Commission
on Electric
Utility Regulation
Environmental Licensing Requirements in AEP States for New Electric Generating Facilities
The environmental licensing requirements for new electric generating units are relatively uniform from state to state. A new facility requires permits for air emissions, water discharges, solid waste disposal, hazardous materials, fuel handling, wetlands mitigation and others. The specific permits required will depend primarily on the type of fuel intended for use at the new facility and site-specific impacts, with natural gas facilities having the simplest requirements. In addition, certain states include environmental considerations in the rate regulatory commission review of the need for new facilities.
Environmental Licensing
The lead time needed for siting and permitting a new generating facility will depend to a great extent on the type of facility. Simple cycle natural gas combustion turbines will require less time than combined cycle units, which in turn will require less time than coal-fired units. This can be for a number of reasons. The most significant relates to the amount of analysis needed to identify and address environmental impacts, with a coal plant requiring much more extensive air quality modeling and ecological impact analysis than a gas plant. A coal plant is also likely to require a solid waste disposal area for fly ash and scrubber material. Also, public acceptance of a proposed facility is an important factor, with gas plants generally facing less public opposition. These factors tend to be generic regardless of the state as the environmental licensing requirements are fairly uniform from state to state. One key air permitting variable is the existence within a state or a nearby state of a Clean Air Act Class 1 PSD area. Sources within 200 km of a Class 1 area must undergo a more rigorous air quality impact analysis. AEP states with Class I areas include Virginia, West Virginia, Kentucky, Oklahoma and Texas.
Rate Regulatory Commission Processes
State-specific differences can arise if a state has a formal siting process that the proposed source must follow. For example, new facilities in Ohio must apply to the Ohio Power Siting Board for a Certificate of Environmental Compatibility and Public Need. More detail on the Ohio Power Siting Board requirements can be found at http://www.puc.state.oh.us/pubrel/opsb/index.html. The Virginia State Corporation Commission also requires an environmental analysis for applications to construct electric generating facilities. In Kentucky, a regulated utility that wants to build a new plant must obtain a Certificate of Convenience and Necessity from the Public Service Commission. However, an independent power producer siting a plant in Kentucky does not need to obtain this certificate as it is not justifying the plant based on the energy needs of the residents of Kentucky. The West Virginia PSC also requires a certificate of need, although it is unclear whether the Commission has jurisdiction over independent power producers. Texas formerly had an energy siting board, but has discontinued it in light of the move to deregulation in that state. Most states require some demonstration of need for a new facility proposed by a regulated utility before considering rate recovery for the facility, although with the exceptions of Ohio and Virginia, these demonstrations generally are not required to address environmental impacts. In most cases, the siting board/rate commission process can run parallel with the environmental licensing process to minimize the total amount of time needed for licensing.
Practical Application
From a practical viewpoint, what does this mean? AEP recently sited and permitted for another company a new simple cycle gas turbine plant in Ohio. This effort took approximately 15 months from initiation to receipt of the necessary permits for construction, including Ohio Power Siting Board approval. This represents an optimum, as this facility had no water use or waste disposal issues that needed to be addressed during the licensing process. A natural gas combined cycle unit would need to address air emissions and water use for cooling, which would lengthen the licensing time, possibly to as much as 24 months. For a coal plant, required licensing could take 24 months or longer, with the exception of a solid waste landfill. If a landfill is required, the lead time before such a landfill could go into use can be as long as five years. A key factor for a large facility would be whether any Federal permits are needed, such as a Corps of Engineers permit, which in turn would trigger a formal Environmental Impact Analysis process. This could easily add a year to the timeline.
Other Issues
- While the environmental permitting requirements are fairly uniform from state to state, the available resources for new source permitting in the state environmental regulatory agencies does vary. It will be increasingly important to ensure that the Virginia Department of Environmental Quality has adequate resources to efficiently process applications and issue permits for new generating facilities.
- One of the initial steps in the siting process for new generating facilities is a review of the local zoning requirements and other local regulations that may affect where facilities can be located. If not already in place, consideration can be given to establishing "enterprise zones" within Virginia to encourage industrial development, including new generating capability to meet the state’s energy needs. Establishment of such zones sends a signal to energy developers on areas within the state that may be the most suitable for development.
- With the move toward increased use of natural gas for electricity generation, the ability to site natural gas pipelines becomes more important in considering locations for new generating facilities. A review of the existing pipeline infrastructure in Virginia and the current regulatory structure that could affect pipeline expansion may be in order.
- One of the key siting issues in AEP’s western states relates to water use rights. While this has historically not been an issue in the Eastern part of the country, water use issues may become increasingly important in the future.