The comment period has now begun on EPA’s proposal for replacing the Clean Power Plan, named the “Affordable Clean Energy”—or “ACE”—rule.  The rule was published in the Federal Register on August 31. And there is plenty to keep commenters busy over the next 60 days, given that EPA expressly identified 75 distinct requests for comment, not counting potential sub-issues and issues that EPA did not count.  Comments are due by October 30th. Here are the top 10 key aspects of the rule that are likely to be the subject of the most fervent comments:

  1. Section 111(d) Authority. As previously set forth in its proposed repeal of the Clean Power Plan, EPA has decided to return to its historical interpretation of Section 111(d) of the Clean Air Act—that it only authorizes EPA to establish the best system of emission reduction based on measures that can be employed within the fenceline of a source subject to the rule.  Conversely, EPA makes clear that its historical reading of Section 111(d) precludes the use of “generation-shifting,” “reduced utilization,” or “redefining the source” as part of a Section 111(d) emission guideline, all of which were relied upon heavily under the Clean Power Plan.  In the ACE proposal, EPA also characterizes its authority as merely providing “information” to states, that then have the authority to establish the enforceable, pound per megawatt hour “performance standards” on a unit-by-unit or source-category basis.  EPA also leaves to the states to determine the compliance deadlines associated with those performance standards.
  2. The Best System of Emission Reduction (BSER). EPA has determined that the best system for reducing greenhouse gas emission reductions from existing power plants (consistent with its reading of Section 111(d)) is to improve the efficiency of those power plants.  Specifically, EPA listed six equipment upgrades and a seventh catch-all for improved operating practices that could be used to improve the efficiency with which power plants convert fuel into electricity.  EPA expressly rejected carbon capture and sequestration as insufficiently demonstrated and co-firing with gas or biomass as insufficiently available and unnecessarily costly.
  3. Affected Sources Subject to the Rule. ACE, as proposed, would apply only to coal-fired power plants, not gas-fired plants (unlike the Clean Power Plan, which applied to both).  EPA’s basis for excluding gas-fired units is that it does not have enough information to establish a similar efficiency-based emission guideline for them.  However, ACE is likely to set a precedent that could be important if EPA later decides that a similar program might be appropriate for gas generators after all.  Exclusion from ACE might also mean that gas-fired plants will be unable to take advantage of EPA’s New Source Review reforms, summarized below.
  4. No Presumptive Limits or Cumulative Targets: Unlike the Clean Power Plan, which focused on national and interconnection-level emission reduction targets to establish mandatory emission budgets for each state, ACE is not based on a cumulative emission reduction target, nor does it provide any presumptive limits or a prescriptive methodology for states to follow in setting performance standards.  That approach provides states maximum flexibility and authority, but it may also lead to significant variability from state-to-state, as plans are developed and submitted to EPA for approval. EPA did provide a range of expected efficiency improvement levels for each one of the seven measures proposed, which states must consider, but exactly how states are expected to incorporate those ranges into the process of establishing standards of performance remains unclear.
  5. Some Averaging, But No Trading: In describing the requirements for states, EPA made clear that averaging between affected units within a single facility will be allowed, but averaging or trading of emission reductions between facilities will be out of bounds.  This aspect of the rule is likely to be trouble to states that have already sought to reduce greenhouse gas emissions via a trading program, such as the states participating in the Regional Greenhouse Gas Initiative.
  6. Cost Implications: ACE expressly allows states to decide which measures are cost-effective, and therefore a valid basis for establishing a performance standard, and which measures might be too costly.  As noted above, that evaluation can be case-by-case, so states will need to conduct a detailed assessment of each covered facility’s economic characteristics.  EPA has also indicated a preference for including in that analysis the costs associated with any additional permitting or control requirements that could be triggered by the measures required—something EPA has not typically considered in the past.
  7. New Source Review (NSR) Reform: EPA has resurrected a 2007 proposal for NSR reform that would add to the current NSR permitting applicability test a preliminary hourly emissions check.  In short, if maximum hourly emissions are not expected to increase, NSR will not apply.  The concept could be highly beneficial in simplifying and clarifying the controversial NSR program, and the hourly test squares nicely with the new 1-hour national ambient air quality standards.  However, the exact form of EPA’s proposed preliminary hourly test leaves much to be desired, in that it relies on either a single highest hour or a flawed statistical analysis that must be compared to every single hour of emissions in the future.  It also fails to implement the statutory requirement for evaluating only those emissions increases caused by a project.
  8. State Plan Deadlines: EPA has proposed to significantly extend the deadline for state plans and for EPA action to approve those plans or issue federal plans for states that failed to submit an approvable one.  This timeline will give states much more time to work with EPA and make sure their plan is approvable, but it also means that the deadline for approving plans will not arrive until the next presidential administration.
  9. Adopting Standards Less (or More) Stringent than Guidelines: EPA’s ACE proposal confirms that a state’s standards of performance may be less stringent than the “information” comprising EPA’s emission guidelines.  However, for a less-stringent state plan to be approvable, states must demonstrate the reasonableness of their decisions.  How much or little deference EPA will pay to the state’s demonstrations will be, as noted above, up to the next presidential administration.
  10. Rule Benefits and Costs: In evaluating the potential impacts of its proposal—its costs and benefits—EPA compared its ACE proposal to two baselines, one with the Clean Power Plan in place, and one without it, which reflects the current state of the law in light of the Supreme Court’s stay of the Clean Power Plan.  EPA also relied on the social cost of carbon (but only domestic benefits) and co-benefits of particulate matter reductions (but noting that it has low confidence in the vast majority of the health benefits calculated).  All told, the rule predictably provides fewer benefits and imposes lower costs than the Clean Power Plan, but greater benefits and costs than doing nothing.

This morning, the Environmental Protection Agency (EPA) released its proposed replacement for the Clean Power Plan (CPP) titled the “Affordable Clean Energy Rule,” which would regulate greenhouse gas emissions at existing coal-fired power plants.   The proposed rule gives discretion to states for determining the greenhouse gas performance standards achievable for existing coal-fired power plants within their state.  Specifically, the proposed rule would require states to evaluate a menu of heat rate improvement options and, taking into account the unit’s remaining useful life and other factors, determine the lb/MWh CO2 emission rate achievable at each affected unit. While the rule proposes to allow for emissions averaging among affected units at an individual source, it does not provide for broader averaging or emissions trading.  To facilitate the heat rate improvement projects, EPA also has proposed an option for states to adopt a new emissions test under the New Source Review program for EGUs that is based on both hourly and annual emissions.

Continue Reading Environmental Protection Agency Releases Clean Power Plan Replacement

On April 17, 2010 EPA issued a guidance document on the implementation of significant impact levels (“SIL”) for ozone and fine particles.  Under EPA’s air pollution permitting regime known as “New Source Review,” SIL values are one way to demonstrate that a new facility or modification of an existing facility will not cause a violation of the National Ambient Air Quality Standards (“NAAQS”) or Prevention of Significant Deterioration (“PSD”) increments for a regulated pollutant.  In short, if a source’s “projected impact on air quality” is below the “SIL,” the source is deemed to have no significant impact on air quality.  If a source’s impacts are above the SIL, far more extensive modeling analyses are needed to demonstrate compliance, so the SIL helps streamline the permitting process for projects that can meet it.

Continue Reading EPA Streamlines NSR Permitting for Projects with Insignificant Air Quality Impacts

On March 16, 2018, the D.C. Circuit Court of Appeals partially upheld and partially rejected an EPA rule known as the “Boiler MACT.”  Officially named the “National Emission Standards for Hazardous Air Pollutants for Major Sources: Industrial, Commercial, and Institutional Boilers and Process Heaters,” it regulates the emissions of certain types of air pollutants known as “hazardous air pollutants” from boilers located at “major sources” of those pollutants.  EPA issued the rule in several different rulemakings, due to the fact that the agency decided to reconsider a few provisions several times along the way.  As a result, the litigation over the rule became very complicated.  Sierra Club challenged numerous provisions of the rule, claiming that they failed to comply with the Clean Air Act.  Most of those challenges were resolved in a 2016 decision, but the court had reserved two issues that were finally decided this week—namely Sierra Club’s challenges to EPA’s carbon monoxide (CO) limits for certain boilers and the startup and shutdown work practices.  Specifically, Sierra Club alleged that (1) EPA failed to adequately justify its decision to make CO limit less stringent (130 ppm), and (2) EPA’s qualitative “work practice” standards during startup and shutdown are unlawful.

Continue Reading D.C. Circuit Issues Latest Decision on Long-Running Boiler MACT Saga

On March 20th, the DC Circuit upheld EPA’s June 2012 “CSAPR = BART Rule,” establishing that compliance with EPA’s Cross State Air Pollution Rule (CSAPR) will satisfy the Best Available Retrofit Technology (BART) requirements for SO2 and/or NOx under the Regional Haze Rules for electric generating units (EGUs) subject to CSAPR.   Under the Regional Haze Program, EPA has issued regulations that allow the Agency to approve alternatives to BART if EPA finds that the controls are “better than BART.”

Continue Reading DC Circuit Upholds CSAPR as “Better than BART” under Regional Haze Program

NSR—the program imposing onerous permitting requirements on the construction of new sources and “major modification” projects at existing sources—requires industrial sources of air emissions to determine whether the projects they propose will increase those emissions.  EPA adopted regulations in 2002 to provide a new structure for those critical emission calculations, which specifies that sources must calculate the “sum of the differences” between a baseline and a future projection for each existing emission unit.  That language is particularly important for individual projects that may cause emissions to go down at one unit but up at another.

Continue Reading EPA Decides Both “Increases” and “Decreases” Count in Determining NSR Applicability

On January 25, 2018, EPA’s Assistant Administrator, William Wehrum, issued a memorandum addressing when a “major source” subject to a section 112 maximum achievable control technology (“MACT”) standard of the Clean Air Act (“CAA”) can be reclassified as an “area source,” and thus avoid any more stringent requirements that only apply to “major sources.”  The memorandum departs from and supersedes EPA’s longstanding “Once in Always in” (“OIAI”) policy articulated in the May 1995 Seitz Memorandum.  Under the OIAI policy, a major source of hazardous air pollutants (“HAPs”) was permanently subject to the MACT standard at the “first compliance date” of the standard even if the source was able to later limit its potential to emit (“PTE”) HAPs below the major source thresholds.  EPA’s new policy explains that a major source will become an area source once it takes enforceable limits on its PTE to ensure emissions cannot exceed the applicable major source thresholds for HAPS.

Continue Reading EPA Withdraws “Once in Always in” Policy, Removing Disincentive to Reducing Emissions

On January 8, the Supreme Court denied Murray Energy’s petition for appeal of a Fourth Circuit decision that had rejected its efforts to obtain judicial enforcement of Section 321 of the Clean Air Act (“CAA”).  Section 321(a) requires EPA to evaluate the potential for plant closures and job losses resulting from regulation and/or enforcement under the Act.  The decision marks the end of a legal challenge brought by Murray Energy and 15 states in October 2016, in which the Northern District of West Virginia strongly rebuked EPA’s failure to comply with the statute (as previously reported here).  In a 27-page opinion, the district court took EPA to task, finding that the Agency’s longstanding failure to comply with § 321 evidenced a “continued hostility” to the provision.  The district court required the Agency to establish a system by the end of 2017 for conducting the evaluations.

Continue Reading While Supreme Court Denies Petition for Appeal in Jobs Suit, EPA Plans to Revive Employment Impact Analyses

On December 7, 2017, EPA Administrator Scott Pruitt issued a memorandum explaining EPA’s future approach concerning enforcement of the New Source review program, considering the uncertainty created by the Sixth Circuit’s decisions in the DTE NSR cases (U.S. v. DTE Energy Co., 711 F.3d 643 (6th Cir. 2013) and U.S. v. DTE, 845 F.3d 735 (6th Cir. 2017)). NSR requires new major sources and major modifications at existing sources to obtain a permit before construction commences. In determining whether a permit is needed for a major modification, owners or operators are required to conduct a pre-construction applicability analysis to determine whether the proposed project would cause a significant emission increase, calculated using the actual-to-projected-actual applicability test that compares past actual emissions to future projected emissions. The memorandum’s main focus is on circumstances where sources have used that test in determining NSR applicability and the pre- and post-project source obligations. Continue Reading New Source Review Memorandum Alters EPA’s Enforcement Approach Concerning Actual-to-Projected-Actual Applicability Test