Regulating Emergency Generators: EPA Denies Rehearing of RICE Rule, Appeals Court is Next Stop

On August 15, the U.S. Environmental Protection Agency (“EPA”) issued a notice denying petitions for rehearing of its new rules governing air emissions from stationary Reciprocating Internal Combustion Engines (“RICE”). RICE, especially diesel engines, are widely used for emergency backup generation for hospitals, factories, and other facilities requiring an uninterrupted supply of power. They are also an important source of power to stabilize the electric grid in certain types of emergencies. Developments concerning the RICE emissions rule are therefore of great concern to electric utilities and a multitude of end-use electric consumers who rely on diesel back-up generators.

The rehearing petitions stem from EPA’s 2010 proposal to extend its regulation of hazardous air pollutants emitted by stationary RICE from the previous 500 horsepower limit down to engines as small as 100 HP. As we reported early last year, in response to concerns related to the mismatch between the proposed RICE rule and NERC reliability standards, EPA modified the proposed rules to allow generators that have not been retrofitted with expensive pollution control equipment to operate for up to 100 hours per year during declared electrical emergencies, and for such generators to operate for up to 50 hours per year to prevent voltage collapse or overloads in local transmission or distribution systems.

In last week’s actions, EPA rejected rehearing petitions seeking eliminate the 50-hour provision, which is particularly important for rural electric cooperatives and other utilities serving rural areas. Typically, these areas are served by long radial lines with a single point of interconnection with the main interstate grid. When the transmission system is stressed, operators of these kinds of rural systems often rely on diesel generators to avoid voltage collapse and other reliability problems. EPA’s rejection of the rehearing petition in this regard is therefore an important victory for electric reliability, especially for rural utilities.

EPA also rejected rehearing petitions seeking an immediate shift to ultra low sulfur diesel fuel and an immediate start to reporting requirements for operators of affected RICE generators. Thus, EPA maintained the phased-in approach for these requirements, which should ease the transitional burden for entities subject to the new rule. EPA’s actions settled the last outstanding issues before the agency. Several entities have already filed suit in the U.S. Court of Appeals for the District of Columbia Circuit, where they seek to invalidate several aspects of the rule, in particular the allowance for 100 hours per year of emergency operation. The Court is scheduled to hear argument in the case on September 26, with an opinion expected in the next several months. The Court also held a second set of petitions in abeyance. With EPA’s final action, those petitions now can be expected to move forward.