President Obama's Sept. 2 decision to withdraw draft ozone standards appears to be simply a symbolic olive branch to the electric utility industry. The industry is facing a slew of tougher Environmental Protection Agency air regulations that are having an immediate impact, at least in Texas.
Dallas-based utility Luminant announced on Sept. 12 it was closing down two units at a powerplant in northeast Texas and laying off 500 workers, because, it says, it cannot meet EPA's Cross-State Air Pollution Rule by next year's deadline. The utility, however, still plans to spend $280 million by the end of 2012 and $1.5 billion by 2020 to install environmental controls on other powerplants to meet EPA regulations.
At this point, it is unclear whether the economic blow from plant closures like Luminant's will be offset by new work stemming from retrofits and construction sparked by the final cross-state rule and the maximum achievable control technology (MACT) rule that the EPA proposed earlier this year.
A February report backed by Ceres, a Boston-based non-profit organization, estimates the power sector will invest almost $200 billion in capital improvements to meet the cross-state and utility MACT rules over five years; that amount would create 1.46 million jobs in that time frame. However, a study by IHS/Global Insight estimates that every $1 billion spent on upgrades and compliance will put 16,000 jobs at risk and reduce the U.S. gross domestic product by as much as $1.2 billion.
Andy Byers, an associate vice president at Black & Veatch, Overland Park, Kan., says the new ozone standard would have added to the “overall train wreck” of environmental rules that powerplants face, but its effects would not have been apparent for at least three years. Byers says, “It would have [had] an impact later on … but it wasn't the primary driver for a lot of retrofits and retirements” that utilities announced in the last year.
The ozone standard, if implemented, could have increased the uncertainty surrounding fossil-fuel-based powerplants, says Carl Weilert, principal air-pollution control engineer for Burns & McDonnell, Kansas City, Mo. The standard likely would have placed more cities and states in “non-attainment” status for ozone levels, he says. In turn, individual states might have asked specific industries to trim emissions. However, industries would not have known until several months after the standard was put into place whether they were required to cut their emissions.
That uncertainty would make it difficult for owners of electric powerplants or refineries that emit volatile organic compounds to follow through with expansion plans, Weilert says. While the new rules would have added construction and engineering jobs that are associated with air-quality controls, “an even greater number of potential jobs would be lost than would be lost due to the cancellation of plans for business expansion,” according to Weilert.
Weilert says that while EPA's regulations do create jobs—the estimates depend on which group is talking—too many “onerous regulations” will cause certain plants to shut down. “The ultimate result in the end is the cost of electricity and the resulting impact on our economy,” he says.