EPA Proposes Replacement for Clean Power Plan

On August 21, 2018, Acting U.S. Environmental Protection Agency (EPA) Administrator Andrew Wheeler signed the Affordable Clean Energy (ACE) rule. The proposal seeks to replace the 2015 Clean Power Plan (CPP), the centerpiece of President Obama’s environmental legacy. Unlike the CPP, however, the ACE rule does not set limits for greenhouse gas (GHG) emissions from fossil fuel-fired power plants. Instead, it vests the states with broad discretion to set – or not set – GHG limits at individual power plants based on what emissions reductions are achievable at each facility.   

This devolvement of authority to the states is the cornerstone of the proposed rule: states now have the primary authority to determine what emission controls, if any, are warranted at individual facilities. EPA’s role under the rule is to create a regulatory framework and make recommendations for improving efficiencies at power plants and reducing GHG emissions. EPA will do so by identifying the best system of emission reduction (BSER) as heat-rate efficiency improvements at an existing power plant, and then provides states with a list of “candidate technologies” to consider as they make plant-by-plant determinations.

The ACE rule is comprised of three components. First, EPA is proposing to replace the CPP with revised emissions guidelines that inform the development, submittal, and implementation of state plans to reduce GHG emission from certain electric utility generating units (EGUs). In the proposed emissions guidelines, EPA is proposing to determine that Heat Rate Improvement (HRI) measures are BSER for existing coal-fired EGUs.  (HRIs are efficiency upgrades that reduce that amount of carbon dioxide emitted per unit of electricity generated.) Second, EPA is proposing new regulations that provide direction to EPA and the states on the implementation of emission guidelines. Third, EPA is proposing revisions in the form of reduced regulations to the New Source Review (NSR) program that EPA believes will help prevent NSR from being a barrier to the implementation of efficiency projects at EGUs. 

The rule also provides states with a list of “candidate technologies” that can be used to establish standards of performance and incorporated into their state plans. EPA is also proposing a new applicability test for determining whether a physical or operational change made to an EGU may be a “major modification” triggering NSR. And EPA is proposing revisions to the NSR permitting program to give states the option to adopt an hourly emissions increase test for such projects. Under this approach, only projects that increase a plant’s hourly rate of pollutant emissions would trigger NSR analysis. 

With respect to NSR, EPA specifically is proposing to amend the NSR regulations to include an hourly emissions increase test for modifications at EGUs.   EPA is proposing two alternatives for an hourly emissions test based on maximum achieved emissions (i.e., what the unit has actually emitted in the past) and one alternative based on maximum achievable emissions (i.e., what the unit could have emitted when operating at its maximum capacity).  Under each of the proposed alternatives, NSR applicability for projects undertaken at an EGU would be determined using a four-step applicability process:

• Will the project constitute a physical change or change in the method of operation (applying the current major NSR regulations)?;
• If so, will the change result in an increase the hourly emissions rate of the EGU (based either on the maximum achieved hourly emissions rate (Alternatives 1 and 2 in the proposal) or maximum achievable hourly emissions rate (Alternative 3 in the proposal);
•  If there is an increase in the unit’s hourly emissions rate, is the project also predicted to result in a significant increase in annual emissions (applying the current major NSR regulations)?; and
• If the project is predicted to result in a significant increase in annual emissions, will there also be a significant net increase in annual emissions at the major stationary source?