating utility sector are directly related to any additional control device required on a plant-by-plant basis. Jamestown Power's Samuel A. Carlson Generating Station operates four boilers in total, which are divided into two emission units. The facility exhausts flue gas through one stack per generator for a total of two stacks. Taking into consideration the installation an activated carbon injection system and use of an enhanced activated carbon at a rate of three lb carbon/MMACF; electric use to operate any additional pollution control equipment; and operating costs in addition to reagent materials and land filling of additional fly ash, the installation would have an associated incremental cost of generation (implementation cost) in the range of 0.23 to 0.63 mills/kWh. The facility would also be required to install, operate, and maintain a continuous emission monitoring system to measure and record mercury mass emissions. The installation of a mercury monitoring system is currently in the range of $130,000 to $200,000 per unit installed. An annualized cost per monitoring unit is predicted by EPA to be on the order of $89,500 per year for testing, maintenance, and operation¹². Any estimated impact on wholesale electricity price based on the cost of mercury emission control equipment would not directly reflect the implementation costs incurred by the affected generator owners, because coal generators generally do not set the marginal market price of electricity. However, the on-site cost of installing, operating, and maintaining mercury emission control equipment directly reduces the operating margin (similar in concept to profit) of the Mercury Reduction Program units.

Paperwork

Part 246 adopts the federal requirements for monitoring, reporting, and record keeping thereby eliminating redundant or duplicative reporting. Facilities will not incur additional costs in this regard. In addition, Part 246 does not implement the labor intensive cap-and-trade-portion of the federally mandated model rule, which requires the tracking of emission credits, reducing the regulatory burden on facilities to track allowances. Facilities subject to Part 246 are required to submit quarterly reports electronically, in accordance with federal requirements, and along with their compliance reporting for under the Acid Rain and the Clean Air Interstate Rule. The coordination of reporting for these three regulatory programs will reduce paperwork requirements substantially.

Duplication

The proposed rule does not duplicate or conflict with any other New York or federal rule. The federal model rule, Emission Guidelines and Compliance Times for Coal-Fired Electric Steam Generating Units, is the first time the emission of a bio-persistent, bioaccumulating hazardous air pollutant has been controlled from an electric steam generating source. New York State has opted to not accept the model cap-and-trade rule, but in stead submit a State Plan containing an alternate strategy to reduce mercury emissions from coal-fired power plants in a shorter time frame requiring greater reductions.

Alternatives

The alternatives to adopting Part 246 are to: (1) take no action and submit a state regulation resembling the model rule, Emission Guidelines and Compliance Times for Coal-Fired Electric Steam Generating Units; (2) allow the federal government to run the program under a Federal Implementation Plan (FIP); or (3) adopt the suggested model rule from STAPPA/ALAPCO; or (4) submit a state specific, alternate plan with subsequent approval by EPA.

Federal Standards

The proposed regulation, Part 246, exceeds the minimum standards of the federal government in the following ways. First, the proposed rule disallows trading of excess mercury emissions within or out of state because the cap-and-trade program would maintain existing local hot spots of mercury deposition and more importantly, continue to contribute to widespread regional concentrations of mercury. Regional concentrations could be reduced much sooner through implementation of a New York State rule which limits mercury emissions earlier and to a greater extent. Second, the Part 246 shortens the timeframe for final compliance from 2018 to 2015. Third, the Part 246 does not allow "banking" of excess emissions to be sold and/or kept for future use after 2018. These last two items highlight the Department's goal of adopting a mercury rule which will not exacerbate or contribute to widespread deposition of mercury in New York State's sensitive Adirondack and Catskill mountain lakes areas and coastal estuaries.

The Department, in cooperation with NYSERDA, has calculated the costs of the proposed mercury rule and the federal Clean Air Interstate Rule (CAIR) on the citizens of New York in the form of their monthly electric bill increase due to these regulatory actions. The estimated New York retail electricity price impact showed that the costs to the consumer of implementing Part 246 to be $0.002 per month and for both regulations CAIR and Part 246 the cost will be $0.86 per month equating to 0.8 percent of their total monthly bill. For the industrial consumer, the cost increase for CAIR and Part 246 equals $193 per month or 1.7 percent of their monthly bill, the mercury only portion for the industrial user is $0.5 cents per month.¹³ Thus the Department concluded costs associated with the adoption and implementation of Part 246 was reasonable given the significant benefits associated with reducing mercury deposition to the environment.

Compliance Schedule

The compliance schedule for the proposed rule includes two Phases, Phase I, 2010 and Phase II, 2015. The first compliance date is mandated from the federal Emission Guidelines and Compliance Times for Coal-Fired Electric Steam Generating Units, and all electric generating units in the nation will be on the same compliance schedule. In Phase II, the proposed rule coordinates the requirements of the Clean Air Interstate rule and the Regional Greenhouse Gas Initiative. The Department believes that the regulated sources will have ample time to comply with the Phase II portion of the rule three years earlier than federally required because of the advances in mercury pollution control demonstrated by the Department of Energy's National Energy Technology Laboratory.

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Footnotes

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