Coal, Electricity, Energy Policy, EPA, Gas-Electric Interdependency, Natural Gas, U.S. Supreme Court

EPA & SCOTUS on GHG: EPA’s Proposed Rule on Emissions for Existing Sources Published for Comment & U.S. Supreme Court Makes a Statement on EPA’s Authority to Regulate GHG

Glass globe resting on moss stone in a forestSince the U.S. Environmental Protection Agency’s (“EPA”) June 2, 2014 revelation of its Clean Power Plan to cut carbon dioxide emissions from existing fossil-fuel powered electric generators (the “Plan”), it has garnered much attention and commentary both in support of the initiative to address climate change with a move towards clean energy (e.g., here) and in sharp criticism of the Plan’s potential negative effects on jobs, the American economy, and the reliability and affordability of our power system (e.g., here and here). After the Plan was announced, it was reported that Canada praised the U.S.’s efforts and is seeking to collaborate with the U.S. on reducing greenhouse-gas emissions in the oil and gas sectors. The official 120-day public comment period on the Plan began June 18, 2014 with the EPA’s publishing of the proposed rule to implement the Plan in the Federal Register: Carbon Pollution Emission Guidelines for Existing Stationary Sources: Electric Utility Generating Units. The House Energy & Commerce Committee’s Subcommittee on Energy and Power held a hearing to discuss the Plan on June 19, 2014. And on June 23, 2014, the U.S. Supreme Court issued its decision in a separate matter, Utility Air Regulatory Group v. Environmental Protection Agency, et al., 573 U.S. ___ (2014), which has been described as “a stark reminder that the EPA’s power is not unlimited,” but also as a good result for the EPA that “allows the agency to continue requiring carbon pollution limits for the nation’s largest sources.” EPA will hold four public hearings on the Plan the week of July 28, 2014 in Atlanta, GA (July 29), Denver, CO (July 29), Washington, DC (July 30) and Pittsburgh, PA (July 31). The 120-day public comment period on the Plan ends on October 16, 2014. We highlight several aspects of the Plan here, and discuss the High Court’s decision regarding EPA authority in Utility Air Regulatory Group in a separate post.

The Plan. Pursuant to Section 111(d) of the Clean Air Act, the EPA proposed the Plan seeking to cut carbon dioxide emissions from existing power plants nationwide by 30%, as measured against 2005 levels. The EPA projects that the Plan also would result in a 25%+ reduction of pollution responsible for soot and smog, and that the net climate benefits and health co-benefits could range from approximately $48 billion to $84 billion, depending on whether a regional or state-specific approach is used.

The Plan sets forth state-specific goals based on the EPA’s assessment of potential strategies for reducing carbon pollution and each state’s unique energy mix. The EPA believes that a combination of the following four “building blocks” represents the “best system of emission reduction . . . adequately demonstrated” for fossil fuel-fired electric generators:

  1. Reducing the carbon intensity of generation at individual affected EGUs through heat rate improvements.
  2. Reducing emissions from the most carbon-intensive affected EGUs in the amount that results from substituting generation at those EGUs with generation from less carbon-intensive affected EGUs (including NGCC units under construction).
  3. Reducing emissions from affected EGUs in the amount that results from substituting generation at those EGUs with expanded low- or zero-carbon generation.
  4. Reducing emissions from affected EGUs in the amount that results from the use of demand-side energy efficiency that reduces the amount of generation required.

Under the Plan, states have the option of working singularly or in concert with other states to comply with the Plan. The EPA has stated that the goals “are not requirements on individual electric generating units” and states “will choose how to meet the goal through whatever combination of measures reflects its particular circumstances and policy objectives.” The EPA suggested the following strategies, but noted that states can use a different mix of strategies than that used by the EPA to set the state’s goal:

  • Demand-side energy efficiency programs
  • Renewable energy standards
  • Efficiency improvements at plants
  • Dispatch changes
  • Co-firing or switching to natural gas
  • Construction of new Natural Gas Combined-Cycle plants
  • Transmission efficiency improvements
  • Energy storage technology
  • Retirements
  • Expanding renewables like wind and solar
  • Expanding nuclear
  • Market-based trading programs
  • Energy conservation programs

Details regarding the requirements for state plans under the Plan can be found here.

Proposed Goal for North Carolina. An interactive map with a description of each state’s goal under the Plan, as well as an assessment of each state’s current initiatives, has been provided by the EPA. For North Carolina, the EPA noted that:

In 2012, North Carolina’s power sector CO2 emissions were approximately 53 million metric tons from sources covered by the rule. The amount of energy produced by fossil-fuel fired plants, and certain low or zero emitting plants was approximately 71 terawatt hours (TWh)*. So, North Carolina’s 2012 emission rate was 1,646 pounds/megawatt hours (lb/MWh).

The EPA proposed “that North Carolina develop a plan to lower its carbon pollution to meet its proposed emission rate goal of 992 lb/MWh in 2030.”

Timelines. The EPA anticipates completion of the rulemaking by June 1, 2015, with a June 30, 2016 deadline for states to submit their plans to the EPA. Recognizing that additional time may be needed in some cases, the EPA also proposed “an optional two-phased submittal process” under which states would submit an initial plan meeting certain criteria by June 30, 2016 and then would submit a final plan by June 30, 2017 (for singular state plans) or June 30, 2018 (for multi-state plans).

The EPA proposed that it have twelve months to review and approve state plans. After which, it proposes that “states must begin to make reductions by 2020” and “full compliance with the CO 2 emission performance level in the state plan must be achieved by no later than 2030.” There would be interim CO 2 emission levels that must be met from 2020-2029, and states would have to achieve final CO 2 emission levels by 2030 and maintain that level moving forward. Additional information regarding the proposed rule for emissions guidelines for existing power plants and a link to file comments can be found here and here.

On June 18, the EPA also published in the Federal Register a proposed rule for carbon pollution standards for modified and reconstructed stationary sources – Carbon Pollution Standards for Modified and Reconstructed Stationary Sources: Electric Utility Generating Units. The proposed rule “is proposing standards to limit emissions of carbon dioxide from affected modified and reconstructed electric utility steam generating units and from natural gas-fired stationary combustion turbines.” Additional information regarding the proposed rule for pollution standards for modified and reconstructed power plants and a link to file comments can be found here and here.

Brian Heslin

About Brian Heslin

Brian Heslin represents energy companies in regulatory proceedings at the state and federal level. In addition, he provides advice on busines and strategic planning, upstream natural gas supply and capacity negotiation, compliance and other related services.

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The landscape of the energy industry is rapidly changing, with a focus on the development of clean, domestic energy sources and a secure, reliable energy infrastructure driving significant changes in the interdependency of energy industry segments and an increase in government regulation. Continued growth in the domestic production of oil and natural gas has positioned the U.S. to be an energy exporter in the global market and will have a marked impact on the course of the industry’s development.

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