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In the last month of 2018, EPA released two proposals that it claims will have no immediate effect—revised CO2 standards for new coal-fired power plants that EPA does not expect anyone to build, and a determination that it is not “appropriate and necessary” to have a mercury rule that it nevertheless plans to keep on the books.  The question many may be asking is why EPA would issue two highly controversial rules if they won’t have any practical effect?  The answer may lie in the precedent they will set.

Continue Reading EPA Issues Two Controversial Proposals for Utilities That Will Have No Effect. Why?

This afternoon, EPA announced proposed revisions to performance standards governing CO2 emissions from new, reconstructed and modified coal-fired electric generating units. The proposal would drop carbon capture and storage (CCS) as the best system of emission reduction (BSER) for new units in favor of efficient supercritical steam design for large units and subcritical design for smaller units, both in combination with best operating practices. EPA proposes to increase the corresponding performance standards consistent with the change in the BSER. Given the change in new source standards, EPA is also proposing conforming revisions to the standards for modified and reconstructed units and will add a proposed new standard for new and reconstructed units that burn coal refuse.

Overview of Proposed Changes

Affected EGUs 

 Current Performance Standard Proposed New Performance Standard
New Coal-Fired Units

 

 

1,400 lb CO2/MWh gross

 

 

 

1,900 lb CO2/MWh gross for large units1 2,000 lb CO2/MWh gross for smaller units2

 
Reconstructed Coal-Fired Units

 

1,800 lb CO2/MWh gross for large units

2,000 lb CO2/MWh gross for smaller units

 

 

1,900 lb CO2/MWh gross for large units

No change for smaller units

 

New & Reconstructed Coal-Refuse-Fired Units

 

 

No separate standard

 

 2,200 lb CO2/MWh-gross, regardless of the size of the unit
Modified Coal-Fired Units  

Unit-specific standards based on the unit’s best historical annual CO2 emission rate but no lower than 1,800 lb CO2/MWh gross for large units and 2,000 for smaller units

 

Same unit-specific approach but conforming the lower limit to the new source standards: 1,900 for large units, 2,000 for smaller units, and 2,200 for coal-refuse-fired units

1 Large units are defined as those having a base load rating of greater than 2000 MMBtu/hour.

2 Smaller units are defined as those having a base load rating of 2000 MMBtu/hour or less.

In addition to these changes, EPA is soliciting comment on the proper interpretation of the regulatory language providing the predicate for the regulations – the cause or contribute determination. Under Section 111 of the Act, before EPA can regulate, it must find that emissions from the source category “cause or contribute significantly to air pollution which may reasonably be anticipated to endanger public health or welfare.” EPA requests input on “the proper interpretation of this phrase, the agency’s historic approach to this requirement, and whether this requirement should apply differently in the context of greenhouse gases than for traditional pollutants.”

While EPA is not proposing revisions to the CO2 performance standards for natural gas fired units (simple cycle combustion turbines and combined cycle units), it does request comments on the current standard for new simple cycle aero-derivative turbines, including those used as back-up generation for wind and solar generation. Based on the feedback, EPA notes it might undertake separate action in the future on those standards.

This proposal responds to the Trump Administration’s Executive Order on Promoting Energy Independence and Economic Growth, which directed EPA and other agencies, to review existing regulations and revise or rescind “those that unduly burden the development of domestic energy resources beyond the degree necessary to protect the public interest or otherwise comply with the law.”

Comments on the proposed revisions will be due 60 days from the date of publication in the Federal Register. EPA’s proposal and supporting documentation are available here on EPA’s website.

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 July 25, California Governor Jerry Brown signed into law Assembly Bill 398, an extension of California’s greenhouse gas (GHG) cap-and-trade program through 2030.  Eight days after being introduced, AB 398 passed the California Legislature with a two-thirds majority vote of 55-22 in the Assembly and 28-12 in the Senate.  AB 398 implements California’s goal of reducing GHG emissions to 40 percent below 1990 levels by 2030, which was codified in SB 32, a bill signed by Governor Brown last year.

Continue Reading California Extends Greenhouse Gas Cap-and-Trade Program Through 2030

California’s Supreme Court recently upheld the State’s greenhouse gas (GHG) cap-and-trade auction program.  In a June 28, 2017 order, the Court denied petitions to review a lower court’s ruling that affirmed the program’s legality.  Filed by a coalition of industry groups, including the California Chamber, the petitions had alleged that the cap-and-trade program constitutes an illegal tax under Proposition 13 because the law authorizing it, AB 32, was not passed by a two-thirds vote.

Continue Reading California’s High Court Upholds GHG Allowance Auction Program

In the Rose Garden of the White House, President Trump fulfilled a key campaign promise today by confirming that the United States will begin withdrawing from the Paris Climate Change Agreement (“Agreement”).  President Trump cited the Agreement’s potential financial and economic burdens as a key reason for the withdrawal. Continue Reading U.S. to Withdraw from Paris Climate Deal

Recently, the Ninth Circuit upheld the Environmental Protection Agency’s (“EPA”) decision to issue an air permit under the Clean Air Act for the construction of a biomass cogeneration facility at a lumber mill, concluding that EPA had acted reasonably when it determined that the applicant should not be required to consider solar power or a greater use of natural gas as part of the Greenhouse Gas Best Available Control Technology (“GHG BACT”) review for the permit.  

Continue Reading 9th Circuit Upholds EPA’s Refusal to Require Solar Panels as Part of BACT Analysis for Biomass Facility