Utilization, and Storage Chair, NARUC Subcommittee on Clean Coal and - - PowerPoint PPT Presentation

NARUC-DOE Carbon Capture, Utilization, and Storage Partnership

A Comprehensive Survey of Coal Ash Law and Commercialization: Its Environmental Risks, Disposal Regulation, and Beneficial Use Markets

Moderator:

• Jeremy Oden, Alabama Public Service

Commission Chair, NARUC Subcommittee on Clean Coal and Carbon Management Speakers:

• Maria Seidler, Seidler Consulting
• Ken Malloy, Crisis & Energy Markets

QUESTIONS

| page 2

Submit questions two ways:

• 1. Raise your hand and the

moderator will call on you to unmute your line

• 2. Type a question into the

question box 2 1

A Webinar Review

February 6, 2020 Maria Seidler Ken Malloy

Background for Webinar

1. Coal Ash developments, even since the EPA ‘s Final Rule in 2015, have been far-reaching in their scope and complexity and continue to evolve. 2. There are 4 certainties:

• Electric utilities cannot continue status quo practices;
• Changes in coal ash management will be expensive;
• Cost responsibility will be highly contested;
• Tension between desired environmental outcomes and the ultimate costs.

3. In response, NARUC commissioned this White Paper to better understand the implications of the Final Rule for States, but more specifically for State utility regulatory commissions. 4. The White Paper is organized to provide a comprehensive foundation on which to build a deeper understanding of coal ash issues and regulatory responses. 5. The Webinar will focus on the subject of the regulatory and costs implications for the State. Specifically, States must:

• Adopt a coal ash program for approval by EPA consistent with its Final Rule or, by default, relinquish authority to EPA under

its federal permit program.; and

• Manage impact of compliance costs on electric customers.

6. No clear policy has evolved on how to coordinate state environmental agencies’ responsibility for coal ash programs with PUCs ‘responsibility for managing impact of compliance costs on customers:

• North Carolina is a good case study of the controversy of cost recovery
• Kentucky and Indiana are good case studies of agency coordination for balancing compliance approach and costs.

4

White Paper Main Takeaways

1. Coal ash is an environmental challenge. 2. EPA issued a major rulemaking in 2015 regulating disposal of coal ash from electricity. 3. The Final Rule will require major and costly action by electric utilities /IPPs. 4. Compliance with the Final Rule is very complex and technical. 5. Permitting Rules are in a state of flux creating uncertainty under a tight deadline. 6. Coal ash has many commercial applications qualifying as Beneficial Use with commercial value. 7. Congress enacted WIIN in 2016, giving EPA special enforcement authority over coal ash. 8. State environmental policy will dictate utilities’ compliance path with federal criteria. 9. PUCs will have the responsibility of determining electric rate impact of costs.

• 10. North Carolina serves as a barometer of the debate on who should bear cost responsibility.

5

• 1. Coal Ash

6

• Coal ash or coal combustion residuals (CCR)

is what’s left over after coal is burned for electric generation

• Environmental Challenges from Coal Ash Disposal
• Structural Integrity: Collapse Catastrophes
• Water Quality: Leaching into Groundwater
• Growing commercial uses as an alternative to disposal:
• Established: cement, gypsum, road surfaces
• Potential: Advanced R&D in new applications and rare earth

elements (REE)

• Mostly deposed of in surface

impoundments and landfills located on generation site near waterways

• 2. Size of Disposal Problem
• Number, Size, and Age of On-site CCR Waste Disposal Units:
• Combined total of 310 active landfills and 735 active surface impoundments
• Average size of landfills was over 120 acres, or 90 football fields, with a depth of 40 feet
• Average size of surface impoundments was 50 acres, with a depth of 20 feet
• Most are over 25 years old; 56 units are older than 50 years

7

• Number of Plants:
• 307 plants with on-site CCR waste

disposal units

• 197 plants which transports CCR waste

to off-site landfills

• Many of these plants do both

Over 1000 coal ash ponds and landfills

• 3. EPA CCR Disposal Rulemaking
• 1976 Resource Conservation and Recovery Act (RCRA)
• Provides federal technical and financial assistance to help States to reduce waste through

conservation of resources recoverable from waste

• Authorizes EPA to regulate disposal of hazardous waste
• Raises question whether coal ash is a hazardous waste
• Amended
• 1980 Bevill Amendment requires EPA to report on the coal ash question
• 1991 HSWA adds new subtitle D for disposal of non-hazardous waste
• Infamous coal ash spills in 2010 and 2014
• 2010 Proposed rulemaking to regulate coal ash as non-hazardous waste
• 2015 Final Rule establishing national minimum criteria for the disposal of coal ash non-

hazardous waste

8

• 4. Compliance is Technical and Complex
• 3 primary areas addressed in the Final Rule’s national minimum criteria:
• Standards for safe disposal in existing, new or extended units operating on-

site

• Standards for closure and post–closure care of non-compliant units
• Definition of beneficial use regulatory exemption from disposal regulations
• The minimum criteria designed to address risks posed by
• groundwater contamination
• structural failures
• fugitive dust emissions

9

• 4. Compliance is Technical and Complex
• Technical criteria for disposal units to operate:
• Location Restrictions
• Design Standards – Liners and Structural Integrity
• Operating Standards
• Fugitive Dust Control
• Run-on/Run-off for Landfills
• Hydrologic and Hydraulic Capacity Requirements
• Monitoring, Inspections & Public Information
• Groundwater Monitoring Program and Corrective Action
• Inspections for Surface Impoundments and Landfills
• Record Keeping and Internet Posting

10

• 4. Compliance is Technical and Complex
• Closure and Post-Closure Care Criteria for non-compliant CCR disposal

units

• Closure in Place (Cap-in-place)
• Closure by Removal (Excavate and haul)
• Closure Deadlines

11

• Definition of “Beneficial Use” to identify activities that would be exempt

from CCR disposal criteria

• Encapsulated uses – a use that binds CCR into a solid matrix; cement
• Unencapsulated uses – a use that is not encapsulated; structural fill, roadways
• Temporary “Piles” pending Beneficial Use

• 5A. Beneficial Use: RCRA Alternative Solution to Disposal

Criteria 1: The CR must provide a functional benefit. Criteria 2: The CCR must substitute for the use of a virgin material, conserving natural resources that would otherwise need to be obtained through practices, such as extraction. Criteria 3: The use of the CCR must meet relevant product specifications, regulatory standards or design standards when available, and when such standards are not available, the CCR is not used in excess quantities. If all the requirements of Criteria 1, 2 and 3 are met, and  if the use of the CCR meets the definition of encapsulated use, the CCR use satisfies the beneficial use definition;  if the use does not meet the definition of encapsulated use and so is an unencapsulated use that involves less than 12,400 tons of CCR, the CCR use satisfies the beneficial use definition; but  if the use is an unencapsulated use that involves 12,400 or more tons of CCR, Criteria 4 must be met in order to be a beneficial use. 80 CFR 153 defines encapsulated beneficial use as a beneficial use of CCR that binds the CCR into a solid matrix that minimizes its mobilization into the surrounding environment. Criteria 4 When unencapsulated use of CCR involving placement on the land of 12,400 tons or more in non-roadway applications, the user must demonstrate and keep records, and provide such documentation upon request, that environmental releases to groundwater, surface water, soil and air are comparable to or lower than those from analogous products made without CCR, or that environmental releases to groundwater, surface water, soil and air will be at or below relevant regulatory and health-based benchmarks for human and ecological receptors during use.

12

• EPA Definition of Beneficial Use

64% of 2017 generated coal ash was recycled and sold for a beneficial end use

• 5B. Current Beneficial Uses: Demonstrates Value

13

Conventional coal ash products or CCPs include fly ash, bottom ash, boiler slag and FGD gypsum

• 5C. Future Beneficial Uses: CCR Solution Increasing Value
• DOE: Request for Information in March 2019
• New advancements in fossil fuel byproduct utilization
• Pathways to produce value-added products from coal ash
• National Energy Technology Lab (NETL)
• Maximize the value of coal as a feedstock and develop new high-value

products derived from coal, initiated the Coal Beneficiation Program

• Advanced research in future uses:
• Cenospheres – lighter, but stronger composite for car manufacturing
• Rare earth elements –
• China has 70% of global market; U.S. effectively no domestic supply; national

security need

• Vulnerability of U.S. economic sectors and U.S. defense industries: cell

phones, computers, engines, all things electronics

14

• Inconsistency of fly ash and other CCPs produced
• Type of coal burned
• Difference in plants’ pollution control equipment
• Disposal practices impact on quality of legacy coal ash
• Lack of pathways for technology transfer
• Coal combustion technology and process changes that can enhance quality of coal ash for end uses
• New and improved end use processes
• Lack of market information
• Data on chemistry and physical properties of coal ash generated across power plants
• Coal ash chemistry and technical requirements for coal ash utilization

“concrete producers would have used more fly ash if they could get it”

American Coal Ash Association

• 5D. RCRA Conservation Priority for Beneficial Use

15

• Why wasn’t more used? With an estimated 1.5 billion tons of

coal ash in legacy landfills and surface impoundments?

• EPA’s Final Rule focuses on disposal of CCR waste. Closure deadlines forfeit
• pportunity to develop CCP beneficial use strategies
• DOE/USEA Workshop reveals federal policy needs to advance CCP beneficial uses:
• National data base accessible to CCP market participants registering coal ash chemical

and physical properties generated by individual plants with cross reference to commercial end uses

• Infrastructure to integrate regional CCP markets into a national market with price

transparency

• Harvesting strategies for coal ash previously deposited in legacy surface impoundments
• CCP Storage Option as alternative to disposal of coal ash that
• Manages CCP as marketable inventory with harvesting capabilities
• Provides comparable environmental protections of EPA’s Beneficial Use definition to be exempt from

disposal rules

• 5D. RCRA Conservation Priority for Beneficial Use

16

• 6A. Enforcement of Coal Ash Rule
• 2016 Water Infrastructure Improvements for the Nation (WIIN) Amendment to

RCRA enforcement provision

• RCRA subtitle D did not provide for federal enforcement until WIIN
• WIIN provides a cooperative enforcement approach for coal ash only
• States can adopt their own CCR permit program
• Must be approved by EPA as long as it is as protective as the Final Rule
• Upon EPA approval, operates in lieu of EPA’s CCR regulations under subtitle D
• EPA-approved State permit programs:

⁺ Oklahoma ⁺ Georgia

• EPA allowed to implement a default federal permit program
• Conditioned on congressional appropriation of funds for a federal program, which occurred in 2018
• Federal program would be imposed in non-participating states that do not have an EPA-approved state

permit program

• CCR disposal units subject to Final Rule within a non-participating state must comply with the Final Rule

until a federal permit is obtained.

17

• EPA Proposing CCR Federal Permit Program

(Prepublication Notice, Dec. 19, 2019)

18

• Includes a new subpart E in 40 CFR 257, establishing
• General technical requirements for CCR disposal units based on EPA’s

national minimum criteria adopted under RCRA subtitle D

• Administrative procedures for applying and obtaining a federal CCR permit

⁺ Many of the procedural requirements applicable to the federal hazardous waste permit process and other federal permits set forth in parts 22 and 124 will be amended to cover CCR permits

• Requires CCR units located in non-participating states and Indian country

to obtain a federal CCR permit.

• 6B. Enforcement: WIIN’s Federal Permit Program

• EPA proposing streamlining permit process:

19

• 3 types of CCR permits:
• General: CCR units eligible for a general permit would be based on criteria

defined by operating parameters unique to a classification of CCR units, such as wet or dry, which terms and conditions would be defined in the general permit itself.

• Permit by rule: Is similar to the general permit in being available to a

classification CCR units, except that the terms and conditions would be established in rules applicable to the classification applicable to the CCR unit(s) rather than in the permit itself.

• Individual permit: Permit issued for a specific unit or units at a specific facility

that contains unique terms tailored to the unit(s) specific site conditions to

• btain compliance with EPA’s minimum criteria.
• 6B. Enforcement: WIIN’s Federal Permit Program

• 7. State of Play is Uncertain
• DC Circuit: twice remanded rules back to EPA
• EPA:
• New rulemakings for proposed amendments to Final Rule
• Universe of Units Covered
• Timing of Requirements
• Revise definition of temporary “piles” of CCR that is not disposal
• Revise definition of Beneficial Use in regards to unencapsulated uses
• Using new coal ash enforcement power in WIIN Act, proposing federal CCR

permit program

• State legislatures reacting to constituents’ concerns:
• 4 states have passed new laws
• North Carolina and Virginia demonstrate controversy among diverse stakeholders

20

• 7. State of Play is Uncertain
• Utilities/IPPs: evaluating options in uncertainty
• Traditional option (close-in-place) increased resistance
• But environmentally preferred option (excavate-and-haul): expensive and

requires transport

• Environmental groups: evaluating groundwater data and reaching

dramatic conclusions

• Magnitude of problem is unknowable: closures must be monitored

for 30 years and action taken if ponds are leaching into groundwater

• Potential for future Beneficial Use is blunted by uncertainty of supply
• f coal ash

21

• 8. The State Environmental Arena
• State Legislatures Enter the Arena
• North Carolina in 2014 and 2016
• Michigan in 2018
• Virginia in 2019
• Illinois in 2019
• Environmentalists engaging on water quality
• Corrective action criteria under Final Rule
• Clean Water Act
• Very Political in VA, NC, TVA
• Possible Safety issues for cleanup workers

22

• 9A. State Electric Regulatory Arena
• Electric Utilities vs IPPs
• Utilities’ compliance costs recoverable through regulated rates

charged to its electric customers

• IPPs must recover costs through the competitive wholesale markets
• Bid prices often cannot recover all-in costs of electricity, particularly

capital costs

• For both, shareholders at risk for unrecovered costs
• Shareholder liability affects companies’ credit rating and 10K with

investor implications

• Controversy between customers versus shareholder cost

responsibility

• North Carolina case study

23

• Context for Duke Energy Utilities Controversy:
• After Dan River spill, N.C. Legislation adopted Coal Ash Management Act (CAMA) in 2014, with

amendments in 2016

• CAMA required accelerated closure of all coal ash units
• Amendment prohibited rate recovery of Dan River spill costs
• Duke ‘s closure plans
• DEQ rejects Duke’s cap-in-place proposals and requires excavate-and-haul
• Duke estimates additional $5 billion in future costs
• Duke’s 2018 Rate Case including recovery of closure costs
• NCUC Decision: Allowed rate recovery of $700 million subject to a $100 million penalty
• NC Supreme Court Pending: Attorney General and Sierra Club sued
• Duke filed new rate case in September 2019
• South Carolina disallowed Duke’s recovery on CCR units outside of South Carolina

24

• 9B. North Carolina Case Study on CCR Cost Recovery

• 9B. NC Briefs: Ratemaking Principles Arguments
• Just and Reasonable/Prudency
• Utility’s Historic Treatment of coal ash units
• Current costs for compliance: battle of closure plans
• Most Recovery is for services to past customers
• Used and Useful
• Cost Causation
• Future Test Year: Known and Measurable vs Speculative
• Deferral Accounts
• Operating Costs vs Capital Expenses
• Recovery of Costs vs Rate of Return on costs

25

• 9C. Environmental Protection versus Compliance Cost
• Federal Rule sets up potential for cost tension between state environmental

permitting and PUC’s prudency oversight

• Tension Evident in North Carolina
• Department of Environmental Quality has mandated technology costing billions of dollars
• Duke faces a dilemma: implement DEQ solution and go to NCUC and either recover these costs in

rates to customers after the fact or risk some loss of recovery

• What if NCUC believes that the costs are too high and disagrees with the DEQ?
• Indiana and Kentucky’s alternative approach
• Utilities get permit from state environmental agency
• They then go to PUC for a Certificate of Public Convenience and Necessity
• If Certificate is issued it ensures cost recovery
• If Certificate is problematic, utility can go back to permitting agency
• Eventually both agencies have to approve the “Plan” before any dollars are committed to

implementation

26

• 9D. Analogies for Disposal Cost Recovery
• Establishing funds in anticipation of future disposal costs:
• Nuclear Waste Fund
• Offshore Wind
• Avoids customers’ rate shock
• Insures against bankruptcy
• Comparable Cost Recovery Challenges
• Environmental control technologies
• Nuclear and Coal plant cancellations

27

• 10. Developments since White Paper
• Proposed federal permit program –
• States might consider moving to adopt and seek EPA approval of their
• wn program pending finalization of the federal program to give

utilities/IPP certainty as to where to comply

• EPA approved Georgia WIIN Program
• Duke settled with DEQ on closure plan in North Carolina
• Duke filed appeal of South Carolina’s coal ash rate case
• Georgia completed major rate case deciding $1.8 billion in costs

recovery

28

• 11. Conclusions
• Significant new cost for electric utilities
• Differential Impact on States: few or no units or IPPs
• Long time frame
• Rules and implementation are still uncertain
• Remediation expensive and controversial
• Virginia and North Carolina
• Utilities may use legislation to trade off increased environmental

standards for greater guarantees of cost recovery.

• Environmentalists Focusing on Water Quality
• Coal Ash costs compete with other utility priorities
• Closure expediency under Final Rule and compliance costs puts

pressure on plant retirement and constrains supply to support valuable Beneficial Uses and potential revenues to offset costs

29

• 11. Conclusions
• Role of PUCs is both heightened and uncertain
• Federal Rules in flux
• State Permitting Agency
• Legislature
• Courts
• Fast Moving Target
• EPA Final Rules still being amended
• Supreme Court Case on Clean Water Act pending
• NC Supreme Court Case on cost recovery pending
• Environmentalists Engaging
• Possible State Legislation

30

Where do we go fr from here?

White Paper Research Revealed Limitation of Tools and Objective Guidance

• 1. Coal Ash Policy Institute (CAPI)
• 2. Case Study: Comparison of North Carolina/South Carolina vs

Kentucky/Indiana

• 3. Characterization of Each State
• 4. Conference/Workshops/Webinars
• 5. Research Database
• 6. Monthly/Quarterly Update for Commissions

31

Questions

Contact Information

Maria Seidler

seidlerconsulting@gmail.com 202-207-8709

Ken Malloy

km@caem.org 571-839-4954

32

Q A

QUESTIONS

| page 33

Submit questions two ways:

• 1. Raise your hand and the

moderator will call on you to unmute your line

• 2. Type a question into the

question box 2 1

UPCOMING EVENTS

NARUC’s Winter Policy Summit

February 9 – 12, Washington, DC

https://www.naruc.org/meetings-and-events/naruc-meetings-and-events/2020-winter-policy-summit/

February 9, 1:15 – 2:30 pm: Staff Subcommittee on Clean Coal and Carbon Management

Carbon Capture, Utilization, and Storage: Reflections on the Past Decade and Outlook into the 2020s

2019 saw multiple leaps forward in carbon capture, utilization, and storage (CCUS) technologies capable of decreasing emissions from fossil-fueled power generation and industrial processes. Moderator: James Branscomb, Senior Technical Engineer, Wyoming Public Service Commission Panelists:

• Lee Beck, Senior Advocacy and Communications Advisor, Global CCS Institute
• Lynn Brickett, Carbon Capture Program Manager, Office of Fossil Energy, U.S. Department of Energy
• Jan Mares, Senior Advisor, Resources for the Future

UPCOMING EVENTS

NARUC’s Winter Policy Summit

February 9 – 12, Washington, DC

https://www.naruc.org/meetings-and-events/naruc-meetings-and-events/2020-winter-policy-summit/

February 10, 10:45 – 11:45 am: Subcommittee on Clean Coal and Carbon Management

The Future of the US Coal Fleet: Retrofit, Retire, or Change the Business Model?

This session will cover the near-term outlook for retiring/closing coal plants, the factors that utilities, commissions, and state and local leaders weigh in deciding to close aging plants, and retrofit options that can defer plant closures while maintaining energy reliability and regional economic benefits of energy production. Moderator: Hon. Jeremy Oden, Alabama Panelists:

• Dr. Dave Goldtooth, Superintendent of Central Consolidated School District, New Mexico
• Don Gaston, President and CEO, Prairie State Generating Company, LLC
• Michelle Bloodworth, CEO, America’s Power
• Nate Duckett, Mayor, Farmington, New Mexico
• Dr. Peter Balash, Senior Economist, National Energy Technology Lab

UPCOMING EVENTS

Subcommittee Site Visit

April 21 – 23, Washington, DC

Coal and Carbon Capture Outlook Conference

This conference will bring experts from the U.S. Department of Energy, national labs, the utility industry, and the coal industry to discuss challenges and opportunities for the U.S. coal industry with state public utility commissioners. Thanks to NARUC’s partnership with the U.S. DOE, travel reimbursement is available for public utility

• commissioners. Contact Kiera at kzitelman@naruc.org to RSVP.

General agenda:

• Tuesday, April 21: travel day, optional social dinner
• Wednesday, April 22: full day of panels, presentations, and discussions; group dinner
• Thursday, April 23: additional panels, presentations, and discussions in the morning; conclude at lunch