U.S. EPA Public Hearing

Atlanta, Georgia

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National Emission Standards for Hazardous Air Pollutants From Coal and Oil-Fired Electric Utility Steam Generating Units and Standards of Performance for Fossil-Fuel-Fired Electric Utility, Industrial-Commercial-Institutional, and Small Industrial-Commercial-Institutional Steam Generating Units

Chris Hobson

Chief Environmental Officer and Senior Vice President

The Southern Company

Oral Statement

May 26, 2011

Thank you for holding this hearing today. My name is Chris Hobson, and I am the Chief Environmental Officer at the Southern Company. Southern Company is the leading energy supplier in the southeastern United States and one of the largest generators of electricity in the nation. We work hard every day to ensure that our customers have access to reliable and affordable power. Like the rest of our industry, we are committed to working with our communities, stakeholders and our customers to ensure the environmentis clean. That is why Southern Company has in recent years invested over 8 billion dollars in environmental controls and intends to spend up to 4.1 billion to comply with existing, revised or new rules over the next three years.

The proposed Utility MACT is one of the most burdensome, far-reaching, and expensive rules that EPA has ever put forward. If adopted, the rule could put the reliability and affordability of our electricity supply at risk. It would impact plants responsible for nearly 50 percent of total electricity generation at a cost that EPA estimates to be over 10 billion dollars per year. It would impose an unrealistic three-year timeline for compliance, at a time when the industry is laboring to comply with numerous other mandates. Furthermore, the proposed standards for new power plants would take coal off the table as an energy supply in this country. Such a profound decision should be part of a national energy policy, not made by a regulatory agency.

We are concerned about many aspects of the proposed rule, but today I would like to focus on timing.

At the outset, I would note that substantial questions exist about EPA’s legal authority to promulgate such broad standards. Congress treated electric utilities uniquely by requiring EPA to follow a utility-specific provision in the Clean Air Act and assess the potential public health concerns associated with the emissions and onlyregulate as “appropriate and necessary” to address those concerns. EPA’s December 2000 regulatory determination only identified public health concerns associated with mercury emissions from coal-fired EGUs and nickel emissions from oil-fired units. Despite its previous determination, EPA is now expanding the proposed rule to all hazardous air pollutants. Justifying the onerous rule based on PM benefits which are properly addressed under other provisions of the Clean Air Act is inappropriate. Southern plans to offer more detailed written comments on the scope of EPA’s authority during the comment period.

My first point is that the rulemaking timeline is unreasonable. Under the consent decree schedule that EPA agreed to, the Utility MACT rule must be finalized by November of this year. But that consent decree schedule is severely inhibiting the rulemaking process. To support the rulemaking, EPA issued an information request that required the utility industry to submit extensive information on emissions and required more than 100 million dollars in stack testing. In response to this request, EPA received an overwhelming amount of data at the end of last year. However, the rushed promulgation schedule limited this review to only a few months. Initial assessment of the proposed rule hasshown that EPA needed to take more time to evaluate the data before issuing proposed standards. As I pointed out in a letter to EPA earlier this month, we have identified numerous errors in EPA’s technical analyses of emissions data,which are not limited to thewidespread error involving EPA’s proposed mercury standards.

The consent decree should not be an excuse to deny the public an ample opportunity to understand the proposed rule and provide comments. Sixty days is plainly inadequate for a rule that will cost well over 10 billion dollars each year. WhenJudge Collyer granted EPA’s motion to enter the consent decree, she noted that “[i]f the science and analysis require more time, EPA can obtain it,” and she added “[i]f EPA needs more time to get it right, it can seek more time.” Given the serious stakes, why would EPA not take such a prudent step? We urge EPA to re-propose the rule, provide a 120-day comment period, and ask the court for a reasonable amount of time to finalize the rule. EPA should take note of the unintended consequences of the rushed rulemaking schedule for the Industrial Boiler MACT and not repeat the same mistakes here.

My second point is that the three-year MACT compliance timeline could put the reliability and affordability of the nation’s electric generating system at risk. A study conducted for the Edison Electric Institute by ICF concluded that for the U.S. by 2015 the Utility MACT and other regulations will require over 80,000MWs of generation to install scrubbers and over 160,000 MWs of generation to install fabric filter baghouses. Almost 80,000 MWs of current coal capacity will retire and require replacement generation. As the Chief Environmental Officer of a utility that has installed more pollution controls than any other, I tell you that this cannot be done in three years.

The proposed rule comes at a critical juncture for coal-fired power plants, as EPA is currently developing or implementing multiple other environmental regulations which have independent or overlapping requirements. We do not have the luxury of making decisions on these rules in a vacuum. We must consider all the requirements when making technology investments or retirement decisions. A major challenge of complying with these new rules is ensuring adequate reserve margins—that is, generating capacity that is available during times of high demand or during interruptions of service. According to Bernstein Research, the impact of the Utility MACT rule on smaller plants will cause regional capacity margins to plummet by 7 to 15 percentage points, into the single digits in some regions. Other studies have reached similar conclusions. The result will be a greater risk of power outages.

Construction of the massive numbers of controls that I mentioned plus the costs of replacing the coal plants that will retire will require utilities to spend as much as 300 billion dollars by 2015. Doing this in a compressed 3-year timeframe will result in even higher costswhichwill certainly show up in customer’s power bills and will threaten jobs and any economic recovery.

In conclusion, we believe that the Utility MACT proposal, on its current schedule and in its current form, puts the reliability and affordability of power in the United States at risk. If EPA continues on its present path, the result will be to harm power consumers—which is to say all Americans—and threaten jobs and economic growth. EPA should take the necessary time to seek stakeholder input and develop workable standards for all regulation.

Thank you for holding this hearing today. I’d be happy to answer any questions.