‘Stroke of the Pen’ Risks
Legislation, regulation and litigation can change our business at the “stroke of the pen.” A number of issues – beyond climate change – are capturing headlines or are under deliberation that could potentially affect our use of coal.
In February 2008, the U.S. Court of Appeals for the District of Columbia Circuit (also known as the D.C. Circuit) issued a decision vacating the Clean Air Mercury Rule (CAMR), which would have limited mercury emissions from coal-fired plants across the U.S. through a two-phased cap-and-trade program beginning in 2010. Requests for rehearing and U.S. Supreme Court review of the D.C. Circuit’s decision were subsequently denied. The U.S. Environmental Protection Agency (EPA) will now develop mercury emission standards for utility units under Section 112 of the Clean Air Act to abide with the D.C. Circuit’s decision.
In July 2008, the D.C. Circuit issued a decision vacating the Clean Air Interstate Rule (CAIR) on emissions of sulfur dioxide and nitrogen oxides. The federal appeals court then reinstated the CAIR in December 2008 as an interim solution while the EPA develops a new clean air program to replace CAIR.
In light of the accident at the Tennessee Valley Authority plant in December 2008, the EPA plans to develop new regulations for coal ash management, including impoundments. These impoundments typically hold ash, mixed with water, in basins surrounded by an earthen berm. Regulations for inspection of these structures vary by state. We inspect our dams with a mix of annual in-depth and monthly or periodic (i.e., after a significant rainfall) visual inspections. We recently reviewed our latest inspection reports to assure that all resulting recommendations have been or are being addressed.
Another topic in the news recently is mountaintop-removal coal mining. Duke Energy is obligated by state regulations to purchase the most economic and high-quality coal possible, which may include coal from mountaintop mines. We estimate that approximately 20 percent of the coal we burn comes from mountaintop mines. A bill to ban the use of mountaintop-mined coal was reintroduced in North Carolina in early 2009. Similar bills have been introduced in other states and at the federal level.
Litigation over alleged industry violations of the New Source Review (NSR) provisions of the Clean Air Act (CAA) continued in 2008. Generally, the government alleges that projects performed at various coal-fired units were major modifications, as defined in the CAA. According to the government lawsuits, several utilities – including Duke Energy – violated the Act when they undertook those projects without obtaining permits and installing the best available emission controls for NOx, SO2 and particulate matter. We have maintained that no CAA violations occurred because the regulations do not require permits in cases where the projects are routine or otherwise do not result in a net increase in emissions.