Ameren's choice: Invest $1B in pollution controls for plant or adjust strategy

A federal appeals court ordered Ameren Corp. to install sulfur dioxide scrubbers on its 1,178-MW Rush Island coal-fired power plant, a project the utility estimated could cost up to $1 billion and $50 million annually in additional maintenance expenses.

The Aug. 20 ruling by the U.S. Court of Appeals for the 8th Circuit is the latest twist in a long-standing controversy over the utility's decision to retrofit the plant without a federal permit required by the Clean Air Act. The court said the upgrades led to a decade of increased and unabated emissions from the plant.

The order raises questions over Ameren's plan to keep its Rush Island power plant outside St. Louis running until 2039. According to the Sierra Club, a party to the 2017 lawsuit against the utility, the plant is the nation's sixth-largest emitter of SO2. Each year, the plant emits 18,000 metric tons of SO2, the appeals court noted.

More broadly, the case shows the hesitancy of some utilities to shed coal-fired power plants, which produced 19% of U.S. greenhouse gas emissions in 2020, according to the U.S. Energy Information Administration, as well as other harmful pollutants.

Ameren said in an email it was disappointed by the ruling and that it is "premature to speculate on next steps while we review and assess the judgment." In its most recent Integrated Resource Plan, Ameren modeled "different potential outcomes" for the plants depending on how the litigation would play out, none of which were shared publicly.

EPA first sued in 2011

The saga of the 45-year-old Rush Island plant's SO2 emissions goes back a decade.

The U.S. Environmental Protection Agency sued Ameren in 2011, alleging that the utility had violated the Clean Air Act's New Source Review requirements when it upgraded the plant's two outage-prone boilers in 2007 and 2010 to be able to run them more often. Under the 1977 amendments to the landmark air quality law, major modifications require a permit to ensure plant retrofits do not increase pollution.

"Small performance improvements or increases in unit availability can result in a 40-ton increase in sulfur dioxide" the appeals court noted. "For the Rush Island units to emit more than 40 tons of sulfur dioxide, it takes only an availability of 0.3% or an additional 21 hours of operation at full power."

The EPA first won the liability portion of its case against Ameren in 2017. Two years later, a federal district court judge ordered a remedy that roped in a second Ameren plant in Missouri, the Labadie power plant.

In the unusual 2019 ruling, U.S. District Court Judge Rodney Sippel ordered Ameren to install scrubbers at Rush Island within four-and-a-half years and to invest in pollution control technology at Labadie to offset the excess pollution Rush Island had emitted over the years.

Ameren appealed the case soon after, arguing that the Labadie remedy was punitive and, therefore, prohibited. It also claimed that its $40 million-plus upgrades at the Rush Island plant did not qualify as "major modifications," that they were allowed under Missouri law, and that a district judge could not rule in a Clean Air Act case.

In its Aug. 20 opinion in USA v. Ameren Missouri (No 19-3220), the appeals court upheld the lower court's Rush Island ruling after concluding that it had the authority under the Clean Air Act to order pollution controls be added to Rush Island and rejecting Ameren's other claims of impropriety.

However, because the government never alleged a violation at the Labadie plant, the court found that Ameren could not be punished for something that had not occurred. "Because Ameren committed no violation of the CAA at its Labadie plant, the district court lacked authority to authorize injunctive relief as to it," wrote Chief Judge Lavenski Smith, who penned the court's opinion.

The 8th Circuit, therefore, reversed the lower court's Labadie remedy and remanded it for further proceedings. Joining in the decision were Judges James Loken and Michael Melloy.

The Sierra Club said the decision will allow Labadie, one of the nation's largest coal plants and its second-largest SO2 emitter, to continue to pollute for years to come.

"At least there is some justice that has occurred here on Rush Island," said Andy Knott, an interim regional director of the group's Beyond Coal campaign. Noting that emissions from the plant disproportionally affect low-income and minority communities in the St. Louis region, Knott added, "there's definitely an equity issue here."

The Sierra Club has not yet decided whether to appeal the court's decision to leave the Labadie plant alone, Knott said.

Shedding coal, but not so fast

In the 30-year Integrated Resource Plan that Ameren Missouri submitted to state regulators in 2020, the company laid out plans for transitioning to clean energy sources and net-zero carbon emissions by 2050. The plan earned accolades from some environmental and community advocates who had previously criticized Ameren for not evolving fast enough.

The company pledged to invest $4.5 billion to install 3,100 MW of wind and solar generation by 2030, along with energy efficiency and demand response programs expected to shave nearly 2,000 MW from peak energy demand by 2040.

But the IRP also emphasized that Ameren's continued reliance on natural gas and coal well into the 2040s would be necessary to keep electricity affordable and reliable.

"Recent events in California, where a shortage of reliable capacity resulted in disruptions in service to customers, serve to highlight the need to be thoughtful about how we ensure the reliability of our generation fleet for our customers as we execute on our transformation plan," the IRP said.

After weighing whether to retire the Rush and Labadie plants early, Ameren rejected the idea because of the earlier than expected job losses. The IRP calls for closing the last Labadie unit in 2042 seven years after President Joe Biden said the U.S. grid should be decarbonized and more than a decade later than the U.S. has pledged to cut overall emissions in half.

Ameren's Missouri business relied on coal for 69% of its generation in 2020 and plans to shrink that share to 17% by 2040, a year when the company expects natural gas to produce 3% of the power the company sells.