By Johanna Adashek
On May 23, 2023, EPA proposed a new rule that would regulate fossil fuel-fired electric generating units (EGUs). The regulations reflect different regulatory requirements that EPA has crafted using its authority under the Clean Air Act (CAA) § 111, often referred to as New Source Performance Standards or NSPS. This blog post will provide a brief explanation of the NSPS as well as factual background on the kinds of fossil fuel-fired EGUs that are treated differently for purposes of this proposed rule. The post will then discuss the five components of the new rule in the following order: (1) the revised NSPS for greenhouse gas emissions from new fossil fuel-fired stationary combustion turbine EGUs; (2) the repeal of the Affordable Clean Energy Rule; (3) the emission guidelines for existing fossil fuel-fired steam generating units; (4) the emission guidelines for existing large and frequently used stationary combustion turbine EGUs; and (5) the solicitation of comments on regulating existing smaller and less frequently used fossil fuel-fired combustion turbines.
Legal Background on New Source Performance Standards
The CAA requires EPA to regulate categories of stationary sources that cause or contribute to “air pollution which may reasonably be anticipated to endanger public health or welfare.” § 111(b)(1)(A). The statute distinguishes between new or modified sources that EPA is authorized to regulate under § 111(b) and existing sources whose regulation is governed by § 111(d). For new sources under § 111(b), EPA first lists the source category. It then establishes standards of performance for each listed category. Once promulgated, these standards apply directly to all sources without state participation. EPA must base the NSPS on what it determines to be the best system of emission reduction that has been adequately demonstrated (BSER) for the category in question, taking into account the cost of the reductions, non-air quality health and environmental impacts, and energy requirements. § 111(a)(1). Once EPA defines the BSER, it must determine the degree of emission limitation achievable through its application. Those are the emission limits that are binding on new or modified sources in the regulated category. § 111(e).
Section 111(b) applies only to new or modified stationary sources. But once EPA has established a NSPS for a category of new sources, § 111(d) requires that it regulate emissions from existing sources in that category that are not regulated as so-called criteria pollutants covered by National Ambient Air Quality Standards under §§ 108 to 110 or as hazardous air pollutants regulated under § 112’s National Emission Standards for Hazardous Air Pollutants. Whereas the federal government is solely responsible for the enactment and enforcement of § 111(b) NSPS, for existing sources, § 111(d) requires EPA to create emission guidelines based on BSER and the associated degree of achievable emission limitation. The states must then submit to EPA plans for the implementation and enforcement of standards applicable to existing sources in a regulated category. § 111(d)(1)(A)-(B). If a state fails to submit a plan or EPA determines that a state plan is not satisfactory, EPA has the authority to establish a federal CAA § 111(d) plan. § 111(d)(2)(A).
Section 111(b), which governs new sources, requires EPA to review NSPS at least once every 8 years. § 111(b)(1)(B). However, EPA need not review a NSPS if it determines that review is not appropriate based on the efficacy of the standard, and it is not required to revise a NSPS even if it reviews it. If EPA decide to revise NSPS, the CAA authorizes it to add limits for pollutants or emission sources not currently contained in the NSPS.
Under the proposed rule for EGUs, EPA has proposed to revise two preexisting NSPS and to create two additional NSPS. The proposed rule will update 40 CFR part 60, subpart TTTT, Standards of Performance for Greenhouse Gas Emissions for Electric Generating Units, and 40 CFR part 60, subpart UUUUa, the Affordable Clean Energy Rule. Two new subparts will be created by the proposed rule, including 40 CFR part 60, subpart TTTTa, Standards of Performance for Greenhouse Gas Emissions for Modified Coal-fired Steam Electric Generating Units and New Construction and Reconstruction Stationary Combustion Turbine Electric Generating Units, and 40 CFR part 60, subpart UUUUb, Emission Guidelines for Greenhouse Gas Emissions for Electric Utility Generating Units. Subpart TTTT pertains to new/modified/reconstructed facilities, whereas subpart UUUU pertains to emission guidelines for existing facilities. To help understand and distinguish among the different kinds of sources that would be affected by the proposed rule, the next section provides a brief explanation of the technologies used at these sources.
Factual Background
Originally, EPA listed fossil fuel-fired EGUs, including coal, natural gas, and petroleum from steam-generating boilers in 1971 and listed fossil fuel-fired combustion turbines in 1977. In 2015, NSPS were created for the emission of CO2 from new, modified, and reconstructed affected fossil fuel-fired EGUs (codified in subpart TTTT), utilizing efficient standards and technology as well as implementing partition CCS. The rule created separate standards for steam generating units (usually coal-fired) and stationary combustion turbine generating units (usually natural gas). Stationary combustion turbines can be further broken down into combined cycle (first generates heat from a combustion turbine then reuses the waste heat for additional steam power) or simple cycle (only uses combustion turbine and is less efficient). Within each component of the proposed rule, facilities are further subcategorized and different systems of emission reduction are offered for each.
In order to achieve the greenhouse gas (GHG) reductions in the proposed CAA § 111 rule, EPA is relying on a few key technologies and technological improvements, including carbon capture and storage (CCS), natural gas co-firing, and hydrogen co-firing. CCS involves the removal of CO2 from flue gas, the CO2 is then compressed and transported to a site where it is sequestered or stored deep underground. 88 Fed. Reg. 33240, 33254. Natural gas co-firing is the substitution of natural gas for coal within a coal-fired steam generating unit. Id. Hydrogen co-firing is integrating hydrogen as a fuel in combustion turbines instead of natural gas. 88 Fed. Reg. at 33255. While the combustion of hydrogen does not directly produce CO2, the manufacture and production of hydrogen may generate GHG emissions. Hydrogen can be produced with low-GHG emissions; although without government support, cost-effectiveness has been an issue. However the IILJ (Bipartisan Infrastructure Law) and IRA (Inflation Reduction Act) provide incentives for the production of low-GHG hydrogen, which is reflected in Internal Revenue Code § 45V. The following sections detail the five actions in the proposed CAA § 111 rule.
Revised NSPS for GHG Emissions from New and Reconstructed Fossil Fuel-fired Stationary Combustion Turbine EGUs
NSPS for stationary combustion turbine EGUs were initially codified in 2015 under 40 CFR part 60, subpart TTTT. The NSPS were subcategorized into (1) baseload natural gas turbines, (2) non-baseload natural gas turbines, and (3) multi-fuel-fired combustion turbines. The revisions will replace the above three categories with three categories based on capacity: low, intermediate, and base load combustion turbines. Low load (also known as peaking units) are categorized as those with a capacity factor of less than 20%. Intermediate load facilities are those with a capacity factor between 20% and a source-specific upper bound based off the design efficiency of the combustion turbine (between around 33-40% for simple cycle combustion turbines and 45-55% for combined cycle combustion turbines). The base load subcategory (facilities that run continuously over an extended period of time) is categorized as the turbines that operate above the upper-bound threshold for the intermediate subcategory.
After listing and categorizing the proposed source, EPA then designated the proposed BSER. Low load EGUs will utilize lower emitting fuels (e.g., natural gas and distillate oil) and maintain performance standards of 120 or 160 lb CO2/MMBtu, depending on fuel type. Both intermediate and base load EGUs have multiple phases of BSER. Intermediate load facilities will first need to meet highly efficient generation standards by the date of the final rule. The second phase is co-firing 30% by volume low-GHG hydrogen by 2032 and potentially co-firing 96% by volume by 2038. Base load facilities will also have to meet highly efficient generation. For phase two, base load EGUs will either have until 2035 to achieve 90% capture from CCS, or co-firing of 30% low-GHG hydrogen by 2032, and ultimately 96% by volume low-GHG hydrogen by 2038.[1]
Furthermore, in accordance with EPA’s 8-year review requirements under § 111, EPA concluded that it is unnecessary to review the 2015 NSPS for new construction or reconstruction of fossil fuel-fired steam generators as EPA is unaware of any intentions to construct new or reconstruct existing fossil fuel-fired (i.e., coal) steam EGUs . However, EPA is amending the portions of the 2015 NSPS that pertain to large modifications of fossil fuel-fired steam EGUs in order to align them with the stringency of the requirements for existing plants. The proposed BSER and associated degree of emission limitation for modifications will mirror the proposed BSER for long-term existing coal-fired steam generating units (those planning to operate to 2040) detailed below.
Repeal of the Affordable Clean Energy Rule
After the initial promulgation of the fossil fuel-fired EGUs NSPS standard in 2015 under CAA § 111(b), EPA was required to set standards for existing fossil fuel-fired EGUs under CAA § 111(d). The Affordable Clean Energy (ACE) Rule was EPA’s second attempt to exercise its statutory obligation under CAA § 111(d). The first attempt was the Obama administration’s Clean Power Plan, with BSER being (1) heat rate improvements at coal plants, (2) shifting generation from coal-fired plants to lower-emitting natural gas plants, and (3) shifting generation from fossil fuel-fired plants to renewable energy sources. EPA also established the degree of emission limitations in the form of performance rates. As § 111(d) standards for existing plants are implemented by the states, EPA allowed states to exercise discretion in how they could meet the performance rates. States were not required to follow the three building blocks of the identified BSER, and they could pick any number of methods including carbon trading or averaging. 80 Fed. Reg. 64667, at 64840. Immediately, various parties petitioned for review in the D.C. Circuit and the Supreme Court. After the D.C. Circuit refused, the Supreme Court stayed the rule. With the change in administration, the Trump administration requested, and the D.C Circuit approved, that the case be held in abeyance while a new 111(d) rule was developed. In 2019, the EPA promulgated the ACE rule and in the same rulemaking repealed the Clean Power Plan.
In creating the ACE Rule, EPA interpreted BSER to be limited to only those “measures that can be applied to and at the level of the individual source.” 84 Fed. Reg. 32520, at 32529. EPA thereby concluded that BSER should not include generation shifting. BSER under the ACE rule was essentially equivalent to the first of three building blocks from the Clean Power Plan and only included heat rate improvements.
In 2021, the D.C. Circuit vacated the ACE Rule, holding that EPA is not limited under § 111(d) to measures applied at an individual source and that “nothing in the text, structure, history, or purpose of [CAA § 111] compels the reading the EPA adopted.” American Lung Association v. EPA, 985 F.3d 914, 957 (D.C. Cir. 2021). As the ACE Rule included in the same rulemaking the repeal of the Clean Power Plan, when the D.C. Circuit vacated the ACE Rule, overturning the rule that repealed the Clean Power Plan might have theoretically vacated the repeal of the Clean Power Plan. Nonetheless, EPA requested a stay from the D.C. Circuit for the Clean Power Plan to remain repealed as the emissions reductions projected in the Clean Power Plan had been achieved by 2021, due to changes in electricity generation.
In 2022, despite the D.C. Circuit’s stay of the Clean Power Plan, the Supreme Court granted certiorari in West Virginia v. EPA, which involved claims in opposition to the Clean Power Plan. The Court held that EPA’s use of generation shifting was invalid under the major questions doctrine. West Virginia v. EPA, 142 S. Ct. 2587 (2022). Among other things, the Court viewed generation shifting as unprecedented, representing a transformative expansion of regulatory authority, and a policy that required clear congressional authorization. After the West Virginia v. EPA decision, the D.C. Circuit recalled its vacatur of the ACE Rule, bringing it back into effect. The court stayed proceedings on the ACE Rule, which reestablished the status quo prior to EPA’s new § 111 rule.EPA is now proposing to repeal the ACE Rule on three grounds: (1) the BSER in the ACE Rule of heat rate improvements is no longer appropriate, provides negligible reductions in CO2, and threatens to increase CO2 emissions due to increased efficiency leading to increased generation and increased absolute emissions (known as the rebound effect); (2) the ACE Rule abandoned CCS and natural gas co-firing for reasons no longer applicable due to market and technological changes; (3) the ACE Rule listed a less than adequate degree of emission limitation as it utilized an “indeterminate range of values” and precluded states from incorporating trading and averaging. 88 Fed. Reg. at 33357 (rebound effect). The new CAA § 111(d) rule for existing fossil fuel-fired EGUs is intended to replace the ACE Rule and Clean Power Plan (third time’s the charm).
Emission Guidelines for Existing Fossil Fuel-fired Steam Generating Units
For this CAA § 111(d) rule, EPA is subcategorizing existing fossil fuel-fired steam generating units into coal, oil, and natural gas facilities. Coal-fired steam generating units are further separated by expected longevity of operation. For long-term existing coal-fired steam EGUs that expect to operate into or beyond 2040, BSER is CCS with 90% capture of CO2with an associated degree of emission limitation of 88.4% reduction in emission rate. For medium-term coal-fired steam EGUs operating into 2032 that commit to cease operations before 2040, BSER is co-firing at 40% natural gas on a heat input basis with an associated degree of emission limitation of 16% reduction in emission rate. For near-term coal-fired steam EGUs that commit to cease operations before 2035 and adopt an annual capacity factor limit of 20%, BSER is routine methods of operation and maintenance and no increase in emission rate. For imminent-term coal-fired steam EGUs that commit to cease operations before 2032, BSER is routine methods of operation and maintenance and no increase in emission rate. The facilities committing to cease operations must also elect to make their commitment to retire and the other categorical conditions federally enforceable in the State Plan.
For existing natural gas-fired and oil-fired steam generating units, EPA is proposing emission guidelines of routine methods of operation and maintenance with an associated degree of emission limitation of no increase in emission rate. This is due to the relatively small capacity factors of existing natural gas- and oil-fired steam generating units. There are approximately 200 natural gas and less than 30 oil-fired steam generating units operating in the continental U.S. for electric generation, and most operating not as base loads but as load-followers. In 2019, these natural gas facilities’ average annual capacity factors were less than 15% and all such oil-fired facilities operated at below an 8% annual capacity factor. 88 Fed. Reg. at 33357. The relatively small amount of natural gas and steam generating units provides sufficient rationale for the proposed rule’s light BSER.
Emission Guidelines for Existing Large and Frequently Used Existing Stationary Combustion Turbines
As EPA is proposing NSPS for new fossil fuel-fired stationary combustion turbines under § 111(b), EPA is required to also establish emission guidelines for existing facilities of fossil fuel-fired stationary combustion turbines under § 111(d). For existing stationary combustion turbines, EPA is essentially creating two categories, and is currently proposing regulations for the largest and most frequently operated existing combustion turbines. The rest of the facilities that do not qualify as the largest and most frequently operated are discussed in the section below. The largest and most frequently operated existing stationary combustion turbines target mainly base load facilities, those with more than 300 MW capacity and have an annual capacity factor of more than 50%. EPA is beginning with this category because while projections for 2035 show only 14% of existing combustion turbine capacity and 23% of generation coming from this category of large and frequently operated turbines, EPA projects by that same time this category will be 74% of greenhouse gas emissions from the power sector with only 25% of generation. 88 Fed. Reg. 33361-362.
BSER is either CCS by 2035 or co-firing of 30% by volume low-GHG hydrogen by 2032 and ultimately co-firing 96% by volume low-GHG hydrogen by 2038. This is the same BSER as proposed for the intermediate and base load (low-GHG hydrogen option) in the revised NSPS for new and reconstructed fossil fuel-fire combustion turbine EGUs. For emissions guidelines, EPA is proposing state plan requirements with submittal timelines and methodologies, acknowledging the flexibility with which states can implement the remaining useful life and other factors (RULOF) under CAA § 111(d), and allowing states to include trading or averaging so long as there are equivalent emissions reductions. The proposed deadline for compliance is 2030 for existing fossil fuel-fired combustion turbine EGUs regulated in the proposal.
Effective in 2030, these EGUs will be subject to performance standards and other requirements in their pertinent State plan. For State plans, EPA is proposing a submission deadline of 24 months from publication of the final rule, which is expected in June 2024. States have the discretion to establish their own standards of performance allowing for flexible implementation. The State plans must be at least as stringent as the federal standards of performance and can be more stringent as well. Additionally, EPA will allow states to set the emissions limitation utilizing aggregate reductions from sources, which they can establish using the trading or averaging methods.
Soliciting Comment on Regulating Existing Smaller and Less Frequently Operated Fossil Fuel-fired Combustion Turbines
EPA is not proposing an emission guideline for the smaller and less frequently operated fossil fuel-fired combustion turbines and is instead soliciting comments on how to regulate the EGUs not included in the above section. This includes turbines with capacities between 100 MW and 300 MW and likely a lower capacity factor threshold.
The proposed rule’s preamble explains the extrinsic factors lending support to the proposed rule. Market trends are leaning away from coal and greenhouse gases and towards lower-GHG emitting forms of energy. Companies are also voluntarily retiring old coal plants. States have been enacting policies to encourage emissions reductions and over half of U.S. states have Renewable Portfolio Standards. Recent laws provide incentives for renewable energies, and environmental technologies. The IRA created tax credits for CCS reflected in IRC § 45Q and low-GHG hydrogen reflected in IRC § 45V. The IILJ designated $65 billion for infrastructure investments and upgrades for transmission capacity, pipelines, and low-carbon fuels. 88 Fed. Reg. at 33246. The “Creating Helpful Incentives to Produce Semiconductors and Science Act” (CHIPS Act) authorized billions for low- and non-GHG emitting energy technologies. Id. From a public health perspective, the proposed rule is projected to decrease emissions of CO2, SO2, NOX, and PM2.5. 88 Fed. Reg. at 33412. Further, while the standards would reduce direct PM2.5, the reduction in NOX and SO2 as precursors to the secondary formation of PM2.5 would reduce ambient PM2.5 as well. Additionally, as NOX and volatile organic compounds can form ozone when reacting with sunlight, reducing NOX can also reduce ozone. Reductions in these pollutants will provide various benefits for human health and cleaner air. EPA will accept comments on the proposed rule until July 24, 2023.
[1] For the different associated degrees of emission limitations see 88 Fed. Reg. at 33244-245.
The author thanks Assistant Dean Donna Attanasio, Assistant Dean Randall Abate, and Professor Rob Glicksman for their feedback on this blog post. If you have any questions, feel free to drop a comment below. Follow GW Law Environmental and Energy Law’s social medias for program updates.
