Analyst: ‘Draconian’ MATS regulations now in effect

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“The Environmental Protection Agency Mercury and Air Toxics Standards have now taken effect and MATS represents one of the most draconian environmental regulations ever promulgated,” according to AllianceBernstein.

MATS requires all coal-fired power plants to install Maximum Achievable Control Technology (MACT) for mercury and other toxic metals, acid gases and certain toxic organic compounds by April 16, 2015 — or cease to operate, according to the Bernstein paper issued April 17 by Hugh Wynne, Francois Broquin and Samuel Shrank.

“For plants burning Appalachian and Illinois Basin coal, complying with MATS' stringent emission standards requires a flue gas desulfurization unit (SO2 scrubber), the capital cost of which is comparable to that of new gas-fired power plant,” according to the Bernstein analysis.

For plants burning Powder River Basin coal, compliance may be achieved with a combination of less costly emissions control technologies: dry sorbent injection (DSI), activated carbon injection and fabric filters.

As a result, many older and smaller coal units are being retired.

“Our analysis suggests that over this year and next, ~ 35 GW of coal fired capacity, generating ~100 million MWh annually, will be retired,” Bernstein said in the analysis.

If the loss of 100 million MWh of coal fired generation to be entirely offset by increased generation from gas fired plants, utility gas burn would have to increase by some 2.0 Bcf/day by the second half of 2016, according to the firm.

The Bernstein officials expect MATS to reduce utility consumption of eastern coal by an estimated 34 million tons in 2015 and 2016, and to reduce utility consumption of western coal by an estimated 15 million tons in 2015 and 2016.

Coal car loadings are already down prior to implementation of the regulations, Bernstein said.

In November, the U.S. Supreme Court agreed to hear an appeal of the D.C. Circuit Court's decision in Michigan vs. EPA, a challenge to the legality of EPA's MATS policy. The Supreme Court heard oral arguments in the case on March 25, and will likely render its decision by the end of June 2015.

Even if EPA were to withdraw MATS, coal plants would still be required to comply with EPA’s Cross-State Air Pollution Rule (CSAPR), which limits power plant emissions of SO2 and NOx.

“Critically, however, none of the representatives of the U.S. power industry with whom we have discussed the possible withdrawal of MATS expects to see such a large impact. They note that past retirements are very difficult or to reverse, particularly if decommissioning has already begun,” according to Bernstein.

AllianceBernstein and Bernstein Research are affiliated with Sanford C. Bernstein & Co., LLC.

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