WASHINGTON (Reuters) - The U.S. government's move to suspend a trouble-plagued $1.65 billion carbon capture and storage (CCS) project this month may have bolstered legal challenges to proposed environmental regulations on power plant carbon emissions, several legal experts said.
The FutureGen project in Illinois would have been the first U.S. commercial-scale, near-zero emission coal plant to use technologies to capture carbon dioxide from major industrial plants and store it safely underground. This approach could sharply reduce carbon dioxide emissions and curb global warming.
Under the Clean Air Act, Environmental Protection Agency (EPA) standards must be based upon the "best system of emission reduction" using technology that has been "adequately demonstrated." Some legal experts said this week the Department of Energy's abandonment of the project proves the technology failed to meet those criteria.
FutureGen's demise is further evidence that EPA's standard for new power plants is not legally defensible, said Jeff Holmstead, of Bracewell and Giuliani, which represents energy-industry clients looking to challenge the proposed regulations, a cornerstone of the Obama administration's climate-change strategy.
"It's sort of another nail in the coffin of EPA's proposal," said Holmstead, who headed EPA's office of Air and Radiation during the George W. Bush administration.
Asked about the FutureGen project at a Senate hearing on Wednesday, the EPA's air pollution head Janet McCabe dismissed comments that CCS is not viable and pointed to a project launched in October in Canada as proof that it can work to scale.
The agency had previously pointed to FutureGen, as well as Southern Co's long-delayed Kemper project in Mississippi as beacons for nascent CCS technologies, the varied ways to capture carbon waste from sources such as power plants and transport it to storage sites.
FutureGen was a collaboration between the DOE and coal companies that aimed to show that producing coal-fired electricity under strict carbon emission curbs was possible.
But FutureGen was beset by delays and management problems from its 2003 start, as well as disputes over where to sequester the captured carbon.
When it became clear that FutureGen would not meet its private sector financing target, the DOE suspended the project on Feb. 3 to avoid about $1 billion in financing commitments.
Brian Potts, an energy attorney at Foley & Lardner, said the EPA's mention of CCS as a viable technology in the new power plant emissions standard puts the proposed rule at risk of being overturned.
This would then delay what he said was the more important EPA proposal for existing plants, which would lead to a 30 percent carbon emission cut by 2030.
But the EPA likely anticipates the challenge, some lawyers said. The agency issued its new source standards in two parts, with one rule focused on new plants and a second governing modified and reconstructed plants.
The standards for modified plants exclude requirements for CCS, said Thomas Lorenzen, a lawyer at Dorsey & Whitney pointed out. The EPA has said that if either of the new source rules were to be vacated by a court, the other rule would remain in effect, he noted.
"They may feel they can proceed with the CCS (rules) even though there are legal risks," because they believe the rules for modified plants would act as a back-up if the other provisions are thrown out, said Lorenzen, a former assistant chief for the Justice Department who supervised the federal government's legal defense of EPA's rules from 2004 to 2013.
But Kipp Coddington, who represents energy companies at law firm Kazmarek Mowrey Cloud and Laseter, said the EPA had put the development of carbon capture at risk by getting "ahead of the technology's development."
He equated the EPA's expectations from the short list of CCS projects under development to being "at Kitty Hawk with the Wright Brothers and their wood frame plane with an audience waiting for a 747."
Reporting by Valerie Volcovici and Ayesha Rascoe; Editing by Richard Chang