Clean Power Plan Grants States More Time, Autonomy

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By Andrew Childers

Aug. 3 --The Environmental Protection Agency will extend the deadlines for states to comply with its carbon dioxide standards for power plants and allow them to craft their own glide path toward compliance as part of a final rule released Aug. 3.

The final Clean Power Plan (RIN 2060-AR33), issued under Section 111(d) of the Clean Air Act, phases in the required carbon dioxide emissions reductions between 2022 and 2030 in a concession to states that had argued the original proposal demanded significant emissions reductions too quickly.

“We’ll reward the states that take action sooner rather than later because time is not on our side,” President Barack Obama said when announcing the rules Aug. 3.

Additionally, the rule will explicitly require states to incorporate a reliability safety valve to ensure grid reliability as part of their compliance plans to implement the standards.

The EPA also sought to make its final rule more legally defensible by dropping the energy efficiency component that the agency had proposed. Critics had argued the EPA lacked the legal authority to require the emissions reductions beyond the fenceline of the power plants themselves. Instead, the agency will establish a voluntary energy efficiency program to encourage early emissions reductions (see related story).

The EPA predicted that its final Clean Power Plan will reduce carbon dioxide emissions from the power sector by 32 percent below 2005 levels by 2030 at a cost of $8.4 billion per year in 2030.

The agency also issued final carbon dioxide emissions standards for new power plants (see related story).

States Given Time, Autonomy

The final Clean Power Plan will extend the initial compliance period for the rule from 2020 as proposed to 2022, allowing states additional time to develop their strategies .

“This rule is sort of what the federal government can do under the existing law. It’s now going to be up to the states to carry out the planning process,” Bob Perciasepe, president of the Center for Climate and Energy Solutions and former deputy administrator of the EPA, told reporters Aug. 3.

States had complained that the EPA's proposed rule would create a “cliff” by requiring the bulk of the emissions reductions beginning in 2020, when the rule was to have taken effect. Instead, the final rule will begin implementation in 2022 but phase the emissions reductions in over time, allowing states to chart their own glide path toward compliance. The states would need to meet emissions rates targets between 2022 and 2024; 2025 and 2027; 2028 and 2029, with the final targets achieved by 2030.

States will have the option of submitting either their final plans or an initial submission to the EPA by Sept. 6, 2016. States that choose to make that initial submission will have until Sept. 6, 2018, to complete their plans.

Nathan Richardson, assistant professor of law at the University of South Carolina School of Law and a visiting fellow at Resources for the Future, told Bloomberg BNA Aug. 3 that the initial submission deadline is meant to cajole reluctant states into working with the EPA to implement the rule.

“You got to play ball with EPA to get an extra two years,” Richardson said.

While states will be tasked with developing plans to implement the Clean Power Plan, the EPA Aug. 3 also issued a model federal plan to guide that process. The EPA will issue a federal plan, which focuses on emissions trading, for those states that choose not to develop their own (see related story) .

New Calculations Modify State Goals

Many states saw their emissions rate targets change from the proposed rule as the EPA adjusted how it calculated each state's targets, including dropping energy efficiency components of the proposal.

As a result, Texas, for example, will have a 2030 carbon dioxide emissions rate target of 1,042 pounds per megawatt-hour, up from 791 pounds per megawatt-hour in the proposal. Other states will see more lenient goals. Kentucky's 2030 emissions rate target will decrease from 1,763 pounds of carbon dioxide per megawatt-hour in the proposal to 1,286 pounds per megawatt-hour in the final rule.

“For some states, they will be comfortable with their targets,” Alexandra Dunn, Executive Director and General Counsel of the Environmental Council of the States, told Bloomberg BNA Aug. 3. However, she conceded, “We know other states won’t be.”

The rule does not include standards for Alaska, Hawaii, Puerto Rico or Guam because the EPA said it lacks sufficient data to set the standards at this time.

The revisions are driven by new assumptions about the how often natural gas-fired power plants can operate and the ability of existing power plants to improve their operating efficiency. The EPA in its final rule has taken a regional approach to calculating heat rate improvements at existing power plants, based on regional grids. The final rule calculates states' emissions targets using heat rate improvements of between 2.1 percent and 4.3 percent regionally rather than 6 percent nationally as proposed. The EPA also revised its method for determining the emissions reductions that can be achieved by greater use of the existing natural gas-fired fleet of power plants by setting emissions guidelines based on those units operating at 75 percent of net summer capacity rather than the 70 percent of their nameplate capacity as proposed.

Energy Efficiency Component Dropped

The EPA had proposed four “building blocks” that states could use to comply with the carbon dioxide standards: heat rate improvements at existing power plants, shifting more generation to natural gas-fired units, new renewable energy generation or investments in energy efficiency programs.

The final rule dropped the energy efficiency component, widely viewed as the most legally vulnerable component of the proposal. Opponents had argued that the EPA lacked the authority to regulate consumer behavior rather than emissions at the power plants themselves.

Despite those revisions, the EPA expects the final rule to produce more carbon dioxide emissions reductions than previously proposed. The agency had anticipated that the proposed rule would reduce carbon emissions by 30 percent from 2005 levels by 2030, but now it expects a 32 percent reduction. The additional gains are driven by a greater emphasis on renewable energy and an expanded role for natural gas.

Thomas Lorenzen, a partner at Crowell & Moring LLP, told Bloomberg BNA Aug. 3 that the energy efficiency component was “truly beyond the bounds because it was actually regulating consumer demand, not even generation of electricity but consumer demand for a product.”

Although the EPA has dropped energy efficiency from its calculations, states will still have the option of pursing that as a compliance measure.

“The energy efficiency change--that those efforts are not part of a formal building block, but are still an acceptable way to meet goals--makes the rule more defensible,” Michael Gerrard, director of the Sabin Center for Climate Change Law at Columbia Law School, told Bloomberg BNA. “With the building block, there was a legal question of could EPA indirectly require actions by those outside the fenceline.”

Reliability Safety Valve Added

The EPA also added a reliability “safety valve” to address unanticipated events to allow power plants to continue operating even if that would conflict with a state's compliance plan, thus ensuring grid reliability.

However, the EPA said it expects these situations to be “extremely rare” because states will have the flexibility to develop requirements for their power plants that will provide long averaging period and/or compliance mechanisms.

EPA said it is providing the safety valve as precaution, though, based on many comments it received on the proposed rule, including input from the Federal Energy Regulatory Commission .

Separately, the EPA, FERC and the Energy Department released a coordination plan Aug. 3, that details how the three agencies will work together to ensure reliable electricity generation and transmission during the implementation of the Clean Power Plan.