EPA’s Proposed Startup, Shutdown, and Malfunction (“SSM”) Rule: The Emperor’s New Clothes


By Michael Krancer
Follow me @MikeKrancer 

The EPA’s proposed Clean Air Act (“CAA”) emissions standards for the Startup, Shutdown, and Malfunction (“SSM”) Rule, which was issued on February 22, 2013 (78 Fed. Reg. 12460) and is set to be finalized by the EPA in September, is fundamentally flawed.  Just last week, it was reported that “environmental justice advocates” met with Obama Administration officials to push the Rule as an “environmental justice” measure.  The proposed Rule is the EPA’s response to a petition filed by the Sierra Club in 2011, and requires a whopping 36 states and jurisdictions to revise their State Implementation Plans (“SIPs”) with respect to their individual SSM provisions.

The proposed Rule is a solution in search of a problem.  Even worse:

(1) the process behind the proposed Rule is flawed;

(2) it is not based on any documented evidence of environmental or public health concerns;

(3) it is factually and technologically flawed;

(4) it is legally flawed; and

(5) it has nothing to do with environmental justice, but rather is a serious disservice to environmental justice.

SSM events, by definition, are very short in duration.  There is not a single shred of documented evidence that emissions from any SSM event have resulted in an exceedance of a National Ambient Air Quality Standard (“NAAQS”) for any parameter anywhere.  There is likewise no evidence that any SSM event has caused a threat to the environment or to public health and safety.

The proposed Rule was promulgated in an undemocratic and non-transparent fashion.  It was the process of the “sue and settle” dynamic.  The states—who are the most directly impacted by the proposed Rule—never had a seat at the table while the EPA and Sierra Club entered into this private “settlement.”  Consequently, many states were rightfully offended by this running roughshod over the principle of “cooperative federalism” that the CAA requires.  Just recently, the D.C. Circuit court took the EPA to the woodshed for violating the “cooperative federalism” provisions of the CAA in the case of EME Homer City Generation v. EPA, 696 F.3d 7, 11 (D.C. Cir. 2012).  Adding to the unfairness, while the EPA and Sierra Club ruminated over this “settlement” for two years, the EPA gave the states and the rest of the public only 30 days to comment on the 80-page proposed Rule.  The EPA later extended the time, but not by enough.

The Rule is technologically flawed for various reasons.  First and fundamentally, SSM events are beyond the control of the operator.  Moreover, with respect to Electric Generating Units, the EPA is wrong that startup and shutdown events are “planned.”  Also, emissions control equipment does not, and cannot, run at full efficiency during startup and shutdown.  By way of example, the EPA’s proposed rule is as silly as making automakers hit their fuel mileage standards during acceleration to a steady speed.  The proposed Rule also compromises worker safety because there are increased dangers of fire and other mishaps during startup and shutdown should emissions control equipment be forced online too early.

The Rule is also legally flawed and will certainly be challenged after it becomes final.  The EPA does not respect the case law on SSM under the CAA, and its proposed Rule seems to restrict the state’s discretion on SSM more than is allowed by the case law under the CAA.

Finally, despite the lip service, the proposed Rule is no “environmental justice” provision.  As mentioned before, there is no evidence that SSM events cause any NAAQS exceedances or adverse environmental or public health impacts.  The proposed Rule will do little more than open the door to private lawsuits for money damages—where there is no environmental or public health threat.  In that regard, this proposed Rule is more about the Sierra Club’s long-term financial planning than it is about environmental justice.  Affordable and available electricity and products are fundamental tenants of environmental justice.  This proposed Rule will end up creating scarcity and adding unjustified costs.  It will, however, create a profit center for the Sierra Club.

Harvard Professor and Former Clinton Official: Fear of Fracturing Overblown; Embrace It For The Good of the Environment and The Economy

By Michael Krancer
Follow me @MikeKrancer 

Jeffrey Frankel has written a tour de force piece on natural gas and hydraulic fracturing entitled “Frack to the Future”. His message in a nutshell: the fear of hydraulic fracturing is way overblown, natural gas and fracturing is good for the environment, the economy and for national security: therefore, all of us, especially environmentalists, should embrace it. Frankel is currently a professor at Harvard University’s Kennedy School of Government and he is a former member of President Bill Clinton’s Council of Economic Advisors.

Please click here to read the full text of his article:  http://www.project-syndicate.org/blog/frack-to-the-future

First, Professor Frankel establishes the enormous environmental and economic benefits America is reaping from hydraulic fracturing and the natural gas obtained thereby. American carbon emissions have plummeted to the tune of 12% and are presently back to 1995 levels. This is a direct result of the increased use of natural gas obtained through hydraulic fracturing as a fuel for electricity generation. This decrease in carbon emissions, by the way, puts the United States at or better than the would-be limits of the Kyoto Protocol and at about the 2020 Waxman-Markey goal for emissions reductions. Some commentators claim this is as a result of the economic recession, but as Professor Frankel points out, these critics are mistaken. Frankel notes that the American economy has indeed been more sluggish than what would be ideal, but it has grown since 2009. America’s huge reductions in carbon emissions during this time of GDP expansion contrast sharply with Europe’s increasing carbon emissions since then.

Then Professor Frankel notes what we already know and see here in Pennsylvania—the natural gas industry is a prodigious job creator. In Pennsylvania alone, the Department of Labor and Industry attributes about 240,000 direct and indirect jobs to our natural gas sector. In fact, Chris Lafakis, a senior economist at Moody’s Analytics, reports that half of the jobs that have been created in the entire Commonwealth since 2000 have been in the energy industry—which is a remarkable fact. In addition, we are witnessing (as the American Chemical Council pointed out in testimony before Congress a few weeks ago) a rebirth of the American chemical and manufacturing industries. This is a phenomenon generally referred to as “re-shoring”—a word that was unheard of just a few years ago, prior to our American energy revolution. The “re-shoring” to the U.S. means that manufacturing operations are moving back to America from overseas because of the advantages offered by low-cost energy. Energy is one of the most significant costs of manufacturing production. Re-shoring is a big win for America and American competitiveness. It also makes America less subject to a fundamental economic risk to which it has been subject for decades: the risk of volatile world oil market prices.

National security is being bolstered concurrently with our energy revolution. We are doing what has been dreamed of on the energy front for several generations: rendering the Middle East and OPEC less relevant and they know it. This revolution drives home the meaning of the bumper sticker that I have been told has been seen on more than a few cars in our Commonwealth: “Frack More—Bring a Soldier Home.”

Then, Professor Frankel methodically tackles one-by-one the environmentalists’ overblown objections to hydraulic fracturing. The assertion that natural gas will displace or retard the growth of renewables like wind and solar, says Professor Frankel is false. Presently, the total contribution of renewables is barely 5%. Thus, carbon emissions cannot continue to be cut at this point in time through the use of renewables: only natural gas can do that. That very point was driven home by the Center for Climate and Energy Solutions (C2ES) in its blockbuster recent report entitled “Leveraging Natural Gas to Reduce Greenhouse Gas Emissions”. Peg Hill, my Environmental Department partner at Blank Rome, and I just distributed a “Client Alert” about the C2ES Report. It is worth another read. Please click here to find the alert:  http://www.blankrome.com/index.cfm?contentID=37&itemID=3068

I would add to Professor Frankel’s analysis, as discussed in the Client Alert on the C2ES Report, that it is fundamentally wrong to conclude that natural gas is inimical to renewables. Indeed, natural gas-fired and renewables generation are fundamentally complimentary. The C2ES Report demonstrates this point as well. I was in the energy generation business having worked for the Exelon Corporation and I know from experience that renewables and natural gas generation can and should work as a complement to each other, not in competition. It is this simple: it is true that “the wind doesn’t always blow and the sun doesn’t always shine.” In other words, those sources are, by their nature, limited and intermittent. As we say in the energy business, their “capacity factor” is low. Capacity factor is the measure of how often an electric generator runs for a specific period of time. The Energy Information Agency estimates that the capacity factor for wind is only between 34% and 37% and for solar about 20% to 25%. In contrast, the capacity factor for a natural gas fired plant is about 87%, 85% for a coal plant and 90% for a nuclear plant. Therefore, you need a generation source to work with wind and solar that can pick up the capacity factor slack for them when they cannot run. Gas generation does that better than anything because only natural gas generation plants can cycle up and down (meaning start from a cold start, stop and then restart again) quickly enough, often enough and cheaply enough to be that working partner.

Professor Frankel then deals with the perceived “local risks” such as risk to water supplies, methane leaks, and seismic activity. I agree with him that such risks should be recognized and managed. These risks are indeed being managed very well by the states in which fracturing has taken place for the last 60 plus years. For example, Pennsylvania and other states in which fracturing has been taking place have very robust and have comprehensive regulatory programs in place.

In addition, Governor Corbett and his Department of Environmental Protection, which I headed for nearly two and a half years, have a commitment to strong enforcement of our laws and regulations which has been demonstrated in practice. As I noted many times when I was Secretary, we have a world-class play, world-class operators, and we have world-class expectations. It was Pennsylvania’s commitment to proper enforcement that led our administration to issue the single largest penalty in the history of the oil and gas program and that led to our call to the industry to stop delivering unconventional flowback wastewater to the dozen or so wastewater treatment facilities that were subject to the “special exception” to our 2010 Total Dissolved Solids regulations which allowed them to continue operations without installation of compliant treatment equipment. That “call” was heeded within 28 hours of our issuing it, so we had compliance in 28 hours instead of 28 months or maybe never, and we accomplished a sea change in the way shale flowback wastewater was being handled in Pennsylvania.

Professor Frankel then points out that “incident risk” for fracturing needs to be considered in context with all risks posed by any industrial or energy production activity. This is a point that is often overlooked. Methane migration cases are not about hydraulic fracturing, they are about well construction. The drilling of any well for any purpose needs to be done with care, especially in a place, like Pennsylvania, where we have for generations had naturally occurring methane in our shallow geology. In fact, a recent study by the National Groundwater Association demonstrates what we Pennsylvanians have known for a very long time: naturally occurring methane is ubiquitous in groundwater here. In Pennsylvania, we have very strong unconventional natural gas well construction regulations to deal with this. Interestingly, we do not have any regulations governing the drilling of water wells. Even one case of methane migration is surely too many, but even if one does happen it can be addressed and corrected both in terms of the impacted water supply and the well itself.

On a more fundamental level, Professor Frankel argues that we cannot allow ourselves to be paralyzed by the so-called “precautionary principle”. He is right. Those who adhere to the “precautionary principle” argue that we should never proceed with any new technology until it is proven, basically beyond a reasonable doubt, to be without risk. First, I would point out that hydraulic fracturing is hardly a new technology. It had been being successfully practiced in the United States for over 60 years before it ever attracted the constant ire of certain NGOs that now cannot seem to go even a day without slamming it in some forum or another. In any event, the “precautionary principle”, says Professor Frankel, results in asymmetrical risk analysis since it ignores the risk, and I would add the cost, of doing nothing, i.e., the status quo. If the “precautionary principle” had been applied in history as some would have it applied here, we would still be riding horses and the world would still be plagued, quite literally, by the scourge of polio.

There is, I think, a substantial risk, and huge cost, to our “doing nothing” to develop our abundant, domestic, cheap and clean energy supplies. We have all grown up with the reality of energy scarcity and we are now, all of a sudden, in a reality of energy abundance. There is a real risk to life and limb and pocketbook of declining that opportunity and throwing us back into the Dark Ages of scarcity and dependence. It was Sir Winston Churchill who said that we can always count on Americans to do the right thing—after they have exhausted all other options. This time, with America’s position as the hope of all free people being challenged every day and with our world competitiveness at stake, we cannot afford to waste precious time exhausting “all other options” before we do the right thing.

A deep congratulations is due to Professor Frankel for his very thoughtful piece.