EPA Followed States' Lead in Developing Power Plant Proposal, Officials Say

By Andrew Childers  

July 14 — The Environmental Protection Agency built off of successful state initiatives when it proposed carbon dioxide emissions standards for existing fossil fuel-fired power plants, agency officials and environmental advocates said.

The various components of the proposed carbon dioxide standards are already being implemented by the states and have proven to be achievable and cost effective, Lorie Schmidt, the EPA's associate general counsel for air and radiation, said at a July 14 forum sponsored by the Environmental Law Institute. The EPA's proposal, which would be administered by state and local air pollution officials, would allow states to choose a variety of options for achieving the required emissions reductions, including heat rate improvements at the power plants themselves, increased use of natural gas generation or investment in new renewable generation or demand reduction programs.

“We base them on what's happening out in the electricity markets now,” Schmidt said.

Industry advocates argue the EPA is reading the Clean Air Act's requirement to determine the “best system of emissions reduction” for power plants too broadly. The EPA argues that language is sufficiently broad that it can regulate the power sector as a whole. Industry advocates say the EPA is limited to only those emissions reductions that can be achieved at individual power plants, which would greatly limit the proposed rule's projected emissions reductions.

Rule Mirrors State Programs

Megan Ceronsky, a senior attorney at the Environmental Defense Fund, said the proposed rule should be defensible when it is inevitably litigated because of how well it mirrors the steps states are already taking.

“It looks a heck of a lot like what all of these states across the county have been doing that is actually producing emissions reductions,” she said.

The proposed carbon dioxide standards for existing power plants under Section 111(d) of the Clean Air Act (RIN 2060-AR33) would establish unique carbon dioxide emissions rates for the power industry in each state. The EPA anticipates its proposal could reduce carbon dioxide emissions from the existing fleet of power plants by 30 percent from 2005 levels by 2030 at a cost to the power industry of $5.4 billion to $8.8 billion in 2030 (79 Fed. Reg. 34,959).

“Our understanding of [best system of emissions reduction], as well as practicality, is we couldn't work with a one size fits all approach. We had to allow each state to start where it is,” Joseph Goffman, senior counsel for the EPA's Office of Air and Radiation, said.

Bill Becker, executive director of the National Association of Clean Air Agencies said the EPA's proposal largely includes all of the flexibilities that states had requested prior to its development.

States had outlined a series of principles to guide the EPA as it developed the proposed rule in a 2013 letter to the agency.

“It is really nice to see the principles mirror identically what EPA proposed,” Becker said.

Enforcement a Concern

The EPA's decision to look beyond individual power plants and include options such as investment in renewable electricity generation and demand-reduction programs creates unique enforcement complications, Allison Wood, a partner at Hunton & Williams LLP, said. The rule could hold power plants liable for emissions reductions that take place beyond the facility itself.

“How do you enforce it other than making the source responsible?” Wood asked. “Who's responsible if the demand side management program doesn't work? Who do you sue?

The EPA's proposed rule offers states four “building blocks” they can use to achieve their individual emissions rates. The proposed rule would allow states to take credit for carbon dioxide emissions reductions achieved by making improvements to the heat rate at individual power plants, switching electricity generation from coal-fired units to more efficient gas-fired generation, investments in renewable energy and other sources with no or few carbon dioxide emissions and investing in programs to reduce demand for electricity.

The heat rate improvements are the only emissions reductions that can be achieved at the power plants, themselves, Wood said. She said Section 111 of the Clean Air Act is intended to achieve emissions reductions at regulated facilities and was not written to credit reductions achieved off site.

“You have to have something you can do at the source that will reduce emissions from that source and that's how it's always been interpreted,” Wood said.

Opponents See Vulnerabilities

The EPA's decision to reach beyond the fence line of power plants to require carbon dioxide emissions reductions could leave the proposed rule vulnerable to litigation, industry attorneys said.

“If you were to poll all of the lawyers, this would be the number one issue,” Roger Martella, a partner at Sidley Austin LLP, said.

The EPA's proposed rule would allow states to adopt energy portfolios to demonstrate compliance with the carbon dioxide emissions rates, but that could leave renewable energy producers and demand side reduction groups liable for emissions reductions, Martella said.

The EPA's proposed rule also could run afoul of a recent U.S. Supreme Court decision that limited the EPA's greenhouse gas permitting authority, Martella said.

That decision seems to indicate the EPA may expect heightened scrutiny from the court when it interprets ambiguous statutory language (Util. Air Regulatory Grp. v. EPA, 2014 BL 172973, U.S., No. 12-1146, 6/23/14).

Though the Supreme Court has indicated that it supports the EPA's authority to regulate greenhouse gases under Section 111 of the Clean Air Act, Martella said that high court decision could constrain the EPA's ability to look beyond the power plant fence line to seek emissions reductions.

“This is going to cast a significant shadow over everything EPA does,” he said.

To contact the reporter on this story: Andrew Childers in Washington at achilders@bna.com

To contact the editor responsible for this story: Larry Pearl at lpearl@bna.com