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Carbon Constraints: What Impact will they have on Manufacturing in Kentucky?

01 Feb 2010 5:04 PM | Deleted user
By Sara G Smith
President, Smith Management Group

Limitations on carbon dioxide and other greenhouse gas emissions (GHG – includes carbon dioxide and related gases) are no longer a distant threat.  With the December 7th declaration by U.S. EPA that GHG are a danger to human health and the environment, we have begun a wild ride – one which does not have a clear outcome.  The question as to whether Congress or EPA would act first has been answered with EPA’s announcement.  We will be especially vulnerable in Kentucky to the changes coming.  Many of our industries will be subject to the rule, as a general stationary fuel source or due to their particular industry – or both.  At a minimum, many industries will be required to work through some complex calculations to determine if they are in or out.

Because of the “endangerment finding”, EPA now MUST regulate GHG under the Clean Air Act.  Currently, that means any facility emitting over 250-tons per year of GHG would be regulated.  CO2 emissions are common and come from both natural and man-made sources.  Each of us individually emits between ½ and one ton of CO2 annually.  A 250-ton per year limit could mean that a large elementary school may require a permit.  To counteract that departure from common sense, EPA is developing a “tailoring rule” to raise the permitting limit to 25,000 tons per year.  Whether EPA actually has the power to change the regulation in this way remains to be seen.

You are now required to monitor and report GHG emissions over 25,000 tons per year.  Compliance with this regulation, effective December 29, 2009, will increase costs for affected manufacturers substantially.  The regulation (Docket ID No. EPA-HQ-OAR-2009-0171), consisting of over 1200 pages, could be the subject of an article by itself.  Critical dates are coming up quickly – and some are already past.  Monitoring and measuring your emissions begins January 1, 2010, and the first report is due in April 2011.  If you won’t be able to install required monitoring equipment and procedures by April 1, 2010, you may have some pretty big trouble.  Extension requests had to be substantively supported and submitted by January 28, 2009!

Now is the time to learn about this rule and whether it applies to your facility.  SMG is presenting a seminar on the Mandatory Reporting of Greenhouse Gases Rule on February 23, 2010 at 3:00pm.  We will review the rule in general and go through a case study to learn how to work through the specific requirements.

Next we can expect the addition of GHG to the air permitting process, with requirements of “Best Available Control Technology” (BACT), although EPA notes that they don’t know what BACT is yet. 

All of this is happening without Congress moving on cap and trade legislation.  In fact, EPA’s actions can be characterized as part of a game of chicken the administration is playing with Congress.

Kentucky stands in the center of the controversy due to our heavy dependence on coal for electricity (greater than 92%) and our currently low electric rates which have attracted industries that use large amounts of electricity, like aluminum smelters. 

Kentucky has few alternatives to replace coal as our primary source of electricity.  Alternative energy from solar and wind will provide very little to our energy mix, purely as a function of our geography.  Biomass can be developed to provide some fuel for power generation but may not provide more than a small change.  Nuclear generation takes over twenty years to permit and develop, and currently cannot be legally sited in Kentucky.

There is significant debate and discussion about the impact of these restrictions on electric generating industries, but little attention has been paid to the impact on general industry and manufacturers – whether through substantially increased energy prices or direct regulatory control of greenhouse gas emissions.

Litigation is a certainty.  EPA’s actions will likely be attacked by the environmental community questioning whether EPA has the power to alter the PSD threshold from 250-tons per year to 25,000 tons per year.  Impacted industry and energy producers will likely question EPA’s authority to add GHG to the list of regulated pollutants, as carbon dioxide is both a valuable commodity and essential to life.  GHG are vastly different from the types of pollutants currently regulated under the Clean Air Act.

Wait and see is not a viable response to this issue.  The impact of the proposed actions is too significant to allow others to make decisions that can significantly impact our economy.

Sara G. Smith is President of Smith Management Group, an environmental and energy development consulting firm in Lexington and Louisville, Kentucky.  SMG provides permitting and compliance assistance to manufacturing clients and has been involved in energy policy development, siting and permitting of energy facilities.

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