Saturday, August 25, 2007

Analysis of the DNREC/NRG Agreement

Through writing on wind power and clean air issues, I have become acquainted with John Austin, a former EPA staffer, and Patricia Gearity, a lawyer, two of the leaders of Citizens for Clean Power. They have reviewed the DNREC agreement with NRG and published their conclusions in the News Journal:
Is pact with NRG best deal for state?
Citizens for Clean Power has reviewed the Department of Natural Resources and Environmental Control's Aug. 9 memorandum to NRG power company. The memo outlines a settlement to reduce pollution from the Indian River Power Plant in Millsboro. NRG's agreement to meet Phase I requirements for mercury reduction by Dec. 1, 2008, is good news. Only weeks ago, NRG asserted this could not be done. (See NRG's "Compliance Plan" for Regulation 1146, posted on DNREC's Web site.)
The announcement is here and the letters detailing the consent decree are here.
However, it appears the rest of the settlement was driven not by NRG's technical inability to meet Regulation 1146 requirements, but by corporate financial considerations. NRG made no secret of its refusal to comply with Regulation 1146 for Units 1 and 2 (now 50 years old with no pollution controls and no capital expenses). Compliance would require retrofitting the old units at great expense, or shutting them down. Since Units 1 and 2 provide NRG with massive profits, it makes business sense to keep them operating as long as possible.
John and Pat have it exactly right. With the capital costs long since paid for, NRG can operate these units as cash cows, throwing off profits without the need for further investment in them.
However, the deal to delay reduction of toxic sulfur dioxide, or SO2, and nitrogen oxide, or NOx, comes with a big price tag for Delaware. According to the Office of Management & Budget, each reduction of one ton of SO2 saves approximately $7,300 in health care costs and mortality-based benefits. Reduction in NOx emissions saves $1,300 per ton in mortality-based benefits alone.
"Mortality-based benefits" is a term used by economists to quantify the cost of people dying prematurely.
The settlement allows NRG to emit 23,000 tons more sulfur dioxide from 2009-2011 than is allowed under Regulation 1146. Based on OMB's calculation for SO2, delaying full compliance with Regulation 1146 will cost $167.9 million in extra health care costs and mortality-based benefits. Instead of reducing NOx emissions below 4238 tons starting in 2009, NRG will be able to emit an additional 5000 tons over three years. The cost of that provision will be at least $6.5 million in health costs and mortality-based benefits.
In sum, because compliance with SO2 and NOx regulations has been delayed, the deal will cost at least $174.4 million in additional health costs and mortality-based benefits. How much expense could be offset by the larger reductions in emissions after 2011? The actual reduction in NOx will be from 0.125 lbs./million BTU to 0.100 lbs./million BTU. The reduction in SO2 will be from 0.26 lbs./million BTU to 0.20 lbs./million BTU. In tons per year, these are not large changes. Health-related savings will be about $17.95 million/yr. At that rate, it will take at least 10 years to recover the cost of the deal with NRG.
Here we see the cold economic calculus on the part of NRG: The free cash flow generated by operating Units 1 & 2 is accompanied by measurable health costs that don't show up on the company's financial statements.
The full cost of this settlement must include the suffering, stress, disease and premature loss of loved ones which will be experienced by many in the coming years. How much did NRG save by settling? We don't know. NRG will continue to pump large amounts of toxic SO2, NOx, carbon monoxide, arsenic, lead compounds, nickel compounds and chromium compounds into the air every day for the next three years. In that respect, little has changed.
CCP calls on DNREC to install several gas analyzers and fine particulate, or PM2.5, monitors near the NRG coal plant. We need reliable data on current and future amounts of pollutants at ground level. Currently, the only PM2.5 monitor in Sussex County is at Seaford, well outside the downwind swath of polluted air from the coal plant. Put monitors and gas analyzers in CCP's suspected non-attainment areas of Dagsboro, Millsboro and Lewes. There is no excuse for failing to monitor arsenic, SO2, NOx, carbon monoxide, and fine particulates in locations with high rates of asthma, heart disease and cancer.
People have a right to know if substances from the coal plant are making them sick. If the state says it can't afford monitoring equipment, have NRG write a check from their multimillion-dollar revenue stream at Indian River. Make it the price for doing business in Delaware.
It seems to me a modest proposal: Ask NRG to at least pay for the equipment that would measure the quality of the air surrounding its plant.


Anonymous Anonymous said...

NRG stock investments of those in Delaware politics need to be exposed - there is sure to be as much profiteering here as there is in DP&L

1:17 PM, August 25, 2007  
Blogger David said...

Great Work!

1:05 PM, August 26, 2007  

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