TAUC Summer Summit: Tackling the Big Issues in Cincinnati (Part 6 - AEP's John Hendricks on EPA regs)

August 20 2014

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EPA’s Regulatory Train Wreck

No union construction conference would be complete without a discussion of the federal government’s shortsighted regulatory actions. Over the past several years, the EPA has proposed several major regulations aimed at destroying coal-fired power generation in the United States. These actions not only jeopardize the reliability of our country’s energy grid; they could also spell disaster for thousands of union contractors and their partners in the building trades, who have provided coal-fired plants with safe, highly skilled labor for generations.

As Director of Air Quality Services for American Electric Power, a utility that relies heavily on coal-fired generation, John Hendricks knows this all too well. TAUC was honored to have Hendricks serve as our closing keynote speaker for the 2014 Summer Summit and provide us with an owner’s perspective on EPA’s regulatory overreach.

Hendricks was blunt in his assessment. He said EPA’s recent actions were nothing less than a “regulatory train wreck” and “mostly bad news for our industry and, I think, for the economy going forward.”

Take the Mercury and Air Toxics Standards rule, or MATS. The final rule issued in February 2012 (with a compliance deadline of April 2015) regulates emissions of mercury, acid gases and other metals from coal- and oil-fired power plants. Hendricks said the MATS rule will force the retirement of nearly 6,000 MW of AEP coal-fired power plants and a staggering 60-80 GW of capacity nationwide, prompting serious concerns about the reliability of the energy grid. In addition, retrofits to 2,300 MW of existing generation capacity to meet MATS numbers will cost in the range of $1 billion.

Ozone standards are another potential landmine for coal-fired plants. EPA will propose a revision to the existing ozone air quality standard of 75 ppb in December, with a final rule expected in October 2015. Hendricks said the standard is likely to be reduced to anywhere between 60 and 70 ppb, which could trigger “significant economic impacts.” Citing a National Economic Research Associates report, Hendricks said those impacts could include:

• Reducing U.S. GDP by $270 billion per year
• Loss of nearly 3 million job equivalents per year on average through 2040
• Cost the average U.S. household $1,570 per year in lost consumption

Hendricks urged contractors to contact their state and federal representatives and make their concerns known about the upcoming ozone standard changes.

EPA’s recent Clean Power proposal, released earlier this summer, is another potential game-changer (and not in a good way). The plan’s stated purpose is to reduce emissions of carbon dioxide (greenhouse gas) from existing power plants. EPA proposed state-specific CO2 emission rate goals. But these state goals vary widely; West Virginia, for instance, must cut 20% from their 2012 emission rate by 2030, while for Arkansas, the goal is 45%.

Each state’s goal was created using four “building blocks,” including heat rate improvements and energy efficiency. However, Hendricks said that these building blocks have “significant flaws” when it comes to assumptions on feasibility and cost.

In addition, Hendricks pointed out that EPA assumed coal-fired plants can achieve a 6% heat rate improvement. But such gains are neither possible nor sustainable, he argued; 1-2% would be a more realistic goal. Likewise, he cited estimates from the Electric Power Research Institute that show when it comes to energy efficiency, it may only be possible to achieve one-third of EPA’s stated levels.

The deadline for comments on EPA’s Clean Power Plan is October 16, and everyone’s voice needs to be heard. TAUC will soon be releasing guidelines and comment templates for its members; stay tuned to www.tauc.org and check our monthly e-newsletter, TAUC About Construction, for more details.

View John Hendricks’ PowerPoint presentation here.

P.S. – All available PowerPoint Presentations from the 2014 TAUC Summer Summit are available here.

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