Of Boiler Rules and Biofuels: Biomass Energy Faces New Emissions Restrictions, Regulation Under Waste Laws

Air emissions rules proposed for boilers and waste incinerators threaten to disrupt the burgeoning biomass energy industry. Currently, biomass accounts for about 10 gigawatts of installed U.S. energy capacity. Biomass proponents hope to see an additional 100 gigawatts online by 2025.[1] But for that to happen, biomass must establish itself as a competitive economic alternative to fossil fuel and other renewable energy sources. EPA has proposed stringent new emissions, monitoring and reporting requirements for broad categories of new and existing non-residential boilers, including those fired by biomass. EPA also would redefine which units are considered solid waste incinerators, subject to even more stringent requirements, in such a way that owners of biomass-fired units receiving fuel from off-site sources would be required to petition EPA for an exemption or comply with the incinerator standards.

Biomass Basics

It is not easy to define exactly what constitutes “biomass.” The term might indicate any non-fossil organic material that can be used to generate energy (e.g. wood, food waste). Biomass that has been processed in some way to render it more manageable or to increase its energy density is often called “biofuel,” although some reserve this term for liquid fuels (e.g., corn-derived ethanol), while simply calling solid fuels (e.g., pelletized wood chips) “biomass.” “Biogas” is gas derived from biomass, generally through decomposition (e.g., landfill gas or waste digesters), but it might also be called a biofuel.

In legislation, the definition of “biomass” often governs the units or fuels that will be regulated, or that qualify for legislatively-bestowed benefits. Consequently, lists are popular. The boiler rules discussed below – designed to capture and regulate a wide range of technologies burning a wide range of fuels – define “biomass” with a broad exemplary list of organic materials that might be used as fuel in boilers.[2] In proposed federal laws governing climate change – which would provide significant advantages to carbon-neutral fuels – the definition of biomass is drawn tightly to provide those benefits only to a limited pool of “renewable” biomass sources based on concepts of carbon neutrality.[3]

However you define it, biomass is generally burned to generate steam or heat that is either used directly or to generate power. This entails enclosed devices using controlled flame combustion to recover thermal energy from organic fuels and export that energy in the form of steam or hot water. In most contexts, the necessary equipment is called a “boiler.”[4] But biomass blurs the lines between waste disposal and energy production, and conflicts arise when the associated regulatory regimes must be merged. If a boiler burns solid waste, it might be an “incinerator,” even if its primary purpose is to recover energy.

These definitional issues have bedeviled the Environmental Protection Agency (EPA) for the last decade, as it has struggled to regulate biomass-fired units through laws that were not designed with biomass in mind – particularly the Clean Air Act Amendments of 1990, and the Resource Conservation and Recovery Act, originally enacted in 1976.

The Troubled History of the Boiler Rules

On June 4, 2010, EPA proposed national emissions standards for hazardous air pollutants for new and existing boilers, including those that burn biomass for energy. Four related rules – the first applying to industrial, institutional and commercial boilers at “major” sources of hazardous air pollutants (i.e., facilities emitting 10 tons per year of any single or 25 tons per year of any combination of hazardous air pollutants), the second applying to the same boilers at “area” sources (facilities below “major” source emissions thresholds), and the third and fourth applying to the same boilers, if they burn fuel meeting the regulatory definition of “solid waste”[5] – would limit emissions of particulate matter, mercury, carbon monoxide and other hazardous air pollutants far below previously permitted levels.

Understanding these recent developments requires reaching back twenty years, to the Clean Air Act Amendments of 1990. Among other things, the Amendments expanded EPA’s authority over hazardous air pollutants (HAP), those air pollutants most harmful to human health. Congress’s HAP regulatory scheme required EPA to identify and list numerous “categories” of HAP sources, and later to promulgate technology-based emissions control standards on a category-by-category basis. EPA’s initial list included several “boiler” categories. Specifically, EPA listed “industrial,” “institutional” and “commercial” boilers – essentially boilers at non-residential facilities[6] – as major and area source categories.

Having listed its source categories, EPA was then required to develop National Emissions Standards for Hazardous Air Pollutants (NESHAPs) “for each category or subcategory of major sources and area sources of hazardous air pollutants listed.”[7] With exceptions not relevant here, this requires EPA to identify the category’s “maximum achievable control technology,” or “MACT” – essentially the top performing units in each category – and base the standards for that source category on the MACT. As a result, while EPA calls them NESHAPS, these regulations are commonly referred to as “MACT” standards. After a lengthy development process, in 2004 EPA promulgated its first attempt at a final boiler MACT standard.[8]

Unfortunately, in developing the 2004 boiler MACT, EPA included units that burn solid waste in its MACT calculations for boilers. The Clean Air Act Amendments of 1990 included a section specifically dealing with “solid waste incineration units,”[9] which are subject to their own specific requirements, including emissions limits based on a separate MACT analysis. EPA had already set emissions limits for these facilities in 2000,[10] but had not included facilities that burned solid waste to recover heat for a useful purpose. In other words, EPA had set limits for all “boilers” (including those that burned solid waste), and separately set limits for all solid waste incinerators (excluding those that burned solid waste to recover heat for useful purposes).

Reviewing this result, the D.C. Circuit concluded that EPA had impermissibly excluded energy-recovering solid waste incinerators when calculating the incinerator limits.[11] Since the boilers burning solid waste should have been grouped with the incinerators, they should not have been grouped with the boilers. The Court, thus, invalidated both rules. As the Court itself concluded, its ruling “shift[ed] thousands of units that are currently regulated under the ... Boilers Rule into the [incinerator] category … [and a]s a result, the populations of units subject to EPA’s boilers and [incinerator] rules will change substantially, requiring that EPA recalculate the stringency of the emissions standards for the newly expanded [incinerator] category and the newly shrunk boilers category.”[12]

EPA went back to the drawing board, recalculating MACT for the several relevant categories of boilers and incinerators, and redefining the types of fuels that would convert a “boiler” into an “incinerator.”

The Proposed Emissions Limits

Subject to several important exceptions,[13] existing biomass-fired industrial, institutional and commercial boilers at “major” sources with a designed heat input capacity of 10+ million Btu per hour (MMBtu/h) and not burning “solid waste” would be required to limit their emissions of carbon monoxide (CO), particulate matter (PM), hydrogen chloride (HCl), mercury (Hg) and dioxins/furans.[14] These limits represent EPA’s calculation of control levels achieved by the country’s top 30 (top 12 percent) large biomass-firing boilers.[15]

Also subject to several important exceptions,[16] identical (i.e., biomass-fired, capacity exceeding 10 MMBtu/h, etc.) existing boilers at “area” source facilities would be required to limit their CO emissions, but would not be required to limit any other emissions.[17]

Regardless of heat input capacity, units that would otherwise be classified as “boilers,” but which burn any materials that EPA classifies as “solid waste” would be subject to the solid waste incinerator standards.[18] The solid waste incinerator standards include emission limits on nitrogen oxides (NOx), sulfur dioxide (SO2), CO, PM, opacity, HCl, Hg, lead, cadmium and dioxins. These standards represent EPA’s determination of the emission control levels achieved by the top five (top twelve percent) waste-burning energy recovery units.[19]

Emissions limits for new units would be even more stringent.[20] New units at major sources would be required to meet emissions limits for PM, CO, HCl and Hg that would be uniformly lower than for existing units, representing EPA’s determination of the “best” controlled units across the country. Area source boilers would be required to meet a reduced CO standard, and to limit their PM emissions.[21] The performance standards for new energy recovery incinerators would be orders of magnitude lower than the existing unit standards.[22]

All units also would be required to conduct initial and annual stack tests to determine compliance with all applicable NESHAP.[23] Units with a capacity of 250+ MMBtu/h would be required to install a continuous emissions monitoring system (CEMS) for particulate matter; units with smaller capacities would have varying alternative continuous compliance requirements.[24] Units with capacity of 100+ MMBtu/h would have to continuously monitor CO[25] and undergo an “energy assessment” identifying cost-effective energy conservation measures.[26] All new and existing units would be required to comply with notification, recordkeeping and reporting requirements.[27]

New and existing boilers with input capacities below 10 MMBtu/h would not be required to meet the newly proposed emissions standards.[28] Rather, they would be required to perform the energy assessment, as well as a “tune-up inspection” to ensure emissions consistent with manufacturer specifications.[29] These units also would have to comply with continuous monitoring, notification, recordkeeping and reporting requirements applicable to larger units.

The Solid Waste Issue: How to Tell a Boiler from an Incinerator

Under the proposed rules, whether a unit falls under the boiler or incinerator provisions is a high-stakes question. First, as explained above, while the boiler rules establish less onerous requirements for mid- and small-capacity units, the incinerator rules are applicable to all incinerators. Second, as explained above, the incinerator rules require control of many more emissions than the boiler rules. Third, waste incinerators are subject to operator training, preconstruction site-assessment and monitoring requirements that are not applicable to boilers.

The key is whether the unit burns any “solid waste.” This leads to the question: when is biomass also solid waste? EPA’s original approach to this question was to exempt most materials that would be considered biomass (e.g., wood, food, agricultural byproducts – even manure, if burned) because they had not been “discarded.”[30] However, EPA has now changed its rule to include an additional criterion: these materials are only exempted from treatment as solid waste if they remain in control of the generator.[31] If these materials leave the point of generation, operators are now required to petition EPA for a “non-waste determination.”

EPA has indicated it will grant a non-waste determination if the boiler operator can establish that market participants treat the biomass stock as a fuel rather than a solid waste, and that the fuel stock has a chemical and physical identity comparable to commercial fuels, will be used in a reasonable timeframe, and has air emissions when burned comparable to traditional fuels.[32] EPA’s determination is subject to notice, comment and hearing requirements, and, presumably, judicial review. Depending on how EPA handles this process, it could pose a significant administrative burden and uncertain time delays for fuel supply contracts between biomass energy project developers and timberland managers, farmers, and other suppliers of biomass.

A Threat to the Industry?

EPA estimates that as a result of its proposed controls, emissions from biomass-fired boilers and solid waste energy recovery units will drop significantly.[33] EPA calculates a social benefit from medical savings attributable to HAP reductions in the billions of dollars.[34] On the other hand, EPA estimates that compliance at the 420 identified biomass-fired major source units will require capital expenditures of over $2 billion, an annualized cost (factoring testing and monitoring costs and fuel savings) of about $609 million.[35] EPA estimates that compliance at the approximately 11,000 affected biomass-fired area source units will impose about $48 million in annualized costs (not factoring fuel savings). This does not include the costs associated with a non-waste determination petition, which may become a necessary adjunct to fuel supply contracts for biomass-fueled power plants.

EPA does not discuss what effect these increased costs will have on the biomass industry or current owners of industrial, commercial and institutional biomass boilers. Clearly, if the proposed rules become law, owners of existing units will need to decide whether the economics support compliance, or whether the unit should be shut down. A similar calculation will drive decisions to invest in new units designed to burn biomass. In particular, the need for an affirmative “non-waste determination” from EPA could significantly slow growth in biomass-based power.

For more information on biomass or the boiler rules, please contact Adam Orford or any member of Marten Law’s Alternative Energy or Air Quality practices.