EAB Upholds GHG Permit CCS Cost Determination
On May 16, 2014, the Environmental Appeals Board (EAB) of the U.S. Environmental Protection Agency (EPA) upheld the greenhouse gas (GHG) Prevention of Significant Deterioration (PSD) permit issued by Region 6 for ExxonMobil’s Chemical Company’s (Exxon) proposed chemical plant in Baytown, TX. The Sierra Club had previously petitioned the EAB to review the GHG permit on the grounds that Region 6 impermissibly rejected carbon capture and sequestration (CCS) as economically infeasible as part of the Region’s best available control technology (BACT) analysis for the facility. The Sierra Club’s petition did not seek to impose CCS as BACT for the facility. Rather, the group sought a ruling that the record did not support Region 6’s determination that CCS was economically feasible as a control technology for the facility and that the Region had abused its discretion regarding how it determined that CCS was not economically feasible.
Exxon estimated a capital cost to install CCS at the facility of over $734 million. Installing CCS at the facility would increase the overall cost of the facility by more than 25 percent. Region 6 reviewed and concurred with Exxon’s cost analysis. Following EPA’s New Source Review Workshop Manual (the NSR Manual) and supported by Exxon’s cost estimate, Region 6 eliminated CCS as a control option for GHG emissions under Step 4 of its BACT analysis. The NSR Manual sets forth 5 steps to guide permit-writers in their BACT determinations. Step 4 requires permit-writers to evaluate the energy, environmental, and economic impacts of the option. In addition, according to EPA’s PSD and Title V Permitting Guidance for Greenhouse Gases (GHG Permitting Guidance), the “emphasis [of Step 4] should be on the cost of control relative to the amount of pollutant removed, rather than economic parameters that provide an indication of the general affordability of the control alternative relative to the source.” The GHG Permitting Guidance states that the costs to remove the pollutant must be “disproportionately high” to justify eliminating the technology as BACT based on cost considerations alone.
The Sierra Club argued that Region 6 failed to follow the guidelines of EPA’s NSR Manual and other applicable guidance when it eliminated CCS as economically infeasible by focusing on the total cost of CCS rather than performing a cost-effectiveness analysis. Although the federal Clean Air Act does not require any particular method for analyzing costs as part of the BACT analysis, the NSR Manual suggests that permit-writers use a cost-effectiveness approach based on the cost per ton of pollutant reduced. Region 6 reviewed Exxon’s cost-effectiveness data showing a cost of $253 per ton of CO2 reduced, but noted that this information had limited utility because of a lack of other facilities in the same industrial sector using CCS. Without any examples for comparison, Region 6 relied on the cost of CCS as compared to the overall cost of the facility in its determination that CCS was economically infeasible and therefore not BACT.
Another issue was Region 6’s decision to combine GHG waste streams in its CCS cost analysis. Sierra Club asserted that because it was cheaper to capture high-purity GHG waste streams, adding low-purity sources to the cost estimates for capture, compression and storage for the proposed facility inflated the overall price tag for CCS. Region 6 examined the combined cost of CCS for the high-purity CO2 stream from the plant’s cracking furnace and the low-purity CO2 stream from the associated utility plant’s flue gas, rather than examining the cost to capture CO2 from each source on an individual basis. The Region based this decision on the rationale that the installation of a utility plant at the facility was necessary to operate any CCS system, and as such the Region could include the cost to capture CO2 emissions from the utility plant in the overall CCS cost analysis.
The EAB found that, given the lack of sufficient CCS cost-effectiveness data for projects similar to Exxon’s proposed facility, it was permissible for permit-writers to assess the technology in a less-detailed manner than typically required by the EAB. The decision held that Region 6 did not err when it considered the costs of CCS in comparison to the total project cost and the impact of those costs on “economic achievability” of the project. The EAB noted that the GHG Permitting Guidance explicitly states that it may be appropriate to assess cost-effectiveness in a different manner when examining the feasibility of CCS. The EAB also cited In re City of Palmdale, where EAB similarly found that the permitting authority could eliminate CCS at Step 4 of the BACT analysis based on the total annualized cost to install CCS at a proposed hybrid natural gas-solar facility. The EAB also deferred to Region 6’s technical decision to combine the two CO2 source streams in its CCS cost analysis and found that it had provided reasonable basis for its actions.
Much of the Sierra Club’s argument rested on policy considerations. The group asserted that “if no one is ever the first to install CCS, then there will not be any comparable facilities to justify imposing that technology as BACT.” The EAB acknowledged this concern but was not persuaded, in part because of the multitude of EPA’s efforts with respect to the regulation of GHGs and the study of CCS. The decision pointed to the EPA’s proposed New Source Performance Standards for GHG emissions from electric generating units and EPA’s Office of Air and Radiation’s efforts to work with the regional offices to develop an appropriate approach to assessing the economic feasibility of CCS. Overall, the EAB’s decision highlights the high bar petitioners face when challenging the technical determinations of a permitting agency.
Posted by Matthew Dobbins
at 5/20/2014 5:02 PM