Vol. 80 Friday, No. 205 October 23, 2015 Book 2 of 2 Books Pages 64661–65120

Part III

Environmental Protection Agency

40 CFR Part 60 Carbon Pollution Emission Guidelines for Existing Stationary Sources: Electric Utility Generating Units; Final Rule

VerDate Sep 11 2014 22:14 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00001 Fmt 4717 Sfmt 4717 E:\FR\FM\BOOK2.TXT BOOK2 tkelley on DSK3SPTVN1PROD with BOOK 2 64662 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

ENVIRONMENTAL PROTECTION Reading Room is (202) 566–1744, and EGU Electric Generating Unit AGENCY the telephone number for the Air Docket EIA Energy Information Administration is (202) 566–1742. For additional EM&V Evaluation, Measurement and 40 CFR Part 60 Verification information about the EPA’s public EO Executive Order [EPA–HQ–OAR–2013–0602; FRL–9930–65– docket, visit the EPA Docket Center EPA Environmental Protection Agency OAR] homepage at http://www2.epa.gov/ FERC Federal Energy Regulatory dockets. Commission RIN 2060–AR33 World Wide Web. In addition to being ERC Emission Rate Credit available in the docket, an electronic FR Federal Register Carbon Pollution Emission Guidelines copy of this final rule will be available GHG Greenhouse Gas for Existing Stationary Sources: on the World Wide Web (WWW). GW Gigawatt Electric Utility Generating Units HAP Hazardous Air Pollutant Following signature, a copy of this final HRSG Heat Recovery Steam Generator AGENCY: Environmental Protection rule will be posted at the following IGCC Integrated Gasification Combined Agency (EPA). address: http://www.epa.gov/ Cycle ACTION: Final rule. cleanpowerplan/. A number of IPCC Intergovernmental Panel on Climate documents relevant to this rulemaking, Change SUMMARY: In this action, the including technical support documents IPM Integrated Planning Model Environmental Protection Agency (EPA) (TSDs), a legal memorandum, and the IRP Integrated Resource Plan is establishing final emission guidelines regulatory impact analysis (RIA), are ISO Independent System Operator kW Kilowatt for states to follow in developing plans also available at http://www.epa.gov/ kWh Kilowatt-hour to reduce greenhouse gas (GHG) cleanpowerplan/. These and other lb CO2/MWh Pounds of CO2 per Megawatt- emissions from existing fossil fuel-fired related documents are also available for hour electric generating units (EGUs). inspection and copying in the EPA LBNL Lawrence Berkeley National Specifically, the EPA is establishing: docket for this rulemaking. Laboratory MMBtu Million British Thermal Units Carbon dioxide (CO2) emission FOR FURTHER INFORMATION CONTACT: Ms. performance rates representing the best MW Megawatt Amy Vasu, Sector Policies and Programs MWh Megawatt-hour system of emission reduction (BSER) for Division (D205–01), U.S. EPA, Research NAAQS National Ambient Air Quality two subcategories of existing fossil fuel- Triangle Park, NC 27711; telephone Standards fired EGUs—fossil fuel-fired electric number (919) 541–0107, facsimile NAICS North American Industry utility steam generating units and number (919) 541–4991; email address: Classification System stationary combustion turbines; state- [email protected] or Mr. Colin NAS National Academy of Sciences specific CO2 goals reflecting the CO2 Boswell, Measurements Policy Group NGCC Natural Gas Combined Cycle emission performance rates; and (D243–05), Sector Policies and Programs NOX Nitrogen Oxides guidelines for the development, NRC National Research Council Division, U.S. EPA, Research Triangle NSPS New Source Performance Standard submittal and implementation of state Park, NC 27711; telephone number (919) NSR New Source Review plans that establish emission standards 541–2034, facsimile number (919) 541– NTTAA National Technology Transfer and or other measures to implement the CO2 4991; email address: boswell.colin@ Advancement Act emission performance rates, which may epa.gov. OMB Office of Management and Budget be accomplished by meeting the state PM Particulate Matter SUPPLEMENTARY INFORMATION: PM2.5 Fine Particulate Matter goals. This final rule will continue Acronyms. A number of acronyms progress already underway in the U.S. PRA Paperwork Reduction Act and chemical symbols are used in this PUC Public Utilities Commission to reduce CO2 emissions from the utility preamble. While this may not be an RE Renewable Energy power sector. exhaustive list, to ease the reading of REC Renewable Energy Credit DATES: This final rule is effective on this preamble and for reference RES Renewable Energy Standard December 22, 2015. purposes, the following terms and RFA Regulatory Flexibility Act RGGI Regional Greenhouse Gas Initiative ADDRESSES: Docket. The EPA has acronyms are defined as follows: RIA Regulatory Impact Analysis established a docket for this action ACEEE American Council for an Energy- RPS Renewable Portfolio Standard under Docket No. EPA–HQ–OAR–2013– Efficient Economy RTO Regional Transmission Organization 0602. All documents in the docket are AEO Annual Energy Outlook SBA Small Business Administration listed in the http://www.regulations.gov AFL-CIO American Federation of Labor and SCC Social Cost of Carbon index. Although listed in the index, Congress of Industrial Organizations SIP State Implementation Plan some information is not publicly ASTM American Society for Testing and SO2 Sulfur Dioxide available (e.g., confidential business Materials Tg Teragram (one trillion (1012) grams) information (CBI) or other information BSER Best System of Emission Reduction TSD Technical Support Document Btu/kWh British Thermal Units per TTN Technology Transfer Network for which disclosure is restricted by Kilowatt-hour UMRA Unfunded Mandates Reform Act of statute). Certain other material, such as CAA Clean Air Act 1995 copyrighted material, will be publicly CBI Confidential Business Information UNFCCC United Nations Framework available only in hard copy. Publicly CCS Carbon Capture and Storage (or Convention on Climate Change available docket materials are available Sequestration) USGCRP U.S. Global Change Research either electronically in http:// CEIP Clean Energy Incentive Program Program www.regulations.gov or in hard copy at CEMS Continuous Emissions Monitoring VCS Voluntary Consensus Standard the EPA Docket Center, EPA WJC West System Organization of This Document. The Building, Room 3334, 1301 Constitution CHP Combined Heat and Power information presented in this preamble CO2 Carbon Dioxide Ave. NW., Washington, DC. The Public DOE U.S. Department of Energy is organized as follows: Reading Room is open from 8:30 a.m. to ECMPS Emission Collection and I. General Information 4:30 p.m., Monday through Friday, Monitoring Plan System A. Executive Summary excluding federal holidays. The EE Energy Efficiency B. Organization and Approach for This telephone number for the Public EERS Energy Efficiency Resource Standard Final Rule

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00002 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64663

II. Background C. State Plan Approaches I. General Information A. Climate Change Impacts From GHG D. State Plan Components and Emissions Approvability Criteria A. Executive Summary B. GHG Emissions From Fossil Fuel-Fired E. State Plan Submittal and Approval 1. Introduction EGUs Process and Timing C. The Utility Power Sector F. State Plan Performance Demonstrations D. Challenges in Controlling Carbon This final rule is a significant step G. Additional Considerations for State forward in reducing greenhouse gas Dioxide Emissions Plans E. Clean Air Act Regulations for Power H. Resources for States to Consider in (GHG) emissions in the U.S. In this Plants Developing Plans action, the EPA is establishing for the F. Congressional Awareness of Climate I. Considerations for CO2 Emission first time GHG emission guidelines for Change Reduction Measures That Occur at existing power plants. These final G. International Agreements and Actions Affected EGUs emission guidelines, which rely in large H. Legislative and Regulatory Background for CAA Section 111 J. Additional Considerations and part on already clearly emerging growth I. Statutory and Regulatory Requirements Requirements for Mass-Based State Plans in clean energy innovation, J. Clean Power Plan Proposal and K. Additional Considerations and development and deployment, will lead Requirements for Rate-Based State Plans Supplemental Proposal to significant carbon dioxide (CO2) K. Stakeholder Outreach and Consultations L. Treatment of Interstate Effects emission reductions from the utility L. Comments on the Proposal IX. Community and Environmental Justice Considerations power sector that will help protect III. Rule Requirements and Legal Basis human health and the environment A. Summary of Rule Requirements A. Proximity Analysis B. Summary of Legal Basis B. Community Engagement in State Plan from the impacts of climate change. IV. Authority for This Rulemaking, Definition Development This rule establishes, at the same time, of Affected Sources, and Treatment of C. Providing Communities With Access to the foundation for longer term GHG Categories Additional Resources emission reduction strategies necessary A. EPA’s Authority Under CAA Section D. Federal Programs and Resources to address climate change and, in so 111(d) Available to Communities doing, confirms the international B. CAA Section 112 Exclusion to CAA E. Multi-Pollutant Planning and Co- leadership of the U.S. in the global effort Section 111(d) Authority Pollutants to address climate change. In this final C. Authority To Regulate EGUs F. Assessing Impacts of State Plan D. Definition of Affected Sources Implementation rule, we have taken care to ensure that E. Combined Categories and Codification G. EPA Continued Engagement achievement of the required emission in the Code of Federal Regulations X. Interactions With Other EPA Programs and reductions will not compromise the V. The Best System of Emission Reduction Rules reliability of our electric system, or the and Associated Building Blocks A. Implications for the NSR Program affordability of electricity for A. The Best System of Emission Reduction B. Implications for the Title V Program consumers. This final rule is the result (BSER) C. Interactions With Other EPA Rules of unprecedented outreach and B. Legal Discussion of Certain Aspects of XI. Impacts of This Action engagement with states, tribes, utilities, the BSER A. What are the air impacts? C. Building Block 1—Efficiency and other stakeholders, with B. Endangered Species Act stakeholders providing more than 4.3 Improvements at Affected Coal-Fired C. What are the energy impacts? Steam EGUs D. What are the compliance costs? million comments on the proposed rule. D. Building Block 2—Generation Shifts E. What are the economic and employment In this final rule, we have addressed the Among Affected EGUs impacts? comments and concerns of states and E. Building Block 3—Renewable F. What are the benefits of the proposed other stakeholders while staying Generating Capacity action? consistent with the law. As a result, we VI. Subcategory-Specific CO2 Emission XII. Statutory and Executive Order Reviews have followed through on our Performance Rates A. Executive Order 12866, Regulatory A. Overview commitment to issue a plan that is fair, Planning and Review, and Executive B. Emission Performance Rate flexible and relies on the accelerating Order 13563, Improving Regulation and Requirements transition to cleaner power generation Regulatory Review C. Form of the Emission Performance Rates that is already well underway in the B. Paperwork Reduction Act (PRA) D. Emission Performance Rate-Setting C. Regulatory Flexibility Act (RFA) utility power sector. Equation and Computation Procedure D. Unfunded Mandates Reform Act Under the authority of Clean Air Act VII. Statewide CO2 Goals A. Overview (UMRA) (CAA) section 111(d), the EPA is E. Executive Order 13132, Federalism B. Reconstituting Statewide Rate-Based establishing CO2 emission guidelines for F. Executive Order 13175, Consultation CO2 Emission Performance Goals From existing fossil fuel-fired electric the Subcategory-Specific Emission and Coordination With Indian Tribal generating units (EGUs)—the Clean Performance Rates Governments Power Plan. These final guidelines, G. Executive Order 13045, Protection of C. Quantifying Mass-Based CO2 Emission when fully implemented, will achieve Performance Goals From the Statewide Children From Environmental Health significant reductions in CO2 emissions Rate-Based CO2 Emission Performance Risks and Safety Risks Goals H. Executive Order 13211, Actions by 2030, while offering states and D. Addressing Potential Leakage in Concerning Regulations That utilities substantial flexibility and Determining the Equivalence of Significantly Affect Energy Supply, latitude in achieving these reductions. Statewide CO2 Emission Performance Distribution, or Use In this final rule, the EPA is establishing Goals I. National Technology Transfer and a CO2 emission performance rate for E. State Plan Adjustments of State Goals Advancement Act (NTTAA) each of two subcategories of fossil fuel- F. Geographically Isolated States and J. Executive Order 12898, Federal Actions fired EGUs—fossil fuel-fired electric Territories With Affected EGUs To Address Environmental Justice in steam generating units and stationary VIII. State Plans Minority Populations and Low-Income A. Overview Populations combustion turbines—that expresses the B. Timeline for State Plan Performance and K. Congressional Review Act (CRA) ‘‘best system of emissions reduction Provisions To Encourage Early Action XIII. Statutory Authority . . . adequately demonstrated’’ (BSER)

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00003 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64664 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

1 for CO2 from the power sector. The specific CO2 emission performance rates comments (RTC) documents, and EPA is also establishing state-specific set by the EPA or, in the alternative, various TSDs and memoranda rate-based and mass-based goals that may be set at levels that ensure that the addressing specific topics. reflect the subcategory-specific CO state’s affected EGUs, individually, in 2 2. Purpose of This Rule emission performance rates and each aggregate, or in combination with other state’s mix of affected EGUs. The measures undertaken by the state The purpose of this rule is to protect guidelines also provide for the achieve the equivalent of the interim human health and the environment by development, submittal and and final CO2 emission performance reducing CO2 emissions from fossil fuel- implementation of state plans that rates between 2022 and 2029 and by fired power plants in the U.S. These implement the BSER—again, expressed 2030, respectively. State plans must plants are by far the largest domestic as CO2 emission performance rates— also: (1) Ensure that the period for stationary source of emissions of CO2, either directly by means of source- emission reductions from the affected the most prevalent of the group of air specific emission standards or other EGUs begin no later than 2022, (2) show pollutant GHGs that the EPA has requirements, or through measures that how goals for the interim and final determined endangers public health and achieve equivalent CO2 reductions from periods will be met, (3) ensure that, welfare through its contribution to the same group of EGUs. during the period from 2022 to 2029, climate change. This rule establishes for States with one or more affected EGUs affected EGUs in the state collectively the first time emission guidelines for will be required to develop and meet the equivalent of the interim existing power plants. These guidelines implement plans that set emission subcategory-specific CO2 emission will lead to significant reductions in standards for affected EGUs. The CAA performance rates, and (4) provide for CO2 emissions, result in cleaner section 111(d) emission guidelines that periodic state-level demonstrations generation from the existing power the EPA is promulgating in this action prior to and during the 2022–2029 plant fleet, and support continued apply to only the 48 contiguous states period that will ensure required CO2 investments by the industry in cleaner and any Indian tribe that has been emission reductions are being power generation to ensure reliable, approved by the EPA pursuant to 40 accomplished and no increases in affordable electricity now and into the CFR 49.9 as eligible to develop and emissions relative to each state’s future. implement a CAA section 111(d) plan.2 planned emission reduction trajectory Concurrent with this action, the EPA Because Vermont and the District of are occurring. A Clean Energy Incentive is also issuing a final rule that Columbia do not have affected EGUs, Program (CEIP) will provide establishes CO2 emission standards of they will not be required to submit a opportunities for investments in performance for new, modified, and state plan. Because the EPA does not renewable energy (RE) and demand-side reconstructed power plants. Together, possess all of the information or energy efficiency (EE) that deliver these rules will reduce CO2 emissions analytical tools needed to quantify the results in 2020 and/or 2021. The plans by a substantial amount while ensuring BSER for the two non-contiguous states must be submitted to the EPA in 2016, that the utility power sector in the U.S. with otherwise affected EGUs (Alaska though an extension to 2018 is available can continue to supply reliable and and Hawaii) and the two U.S. territories to allow for the completion of affordable electricity to all Americans with otherwise affected EGUs (Guam stakeholder and administrative using a diverse fuel supply. As with and Puerto Rico), these emission processes. past EPA rules addressing air pollution guidelines do not apply to those areas, The EPA is promulgating: (1) from the utility power sector, these and those areas will not be required to Subcategory-specific CO2 emission guidelines have been designed with a submit state plans on the schedule performance rates, (2) state rate-based clear recognition of the unique features required by this final action. goals, and (3) state mass-based CO2 of this sector. Specifically, the agency The emission standards in a state’s goals that represent the equivalent of recognizes that utilities provide an plan may incorporate the subcategory- each state’s rate-based goal. This will essential public service and are facilitate states’ choices in developing regulated and managed in ways unlike 1 Under CAA section 111(d), pursuant to 40 CFR their plans, particularly for those any other industrial activity. In 60.22(b)(5), states must establish, in their state seeking to adopt mass-based allowance providing assurances that the emission plans, emission standards that reflect the degree of emission limitation achievable through the trading programs or other statewide reductions required by this rule can be application of the ‘‘best system of emission policy measures as well as, or instead achieved without compromising reduction’’ that, taking into account the cost of of, source-specific requirements. The continued reliable, affordable achieving such reduction and any non-air quality electricity, this final rule fully accounts health and environmental impacts and energy EPA received significant comment to requirements, the Administrator determines has the effect that mass-based allowance for the critical service utilities provide. been adequately demonstrated (i.e., the BSER). trading was not only highly familiar to As with past rules under CAA section Under CAA section 111(a)(1) and (d), the EPA is states and EGUs, but that it could be 111, this rule relies on proven authorized to determine the BSER and to calculate technologies and measures to set the amount of emission reduction achievable more readily applied than rate-based through applying the BSER. The state is authorized trading for achieving emission achievable emission performance rates to identify the emission standard or standards that reductions in ways that optimize that will lead to cost-effective pollutant reflect that amount of emission reduction. affordability and electric system emission reductions, in this case CO2 2 In the case of a tribe that has one or more emission reductions at power plants, affected EGUs in its area of Indian country, the tribe reliability. has the opportunity, but not the obligation, to In this summary, we discuss the across the country. In fact, the emission establish a CO2 emission standard for each affected purpose of this rule, the major guidelines reflect strategies, EGU located in its area of Indian country and a provisions of the final rule, the context technologies and approaches already in CAA section 111(d) plan for its area of Indian for the rulemaking, key changes from country. If the tribe chooses to establish its own widespread use by power companies plan, it must seek and obtain authority from the the proposal, the estimated CO2 and states. The vast preponderance of EPA to do so pursuant to 40 CFR 49.9. If it chooses emission reductions, and the costs and the input we received from stakeholders not to seek this authority, the EPA has the benefits expected to result from full is supportive of this conclusion. responsibility to determine whether it is necessary implementation of this final action. States will play a key role in ensuring or appropriate, in order to protect air quality, to establish a CAA section 111(d) plan for an area of Greater detail is provided in the body of that emission reductions are achieved at Indian country where affected EGUs are located. this preamble, the RIA, the response to a reasonable cost. The experience of

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00004 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64665

states in this regard is especially leading sources of electricity generation express recognition of the utility power important because CAA section 111(d) in the U.S., with coal providing about sector’s ability to shift generation among relies on the well-established state-EPA 27 percent of the projected generation various EGUs, which enabled pollution partnership to accomplish the required and natural gas providing about 33 reduction by increasing reliance on RE CO2 emission reductions. States will percent of the projected generation. and even on demand-side EE. The result have the flexibility to choose from a of our following Congress’ recognition 3. Summary of Major Provisions range of plan approaches and measures, of the interdependent operation of EGUs including numerous measures beyond a. Overview. The fundamental goal of within an interconnected grid is the those considered in setting the CO2 this rule is to reduce harmful emissions incorporation in the BSER of measures, emission performance rates, and this of CO2 from fossil fuel-fired EGUs in such as shifting generation to lower- final rule allows and encourages states accordance with the requirements of the emitting NGCC units and increased use to adopt the most effective set of CAA. The June 2014 proposal for this of RE, that rely on the current solutions for their circumstances, taking rule was designed to meet this interdependent operation of EGUs. As account of cost and other overarching goal while accommodating we noted in the proposal and note here considerations. This rulemaking, which two important objectives. The first was as well, the EPA undertook an will be implemented through the state- to establish guidelines that reflect both unprecedented and sustained process of EPA partnership, is a significant step the unique interconnected and engagement with the public and that will reduce air pollution, in this interdependent manner in which the stakeholders. It is, in many ways, as a case GHG emissions, in the U.S. At the power system operates and the actions, direct result of public discussion and same time, the final rule greatly strategies, and policies states and input that the EPA came to recognize facilitates flexibility for EGUs by utilities have already been undertaking the substantial extent to which the establishing a basis for states to set that are resulting in CO2 emission BSER needed to account for the unique trading-based emission standards and reductions. The second objective was to interconnected and interdependent compliance strategies. The rule provide states and utilities with broad operations of EGUs if it was to meet the establishes this basis by including both flexibility and choice in meeting those criteria on which the EPA has long uniform emission performance rates for requirements in order to minimize costs relied in making BSER determinations. the two subcategories of sources and to ratepayers and to ensure the Equally important, these guidelines also state-specific rate- and mass-based reliability of electricity supply. In this offer states and owners and operators of goals. final rule, the EPA has focused on EGUs broad flexibility and latitude in This final rule is a significant step changes that, in addition to being complying with their obligations. forward in implementing the President’s responsive to the critical concerns and Because affordability and electricity Climate Action Plan.3 To address the priorities of stakeholders, more fully system reliability are of paramount far-reaching harmful consequences and accomplish these objectives. importance, the rule provides states and real economic costs of climate change, While our consideration of public utilities with time for planning and the President’s Climate Action Plan input and additional information has investment, which is instrumental to details a broad array of actions to reduce led to notable revisions from the ensuring both manageable costs and GHG emissions that contribute to emission guidelines we proposed in system reliability, as well as to climate change and its harmful impacts June 2014, the proposed guidelines facilitating clean energy innovation. The remain the foundation of this final rule. on public health and the environment. final rule continues to express the CO2 Climate change is already occurring in These final guidelines build on the emission reduction requirements in this country, affecting the health, progress already underway to reduce the terms of state goals, as well as in terms carbon intensity of power generation in economic well-being and quality of life of emission performance rates for the the U.S., especially through the lowest of Americans across the country, and two subcategories of affected EGUs, carbon-intensive technologies, while especially those in the most vulnerable reflecting the particular mix of power reflecting the unique interconnected communities. This CAA section 111(d) generation in each state, and it and interdependent system within rulemaking to reduce GHG emissions continues to provide until 2030, fifteen which EGUs operate. Thus, the BSER, as from existing power plants, and the years from the date of this final rule, for determined in these guidelines, concurrent CAA section 111(b) states and sources to achieve the CO2 incorporates a range of CO -reducing rulemaking to reduce GHG emissions 2 reductions. Numerous commenters, actions, while at the same time adhering from new, modified, and reconstructed including most sources, states and to the fundamental approach the EPA power plants, implement one of the energy agencies, indicated that this was has relied on for decades in a reasonable timeframe. The final strategies of the Climate Action Plan. implementing section 111 of the CAA. Nationwide, by 2030, this final CAA guidelines also continue to provide an Specifically, in making its BSER section 111(d) existing source rule will option where programs beyond those determination, the EPA examined not achieve CO emission reductions from directly limiting power plant emission 2 only actions, technologies and measures the utility power sector of rates can be used for compliance (i.e., already in use by EGUs and states, but approximately 32 percent from CO policies, programs and other measures). 2 also deliberately incorporated in its emission levels in 2005. The final rule also continues to allow, The EPA projects that these identification of the BSER the unique but not require, multi-state approaches. reductions, along with reductions in way in which affected EGUs actually Finally, EPA took care to ensure that other air pollutants resulting directly operate in providing electricity services. states could craft their own emissions from this rule, will result in net climate This latter feature of the BSER mirrors reduction trajectories in meeting the and health benefits of $25 billion to $45 Congress’ approach to regulating air interim goals included in this final rule. billion in 2030. At the same time, coal pollution in this sector, as exemplified b. Opportunities for states. As stated and natural gas will remain the two by Title IV of the CAA. There, Congress above, the final guidelines are designed established a pollution reduction to build on and reinforce progress by 3 The President’s Climate Action Plan, June 2013. program specifically for fossil fuel-fired states, cities and towns, and companies http://www.whitehouse.gov/sites/default/files/ EGUs and designed the sulfur dioxide on a growing variety of sustainable image/president27sclimateactionplan.pdf. (SO2) portion of that program with strategies to reduce power sector CO2

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00005 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64666 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

emissions. States, in their CAA section performance rates resulting from each state will have the latitude to 111(d) plans, will be able to rely on, and application of the BSER to the two design a program to meet source- extend, programs they may already have subcategories of affected EGUs; (2) state- category specific emission performance created to address emissions of air specific CO2 goals, expressed as both rates or the equivalent statewide rate- or pollutants, and in particular CO2, from emission rates and as mass, that reflect mass-based goal in a manner that the utility power sector or to address the the subcategory-specific CO2 emission reflects its particular circumstances and sector from an overall perspective. performance rates and each state’s mix energy and environmental policy Those states committed to Integrated of affected EGUs the two performance objectives. Each state can do so on its Resource Planning (IRP) will be able to rates; and (3) guidelines for the own, or a state can collaborate with establish their CO2 reduction plans development, submittal and other states and/or tribal governments within that framework, while states implementation of state plans that on multi-state plans, or states can with a more deregulated power sector implement those BSER emission include in their plans the trading tools system will be able to develop CO2 performance rates either through that EGUs can use to realize additional reduction plans within that specific emission standards for affected EGUs, or opportunities for cost savings while framework. Each state will have the through measures that achieve the continuing to operate across the opportunity to take advantage of a wide equivalent, in aggregate, of those rates as interstate system through which variety of strategies for reducing CO2 defined and expressed in the form of the electricity is produced. A state would emissions from affected EGUs, state goals. also have the option of adopting the including demand-side EE programs In this final action, the EPA is setting model rules for either a rate- or a mass- and mass-based trading, which some emission performance rates, phased in based program that the EPA is suggested in their comments. The EPA over the period from 2022 through 2030, proposing concurrently with this and other federal entities, including the for two subcategories of affected fossil action.4 U.S. Department of Energy (DOE), the fuel-fired EGUs—fossil fuel-fired Federal Energy Regulatory Commission electric utility steam-generating units To facilitate the state planning (FERC) and the U.S. Department of and stationary combustion turbines. process, this final rule establishes Agriculture (USDA), among others, are These rates, applied to each state’s guidelines for the development, committed to sharing expertise with particular mix of fossil fuel-fired EGUs, submittal, and implementation of state interested states as they develop and generate the state’s carbon intensity goal plans. The final rule describes the implement their plans. for 2030 (and interim rates for the components of a state plan, the States will be able to address the period 2022–2029). Each state will additional latitude states have in economic interests of their utilities and determine whether to apply these to developing strategies to meet the ratepayers by using the flexibilities in each affected EGU or to take an emission guidelines, and the options this final action to reduce costs to alternative approach and meet either an they have in the timing of submittal of consumers, minimize stranded assets, equivalent statewide rate-based goal or their plans. This final rule also gives and spur private investments in RE and statewide mass-based goal. The EPA states considerable flexibility with EE technologies and businesses. They does not prescribe how a state must respect to the timeframes for plan may also, if they choose, work with meet the emission guidelines, but, if a development and implementation, as other states on multi-state approaches state chooses to take the path of meeting well as the choice of emission reduction that reflect the regional structure of a state goal, these final guidelines measures. The final rule provides up to electricity operating systems that exists identify the methods that a state can or, fifteen years for full implementation of in most parts of the country and is in some cases, must use to demonstrate all emission reduction measures, with critical to ensuring a reliable supply of that the combination of measures and incremental steps for planning and then affordable energy. The final rule gives standards that the state adopts meets its for demonstration of CO2 reductions states the flexibility to implement a state-level CO2 goals. While the EPA that will ensure that progress is being broad range of approaches that accomplishes the phase-in of the made in achieving CO2 emission recognize that the utility power sector is interim goal by way of annual emission reductions. States will be able to choose made up of a diverse range of performance rates, states and EGUs may from a wide range of emission reduction companies of various sizes that own and meet their respective emission measures, including measures that are operate fossil fuel-fired EGUs, including reduction obligations ‘‘on average’’ over not part of the BSER, as discussed in vertically integrated companies in that period following whatever emission detail in section VIII.G of this preamble. regulated markets, independent power reduction trajectory they determine to d. Determining the BSER. In issuing producers, rural cooperatives and pursue over that period. this final rulemaking, the EPA is municipally-owned utilities, some of CAA section 111(d) creates a implementing statutory provisions that which are likely to have more direct partnership between the EPA and the have been in place since Congress first access than others to certain types of states under which the EPA establishes enacted the CAA in 1970 and that have GHG emission reduction opportunities, emission guidelines and the states take been implemented pursuant to but all of which have a wide range of the lead on implementing them by regulations promulgated in 1975 and opportunities to achieve reductions or establishing emission standards or followed in numerous subsequent CAA acquire clean generation. creating plans that are consistent with section 111 rulemakings. These Again, with features that facilitate the EPA emission guidelines. The EPA requirements call on the EPA to develop mass-based and/or interstate trading, the recognizes that each state has differing emission guidelines that reflect the final guidelines also empower affected policy considerations—including EPA’s determination of the ‘‘best system varying regional emission reduction EGUs to pursue a broad range of choices of emission reduction . . . adequately opportunities and existing state for compliance and for integrating demonstrated’’ for states to follow in compliance action with the full range of programs and measures—and that the their investments and operations. characteristics of the electricity system 4 The EPA’s proposed CAA section 111(d) federal c. Main elements. This final rule in each state (e.g., utility regulatory plan and model rules for existing fossil fuel-fired comprises three main elements: (1) Two structure and generation mix) also EGUs are being published concurrently with this subcategory-specific CO2 emission differ. Therefore, as in the proposal, final rule.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00006 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64667

formulating plans to establish emission emissions from affected EGUs, and our steps are presented both in terms of standards to implement the BSER. determination of the BSER does not emission performance rates for the two As the EPA has done in making BSER necessitate the use of the three building subcategories of affected EGUs and in determinations in previous CAA section blocks to their maximum extent, or even terms of state goals, expressed both as 111 rulemakings, for this final BSER at all. The building blocks and the BSER a rate and as a mass. A state may adopt determination, the agency considered determination are described in detail in emission standards for its sources that the types of strategies that states and section V of this preamble. are identical to these interim emission owners and operators of EGUs are e. CO2 state-level goals and performance rates or, alternatively, already employing to reduce the subcategory-specific emission adapt these steps to accommodate the covered pollutant (in this case, CO2) performance rates. timing of expected reductions, as long from affected sources (in this case, fossil (1) Final CO2 goals and emission as the state’s interim goal is met over the fuel-fired EGUs).5 performance rates. 8-year period. In so doing, as has always been the In this action, the EPA is establishing f. State plans.7 case, our considerations were not CO2 emission performance rates for two In this action, the EPA is establishing limited solely to specific technologies or subcategories of affected EGUs—fossil final guidelines for states to follow in equipment in hypothetical operation; fuel-fired electric utility steam developing, submitting and rather, our analysis encompassed the generating units and stationary implementing their plans. In developing full range of operational practices, combustion turbines. For fossil fuel- plans, states will need to choose the limitations, constraints and fired steam generating units, we are type of plan they will develop. They opportunities that bear upon EGUs’ finalizing an emission performance rate will also need to include required plan emission performance, and which of 1,305 lb CO2/MWh. For stationary components in their plan submittals, reflect the unique interconnected and combustion turbines, we are finalizing meet plan submittal deadlines, achieve an emission performance rate of 771 lb interdependent operations of EGUs and the required CO2 emission reductions the overall electricity grid. CO2/MWh. As we did at proposal, for over time, and provide for monitoring In this final action, the agency has each state, we are also promulgating and periodic reporting of progress. As determined that the BSER comprises the rate-based CO2 goals that are the with the BSER determination, first three of the four proposed weighted aggregate of the emission stakeholder comments have provided ‘‘building blocks,’’ with certain performance rates for the state’s EGUs. both data and recommendations to refinements to the three building blocks. To ensure that states and sources can which these final guidelines are The three building blocks are: choose additional alternatives in responsive. meeting their obligations, the EPA is 1. Improving heat rate at affected coal-fired (1) Plan approaches. steam EGUs. also promulgating each state’s goal To comply with these emission 2. Substituting increased generation from expressed as a CO2 mass goal. The guidelines, a state will have to ensure, lower-emitting existing natural gas combined inclusion of mass-based goals, along through its plan, that the emission cycle units for generation from higher- with information provided in the standards it establishes for its sources emitting affected steam generating units. proposed federal plan and model rules individually, in aggregate, or in 3. Substituting increased generation from that are being issued concurrently with combination with other measures new zero-emitting renewable energy this rule, paves the way for states to generating capacity for generation from undertaken by the state, represent the implement mass-based trading, as some equivalent of the subcategory-specific affected fossil fuel-fired generating units. states have requested, reflecting their These three building blocks are CO2 emission performance rates. This view that mass-based trading provides final rule includes several options for approaches that are available to all significant advantages over rate-based affected EGUs, either through direct state plans, as discussed in the proposal trading. and in many of the comments we investment or operational shifts or Affected EGUs, individually, in received. through emissions trading where states, aggregate, or in combination with other First, in the final rule, states may which must establish emission measures undertaken by the state, must establish emission standards for their standards for affected EGUs, do so by achieve the equivalent of the CO2 6 affected EGUs that mirror the uniform incorporating emissions trading. At the emission performance rates, expressed emission performance rates for the two same time, and as we noted in the via the state-specific rate- and mass- subcategories of sources included in this proposal, there are numerous other based goals, by 2030. final rule. They may also pursue measures available to reduce CO2 (2) Interim CO2 emission performance rates and state-specific goals. alternative approaches that adopt 5 The final emission guidelines for landfill gas The best system of emission reduction emission standards that meet the emissions from municipal solid waste landfills, includes both the measures for reducing published on March 12, 1996, and amended on June 7 The CAA section 111(d) emission guidelines 16, 1998 (61 FR 9905 and 63 FR 32743, CO2 emissions and the timeframe over apply to the 50 states, the District of Columbia, U.S. respectively), provide an example, as the guidelines which they can be implemented. In this territories, and any Indian tribe that has been allow either of two approaches for controlling final action, the EPA is establishing an approved by the EPA pursuant to 40 CFR 49.9 as landfill gas—by recovering the gas as a fuel, for sale, 8-year interim period, beginning in 2022 eligible to develop and implement a CAA section and removing from the premises, or by destroying 111(d) plan. In this preamble, in instances where the organic content of the gas on the premises using instead of 2020, over which to achieve these governments are not specifically listed, the a control device. Recovering the gas as a fuel source the full required reductions to meet the term ‘‘state’’ is used to represent them. Because was a practice already being used by some affected CO2 performance rates, a Vermont and the District of Columbia do not have sources prior to promulgation of the rulemaking. commencement date more than six affected EGUs, they will not be required to submit 6 The EPA notes that, in quantifying the emission a state plan. Because the EPA does not possess all reductions that are achievable through application years from October 23, 2015, the date of of the information or analytical tools needed to of the BSER, some building blocks will apply to this rulemaking. This 8-year interim quantify the BSER for the two non-contiguous states some, but not all, affected EGUs. Specifically, period from 2022 through 2029 is with affected EGUs (Alaska and Hawaii) and the building block 1 will apply to affected coal-fired separated into three steps, 2022–2024, two U.S. territories with affected EGUs (Guam and steam EGUs, building block 2 will apply to all Puerto Rico), we are not finalizing emission affected steam EGUs (both coal-fired and oil/gas- 2025–2027, and 2028–2029, each performance rates in those areas at this time, and fired), and building block 3 will apply to all associated with its own interim CO2 those areas will not be required to submit state affected EGUs. emission performance rates. The interim plans until we do.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00007 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64668 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

uniform emission performance rates, or a report to the EPA in 2021 that reflect: (1) Components required for all emission standards that meet either the demonstrates that the state has met the state plan submittals; (2) additional rate-based goal promulgated for the state programmatic plan milestone steps that components required for the emission or the alternative mass-based goal the state indicated it would take during standards approach; and (3) additional promulgated for the state. It is for the the period from the submittal of the components required for the state purpose of providing states with these final plan through the end of 2020, and measures approach. choices that the EPA is providing state- that the state is on track to implement All state plans must include the specific rate-based and mass-based goals the approved state plan as of January 1, following components: equivalent to the emission performance 2022. • Description of the plan rates that the EPA is establishing for the The plan must also include a process • Applicability of state plans to affected two subcategories of fossil fuel-fired for reporting on plan implementation, EGUs • EGUs. A detailed explanation of rate- progress toward achieving CO2 emission Demonstration that the plan submittal is and mass-based goals is provided in reductions, and implementation of projected to achieve the state’s CO2 emission 11 performance rates or state CO2 goal section VII of this preamble and in a corrective actions, in the event that the • TSD.8 In developing its plan, each state Monitoring, reporting and recordkeeping state fails to achieve required emission requirements for affected EGUs and eligible tribe electing to submit a levels in a timely fashion. Beginning • State recordkeeping and reporting plan will need to choose whether its January 1, 2025, and then January 1, requirements plan will result in the achievement of 2028, January 1, 2030, and then every • Public participation and certification of the CO2 emission performance rates, two calendar years thereafter, the state hearing on state plan statewide rate-based goals, or statewide will be required to compare emission • Supporting documentation mass-based goals by the affected EGUs. levels achieved by affected EGUs in the Also, in submitting state plans, states The second major set of options state with the emission levels projected must provide documentation provided in the final rule includes the in the state plan and report the results demonstrating that they have types of measures states may rely on of that comparison to the EPA by July considered electric system reliability in through the state plans. A state will be 1 of those calendar years. developing their plans. able to choose to establish emission Existing state programs can be aligned Further, in this final rule, the EPA is standards for its affected EGUs with the various state plan options requiring states to demonstrate how sufficient to meet the requisite further described in Section VIII. A state they are meaningfully engaging all performance rates or state goal, thus plan that uses one of the finalized stakeholders, including workers and placing all of the requirements directly model rules, which the EPA is low-income communities, communities on its affected EGUs, which we refer to proposing concurrently with this action, of color, and indigenous populations as the ‘‘emission standards approach.’’ could be presumptively approvable if living near power plants and otherwise Alternatively, a state can adopt a ‘‘state the state plan meets all applicable potentially affected by the state’s plan. measures approach,’’ which would requirements.9 The plan guidelines In their plan submittals, states must result in the affected EGUs meeting the provide the states with the ability to describe their engagement with their statewide mass-based goal by allowing a achieve the full reductions over a multi- stakeholders, including their most state to rely upon state-enforceable year period, through a variety of vulnerable communities. The measures on entities other than affected reduction strategies, using state-specific participation of these communities, EGUs, in conjunction with any federally or multi-state approaches that can be along with that of ratepayers and the enforceable emission standards the state achieved on either a rate or mass basis. public, can be expected to help states chooses to impose on affected EGUs. They also address several key policy ensure that state plans maintain the With a state measures approach, the considerations that states can be affordability of electricity for all and plan must also include a contingent expected to contemplate in developing preserve and expand jobs and job backstop of federally enforceable their plans. opportunities as they move forward to emission standards for affected EGUs State plan approaches and plan develop and implement their plans. that fully meet the emission guidelines guidelines are explained further in State plan submittals using the and that would be triggered if the plan section VIII of this preamble. emission standards approach must also failed to achieve the required emission (2) State plan components and include: reductions on schedule. A state would approvability criteria. • Identification of each affected EGU; have the option of basing its backstop The EPA’s implementing regulations identification of federally enforceable emission standards on the model rule, provide certain basic elements required emission standards for the affected EGUs; which focuses on the use of emissions for state plans submitted pursuant to and monitoring, recordkeeping and reporting trading as the core mechanism and CAA section 111(d).10 In the proposal, requirements. which the EPA is proposing today. A the EPA identified certain additional • Demonstrations that each emission state that adopts a state measures elements that should be contained in standard will result in reductions that are approach must use its mass CO quantifiable, non-duplicative, permanent, 2 state plans. In this final action, in verifiable, and enforceable. emission goal as the metric for response to comments, the EPA is State plan submittals using the state demonstrating plan performance. making several revisions to the measures approach must also include: The final rule requires that the state components required in a state plan plan submittal include a timeline with submittal and is also incorporating the • Identification of each affected EGU; all of the programmatic plan milestone approvability criteria into the final list identification of federally enforceable steps the state will take between the of components required in a state plan emission standards for affected EGUs (if applicable); identification of backstop of time of the state plan submittal and the submittal. In addition, we have year 2022 to ensure that the plan is organized the state plan components to 11 A state that chooses to set emission standards effective as of 2022. States must submit that are identical to the emission performance rates 9 The EPA would take action on such a state plan for both the interim period and in 2030 and beyond 8 The CO2 Emission Performance Rate and Goal through independent notice and comment need not identify interim state goals nor include a Computation TSD for the CPP Final Rule, available rulemaking. separate demonstration that its plan will achieve in the docket for this rulemaking. 10 40 CFR 60.23. the state goals.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00008 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64669

federally enforceable emission standards; and development of the final plan, as unexpected issues that could slow down monitoring, recordkeeping and reporting described in section VIII.E of this approval of state plans. requirements. (4) Timing for implementing the CO2 • preamble. As further described in Identification of each state measure and section VIII.B of this preamble, the EPA emission guidelines. demonstration that each state measure will is establishing a CEIP in order to The EPA recognizes that the measures result in reductions that are quantifiable, states and utilities have been and will non-duplicative, permanent, verifiable, and promote early action. States’ enforceable. participation in the CEIP is optional. In be taking to reduce CO2 emissions from existing EGUs can take time to In addition to these requirements, order for a state to participate in the program, it must include in its initial implement. We also recognize that each state plan must follow the EPA investments in low-carbon intensity and implementing regulations at 40 CFR submittal, if applicable, a non-binding statement of intent to participate in the RE and in EE strategies are currently 60.23. underway and in various stages of (3) Timing and process for state plan CEIP; if a state is submitting a final plan planning and implementation widely submittal and review. by September 6, 2016, it must include across the country. We carefully Because of the compelling need for such a statement of intent as part of its reviewed information submitted to us actions to begin the steps necessary to supporting documentation for the plan. regarding the feasible timing of various reduce GHG emissions from EGUs, the If the initial submittal includes those measures and identifying concerns that EPA proposed that states submit their components and if the EPA does not the required CO emission reductions plans within 13 months of the date of notify the state that the initial submittal 2 could not be achieved as early as 2020 this final rule and that reductions begin does not contain the required without compromising electric system in 2020. In light of the comments components, then, within 90 days of the reliability, imposing unnecessary costs received and in order to provide submittal, the extension of time to submit a final plan will be deemed on ratepayers, and requiring maximum flexibility to states while still investments in more carbon-intensive granted. A state will then have until no taking timely action to reduce CO2 generation, while diverting investment emissions, in this final rule the EPA is later than September 6, 2018, to submit a final plan. The EPA will also be in cleaner technologies. The record is allowing for a 2-year extension until compelling. To respond to these working with states during the period September 6, 2018, for both individual concerns and to reflect the period of after they make their initial submittals and multi-state plans, to provide a total time required for state plan and provide states with any necessary of 3 years for states to submit a final development and submittal by states, information and assistance during the plan if an extension is received. review and approval by the EPA, and 90-day period. Further, states Specifically, the final rule requires each implementation of approved plans by participating in a multi-state plan may state to submit a final plan by states and affected EGUs, the EPA is submit a single joint plan on behalf of September 6, 2016. Since some states determining in this final rule that all of the participating states. may need more than one year to affected EGUs will be required to begin complete all of the actions needed for States and tribes that do not have any to make reductions by 2022, instead of their final state plans, including affected EGUs in their jurisdictional 2020, as proposed, and meet the final technical work, state legislative and boundaries may provide emission rate CO2 emission performance rates or rulemaking activities, a robust public credits (ERCs) to adjust CO2 emissions, equivalent statewide goals by no later participation process, coordination with provided they are connected to the than 2030. The EPA is establishing an third parties, coordination among states contiguous U.S. grid and meet other 8-year interim period that begins in involved in multi-state plans, and requirements for eligibility. There are 2022 and goes through 2029, and which consultation with reliability entities, the certain limitations and restrictions for is separated into three steps, 2022–2024, EPA is allowing an optional two-phased generating ERCs, and these, as well as 2025–2027, and 2028–2029, each submittal process for state plans. If a associated requirements, are explained associated with its own interim goal. state needs additional time to submit a in section VIII of this preamble. Affected EGUs must meet each of the final plan, then the state may request an Following submission of final plans, interim period step 1, 2, and 3 CO2 extension by submitting an initial the EPA will review plan submittals for emission performance rates, or, submittal by September 6, 2016. For the approvability. Given a similar timeline following the emissions reduction extension to be granted, the initial accorded under section 110 of the CAA, trajectory designed by the state itself, submittal must address three required and the diverse approaches states may must meet the equivalent statewide components sufficiently to demonstrate take to meet the CO2 emission interim period goals, on average, that a that a state is able to undertake steps performance rates or equivalent state may establish over the 8-year and processes necessary to timely statewide goals in the emission period from 2022–2029. The CAA submit a final plan by the extended date guidelines, the EPA is extending the section 111(d) plan must include those of September 6, 2018. These period for EPA review and approval or specific requirements. Affected EGUs components are: An identification of disapproval of plans from the four- must also achieve the final CO2 final plan approach or approaches month period provided in the EPA performance rates or the equivalent under consideration, including a implementing regulations to a twelve- statewide goal by 2030 and maintain description of progress made to date; an month period. This timeline will that level subsequently. This approach appropriate explanation for why the provide adequate time for the EPA to reflects adjustments to the timeframe state needs additional time to submit a review plans and follow notice-and- over which reductions must be achieved final plan beyond September 6, 2016; comment rulemaking procedures to that mirror the determination of the and a demonstration of how they have ensure an opportunity for public final BSER, which incorporates the been engaging with the public, comment. The EPA, especially through phasing in of the BSER measures in including vulnerable communities, and our regional offices, will be available to keeping with the achievability of those a description of how they intend to work with states as they develop their measures. The agency believes that this meaningfully engage with community plans, in order to make review of approach to timing is reasonable and stakeholders during the additional time submitted plans more straightforward appropriate, is consistent with many of (if an extension is granted) for and to minimize the chances of the comments we received, and will

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00009 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64670 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

best support the optimization of overall change impacts. While this rule will communities that may be currently CO2 reductions, ratepayer affordability provide broad benefits to communities experiencing adverse, disproportionate and electricity system reliability. across the nation by reducing GHG impacts of climate change and air The EPA recognizes that successfully emissions, it will be particularly pollution, how state plan designs may achieving reductions by 2022 will be beneficial to populations that are affect them, and how to most effectively facilitated by actions and investments disproportionately vulnerable to the reach out to them. This final rule that yield CO2 emission reductions prior impacts of climate change and air requires that states include in their to 2022. The final guidelines include pollution. initial submittals a description of how provisions to encourage early actions. Conventional pollutants emitted by they engaged with vulnerable States will be able to take advantage of power plants, such as particulate matter communities as they developed their the impacts of early investments that (PM), SO2, hazardous air pollutants initial submittals, as well as the means occur prior to the beginning of a plan (HAP), and nitrogen oxides (NOx), will by which they intend to involve performance period. Under a mass- also be reduced as the plants reduce communities and other stakeholders as based plan, those impacts will be their carbon emissions. These pollutants they develop their final plans. The EPA reflected in reductions in the reported can have significant adverse local and will provide training and other CO2 emissions of affected EGUs during regional health impacts. The EPA resources for states and communities to the plan performance period. Under a analyzed the communities in closest facilitate meaningful engagement. rate-based plan, states may recognize proximity to power plants and found In addition to the benefits for early actions implemented after 2012 by that they include a higher percentage of vulnerable communities from reducing crediting MWh of electricity generation communities of color and low-income climate change impacts and effects of and savings that are achieved by those communities than national averages. We conventional pollutant emissions, this measures during the interim and final thus expect an important co-benefit of rule will also help communities by plan performance periods. This this rule to be a reduction in the adverse moving the utility industry toward provision is discussed in section VIII.K health impacts of air pollution on these cleaner generation and greater EE. The of the preamble. low-income communities and federal government is committed to In addition, to encourage early communities of color. We refer to these ensuring that all communities share in investments in RE and demand-side EE, communities generally as ‘‘vulnerable’’ these benefits. the EPA is establishing the CEIP. or ‘‘overburdened,’’ to denote those The EPA also encourages states to Through this program, detailed in communities least resilient to the consider how they may incorporate section VIII.B of this preamble, states impacts of climate change and central to approaches already used by other states will have the opportunity to award environmental justice considerations. to help low-income communities share allowances and ERCs to qualified While pollution will be cut from in the investments in infrastructure, job providers that make early investments power plants overall, there may be some creation, and other benefits that RE and in RE, as well as in demand-side EE relatively small number of coal-fired demand-side EE programs provide, have programs implemented in low-income plants whose operation and access to financial assistance programs, communities. Those states that take corresponding emissions increase as and minimize any adverse impacts that advantage of this option will be eligible energy providers balance energy their plans could have on communities. to receive from the EPA matching production across their fleets to comply To help support states in taking allowances or ERCs, up to a total for all with state plans. In addition, a number concrete actions that provide economic states that represents the equivalent of of the highest-efficiency natural gas- development, job and electricity bill- 300 million short tons of CO emissions. fired units are also expected to increase 2 cutting benefits to low-income The EPA will address design and operations, but they have implementation details of the CEIP in a correspondingly low carbon emissions communities directly, the EPA has subsequent action. Prior to doing so, the and are also characterized by low designed the CEIP specifically to target EPA will engage with states, utilities emissions of the conventional pollutants the incentives it creates on investments and other stakeholders to gather that contribute to adverse health effects that benefit low-income communities. information regarding their interests and in nearby communities and regionally. Community and environmental priorities with regard to implementation The EPA strongly encourages states to justice considerations are discussed of the CEIP. evaluate the effects of their plans on further in section IX of this preamble. The CEIP can play an important role vulnerable communities and to take the (6) Addressing employment concerns. in supporting one of the critical policy steps necessary to ensure that all In addition, the EPA encourages states benefits of this rule. The incentives and communities benefit from the in designing their state plans to consider market signal generated by the CEIP can implementation of this rule. In order to the effects of their plans on employment help sustain the momentum toward identify whether state plans are causing and overall economic development to greater RE investment in the period any adverse impacts on overburdened assure that the opportunities for between now and 2022 so as to offset communities, mindful that substantial economic growth and jobs that the plans any dampening effects that might be overall reductions, nevertheless, may be offer are realized. To the extent possible, created by setting the period for accompanied by potential localized states should try to assure that mandatory reductions to begin in 2022, increases, the EPA intends to perform communities that can be expected to two years later than at proposal. an assessment of the implementation of experience job losses can also take (5) Community and environmental this rule to determine whether it and advantage of the opportunities for job justice considerations. other air quality rules are leading to growth or otherwise transition to Climate change is an environmental improved air quality in all areas or healthy, sustainable economic growth. justice issue. Low-income communities whether there are localized impacts that The President has proposed the and communities of color already need to be addressed. POWER+ Plan to help communities overburdened by pollution are Effective engagement between states impacted by power sector transition. disproportionately affected by climate and affected communities is critical to The POWER+ plan invests in workers change and are less resilient than others the development of state plans. The EPA and jobs, addresses important legacy to adapt to or recover from climate- encourages states to identify costs in coal country, and drives

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00010 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64671

development of coal technology.12 state demonstrate in its final state plan to operate effectively as affected EGUs Implementation of one key part of the submittal that it has considered reduce their CO2 emissions under this POWER+ Plan, the Partnerships for reliability issues in developing its plan. program. Opportunity and Workforce and Second, we recognize that issues may (8) Outreach and resources for Economic Revitalization (POWER) arise during the implementation of the stakeholders. initiative, has already begun. The guidelines that may warrant To provide states, U.S. territories, POWER initiative specifically targets adjustments to a state’s plan in order to tribes, utilities, communities, and other economic and workforce development maintain electric system reliability. The interested stakeholders with assistance to communities affected by final guidelines make clear that states understanding about the rule ongoing changes in the coal industry have the ability to propose amendments requirements, and to provide and the utility power sector.13 to approved plans in the event that efficiencies where possible and reduce (7) Electric system reliability. unanticipated and significant electric the cost and administrative burden, the In no small part thanks to the system reliability challenges arise and EPA will continue to work with states, comments we received and our compel affected EGUs to generate at tribes, territories, and stakeholders to extensive consultation with key levels that conflict with their provide information and address agencies responsible for reliability, compliance obligations under those questions about the final rule. Outreach including FERC and DOE, among others, plans. will include opportunities for states and along with EPA’s longstanding As a final element of reliability tribes to participate in briefings, principles in setting emission standards assurance, the rule also provides for a teleconferences, and meetings about the for the utility power sector, these reliability safety valve for individual final rule. The EPA’s ten regional offices guidelines reflect the paramount sources where there is a conflict will continue to be the entry point for importance of ensuring electric system between the requirements the state plan states, tribes and territories to ask reliability. The input we received on imposes on a specific affected EGU and technical and policy questions. The this issue focused heavily on the extent the maintenance of electric system agency will host (or partner with of the reductions required at the reliability in the face of an extraordinary appropriate groups to co-host) a number beginning of the interim period, and unanticipated event that presents of webinars about various components proposed as 2020. We are addressing substantial reliability concerns. of the final rule; these webinars are these concerns in large part by moving We anticipate that these situations planned for the first two months after the beginning of the period for will be extremely rare because the states the final rule is issued. The EPA will mandatory reductions under the have the flexibility to craft requirements also offer consultations with tribal program from 2020 to 2022 and for their EGUs that will provide long governments. The EPA will continue significantly adjusting the interim goals averaging periods and/or compliance outreach throughout the plan so that they provide a less abrupt initial mechanisms, such as trading, whose development and submittal process. The reduction expectation. This, in turn, inherent flexibility will make it unlikely EPA will use information from this will provide states and utilities with a that an individual unit will find itself in outreach process to inform the training great deal more latitude in determining this kind of situation. As one example, and other tools that will be of most use their emission reduction trajectories under compliance regimes that allow to the state, tribes, and territories that over the interim period. As a result, individual EGUs to establish are implementing the final rule. there will be more time for planning, compliance through the acquisition and The EPA has worked with consultation and decision making in the holding of allowances or ERCs equal to communities, states, tribes and relevant formulation of state plans and in EGUs’ their emissions, an EGU’s need to associations to develop an extensive choice of compliance strategies, all continue to operate—and emit—for the training plan that will continue in the within the existing extensive structure purposes of ensuring system reliability months after the Clean Power Plan is of energy planning at the state and will not put the EGU into non- finalized. The EPA has assembled regional levels. These adjustments in compliance, provided, of course, it resources from a variety of sources to the interim goals are supported by the obtains the needed allowances or credits create a comprehensive training information in the record concerning in a timely fashion. We, nevertheless, curriculum for those implementing this the time needed to develop and agree with many commenters that it is rule. Recorded presentations from the prudent to provide an electric system implement reductions under the BSER. EPA, DOE and other federal entities will reliability safety valve as a precaution. In addition, the various forms of be available for communities, states, and Finally, the EPA, DOE and FERC have flexibility retained and enhanced in this others involved in composing and agreed to coordinate their efforts, at the participating in the development of state final rule, including opportunities for federal level, to help ensure continued trading within and between states, and plans. This curriculum is available reliable electricity generation and online at EPA’s Air Pollution Training other multi-state compliance transmission during the implementation approaches, will further support electric Institute. of the final rule. The three agencies have The EPA also expects to issue system reliability. set out a memorandum that reflects their The final guidelines address electric guidance on specific topics. As joint understanding of how they will system reliability in several additional guidance documents, tools, templates work together to monitor important ways. Numerous commenters and other resources become available, implementation, share information, and urged us to include, as part of the plan the EPA, in consultation with DOE and to resolve any difficulties that may be development or approval process, input other federal agencies, will continue to encountered. from review by energy regulatory make these resources available via a As a result of the many features of this 14 agencies and reliability entities. In the dedicated Web site. final rule that provide states and We intend to continue to work final rule, we are requiring that each affected EGUs with meaningful time and actively with states and tribes, as decision making latitude, we believe appropriate, to provide information and 12 https://www.whitehouse.gov/the-press-office/ 2015/03/27/fact-sheet-partnerships-opportunity- that the comprehensive safeguards technical support that will be helpful to and-workforce-and-economic-revitaliz. already in place in the U.S. to ensure 13 http://www.eda.gov/power/. electric system reliability will continue 14 www.epa.gov/cleanpowerplantoolbox.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00011 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64672 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

them in developing and implementing proposal, we expressed the emission of the final rule, which shows lower their plans. The EPA will engage in limitation requirements reflecting the program costs, especially in the early formal consultations with tribal BSER in terms of the state goals in order years of the interim period, and greater governments and provide training to provide states with maximum RE deployment, relative to the analysis tailored to the needs of tribes and tribal flexibility and latitude. We viewed this of the proposed rule. At the same time, governments. as an important feature because each this re-design of the interim goals, Additional detail on aspects of the state has its own energy profile and together with refinements we have made final rule is included in several state-specific policies and needs relative to state plan requirements and the technical support documents (TSDs) to the production and use of electricity. inclusion of a reliability safety valve, and memoranda that are available in the In the final rule, we extend that provide states, utilities and other rulemaking docket. flexibility significantly in direct entities with the ability to continue to 4. Key Changes From Proposal response to comments from states and guarantee system reliability. utilities. The final rule establishes b. Outreach, engagement and a. Overview and highlights. As noted source-level emission performance rates comment record. This final rule is the earlier in this overview, the June 2014 for the source subcategories, while product of one of the most extensive proposal for the rule was designed to retaining state-level rate- and mass- and long-running public engagement meet the fundamental goal of reducing based goals. One of the key messages processes the EPA has ever conducted, harmful emissions of CO2 from fossil conveyed by state and utility starting in the summer of 2013, prior to fuel-fired EGUs in a manner consistent commenters was that the final rule proposal, and continuing through with the CAA requirements, while should make it easier for states to adopt December 2014, when the public accommodating two important mass-based programs and for utilities comment period ended, and continuing objectives. The first objective was to accustomed to operating across broad beyond that with consultations and establish guidelines that reflect both the multi-state grids to be able to avail meetings with stakeholders. The result manner in which the power system themselves of more ‘‘ready-made’’ of this extensive consultation was operates and the actions and measures emissions trading regimes. The millions of comments from already underway across states and the inclusion of both of these new stakeholders, which we have carefully utility power sector that are resulting in features—mass-based state goals in considered over the past several CO emission reductions. The second 2 addition to rate-based goals, and source- months. The EPA gained crucial objective was to provide states and level emission performance rates for the insights from the more than 4 million utilities maximum flexibility, control two subcategories of sources—is comments that the agency received on and choice in meeting their compliance intended to make it easier for states and the proposal and associated documents obligations. In this final rule, the EPA utilities to achieve these outcomes. In leading to this final rulemaking. has focused on changes that, in addition Comments were provided by to being responsive to the critical fact, these additions, together with the model rules and federal plan being stakeholders that include state concerns and priorities of stakeholders, environmental and energy officials, more fully accomplish these two crucial proposed concurrently with this rule, should demonstrate the relative ease tribal officials, public utility objectives. commissioners, system operators, To achieve these objectives, the June with which states can adopt mass-based trading programs, including interstate owners and operators of every type of 2014 proposal featured several power generating facility, other industry mass-based programs that lend important elements: The building block representatives, labor leaders, public themselves to the kind of interstate approach for the BSER; state-specific, health leaders, public interest compliance strategies so well suited for rather than source-specific, goals; a 10- advocates, community and faith leaders, integration with the current interstate year interim goal that could be met ‘‘on and members of the public. average’’ over the 10-year period operations of the overall utility grid. The insights gained from public between 2020 and 2029; and a Many stakeholders conveyed to the comments contributed to the ‘‘portfolio’’ option for state plans. These EPA that the proposal’s interim goals for development of final emission features were intended either to capture, the 2020–2029 period were designed in guidelines that build on the proposal in the emission guidelines, emission a way that defeated the EPA’s objective and the alternatives on which we sought reduction measures already in of allowing states and utilities to shape comment. The modifications widespread use or to maximize the their emission reduction trajectories. incorporated in the final guidelines are range of choices that states and utilities They pointed out that, in many cases, directly responsive to the comments we could select in order to achieve their the timing and stringency of the states’ received from the many and diverse emission limitations at low cost while interim goals could require actions that stakeholders. The improved guidelines ensuring electric system reliability. In could result in high costs, threaten reflect information and ideas that states this final rule, we are retaining the key electric system reliability or hinder the and utilities provided to us about both design elements of the proposal and deployment of renewable technology. In the best approach to establishing CO2 making certain adjustments to respond response, the EPA has revised the emission reduction requirements for to a variety of very constructive interim goals in two critical ways. First, EGUs and the most effective ways to comments on ways that will implement the period for mandatory reductions create true flexibility for states and the CAA section 111(d) requirements begin in 2022 rather than 2020; second, utilities in meeting these requirements. efficiently and effectively. in keeping with the BSER, emission These final rules also reflect the results The building block approach is a key reduction requirements are phased in of EPA’s robust consultation with feature of the proposal that we are more gradually over the interim period. federal, state and regional energy retaining in the final rule, but have These changes will allow states and agencies and authorities, to ensure that refined to include only the first three utilities to delineate their own emission the actions sources will take to reduce building blocks and to reflect reduction trajectories so as to minimize GHG emissions will not compromise implementation of the measures costs and foster broader deployment of electric system reliability or encompassed in the building blocks on RE technologies. The value of these affordability of the U.S. electricity a broad regional grid-level. In the changes is demonstrated by our analysis supply. Input and assistance from FERC

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00012 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64673

and DOE have been particularly expansion of considerations and FERC’s May 15, 2015 letter and the important in shaping some provisions in programs for low-income and comment record, as well as other these final guidelines. At the same time, vulnerable communities. information sources, made it clear that input from faith-based, community- We provide summary explanations in providing sufficient time for planning based and environmental justice the following paragraphs and more and implementation was essential to organizations, who provided thoughtful detailed explanations of all of these ensuring electric system reliability. comments about the potential impacts changes in later sections of this The final guidelines’ approach to the of this rule on pollution levels in preamble and associated documents. interim emission performance rates is overburdened communities and (1) Mandatory reduction period the result of the application of the economic impacts, including utility beginning in 2022 and a gradual glide measures constituting the BSER in a rates in low-income communities, is path. more gradual way, reflecting also reflected in this rule. The final rule The proposal’s mandatory emission stakeholder comments and information also reflects our response to concerns reduction period beginning in 2020 and about the appropriate period of time raised by labor leaders regarding the the trajectory of emission reduction over which those measures can be potential effects on workers and requirements in the interim period were deployed consistent with the BSER communities of the transition away both the subjects of significant factors of cost and feasibility. In from higher-emitting power generation comment. Earlier this year, FERC addition to facilitating reliable system conducted a series of technical to lower- and zero-emitting power operations, these changes provide states conferences comprising one national generation. and utilities with the latitude to session and three regional sessions. The consider a broader range of options to c. Key changes. The most significant information provided by workshop achieve the required reductions while changes in these final guidelines are: (1) participants echoed much of the addressing concerns about ratepayer The period for mandatory emission material that had been submitted to the impacts and stranded assets. reductions beginning in 2022 instead of comment record for this rulemaking. On 2020 and a gradual application of the May 15, 2015, the FERC Commissioners, (2) Revised BSER determination. BSER over the 2022–2029 interim drawing upon information highlighted Commenters urged the EPA to confine period, such that a state has substantial at the technical conferences, transmitted its BSER determination to actions that latitude in selecting its own emission to the EPA some suggestions for the involve what they characterized as more reduction trajectory or ‘‘glide path’’ over final rule. In addition, via comments, ‘‘traditional’’ generation. While some that period, (2) a revised BSER states, utilities, and reliability entities stakeholders recognized demand-side determination that focuses on narrower asked us to ensure adequate time for EE as being an integral part of the generation options that do not include them to implement strategies to achieve electricity system, with many of the demand-side EE measures and that CO2 reductions. They expressed concern characteristics of more traditional includes refinements to the building that, in the proposal, at least some states generating resources, other stakeholders blocks, more complete incorporation in would be required to reduce emissions did not. As explained in section the BSER of the realities of electricity in 2020 to levels that would require V.B.3.c.(8) below, our traditional operations over the three regional abrupt shifts in generation in ways that interpretation and implementation of interconnections, and up-to-date raised concerns about impacts to CAA section 111 has allowed regulated information about the cost and electric system reliability and ratepayer entities to produce as much of a availability of clean generation options, bills, as well as about stranded assets. particular good as they desire, provided (3) establishment of source-specific CO2 To many commenters, the proposal’s that they do so through an appropriately emission performance rates that are requirement for CO2 emission clean (or low-emitting) process. While uniform across the two fossil fuel-fired reductions beginning in 2020, together building blocks 1, 2, and 3 fall squarely subcategories covered in these with the stringency of the interim CO2 within this paradigm, the proposed guidelines, as well as rate- and mass- goal, posed significant reliability building block 4 does not. In view of based state goals, to facilitate emission implications, in particular. In this final this, since the BSER must serve as the trading, including interstate trading and, rule, the agency is addressing these foundation of the emission guidelines, in particular, mass-based trading, (4) a concerns, in part, by adjusting the the EPA has not included demand-side variation on the proposal’s ‘‘portfolio’’ compliance timeframe from a 10-year EE as part of the final BSER option for state plans—called here the interim period that begins in 2020 to an determination. Thus, neither the final ‘‘state measures’’ approach—that 8-year interim period that begins in guidelines’ BSER determination nor the continues to provide states flexibility 2022, and by refining the approach for emission performance rates for the two while ensuring that all state plans have meeting interim CO2 emission subcategories of affected EGUs take into federally enforceable measures as a performance rates to be a gradual glide account demand-side EE. However, backstop, (5) additional, more flexible path separated into three steps, 2022– many commenters also urged the EPA to options for states and utilities to adopt 2024, 2025–2027, and 2028–2029, that allow states and sources to rely on multi-state compliance strategies, (6) an is also achievable ‘‘on average’’ over the demand-side EE as an element of their extension of up to two years available to 8-year interim period. In response to the compliance strategies, as demand-side all states for submittal of their final concerns of commenters that the EE is treated as functionally compliance plans following making proposal’s 10-year interim target failed interchangeable with other forms of initial submittals in 2016, (7) provisions to afford sufficient flexibility, the final generation for planning and operational to encourage actions that achieve early guidelines’ approach will provide states purposes, as EE measures are in reductions, including a Clean Energy with realistic options for customizing widespread use across the country and Incentive Program (CEIP), (8) a their emission reduction trajectories. Of provide energy savings that reduce combination of provisions expressly equal importance, the approach emissions, lower electric bills, and lead designed to ensure electric system provides more time for planning, to positive investments and job creation. reliability, (9) the addition of consultation and decision making in the We agree, and the final guidelines employment considerations for states in formulation of state plans and in EGUs’ provide ample latitude for states and plan development, and (10) the choices of compliance strategies. Both utilities to rely on demand-side EE in

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00013 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64674 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

meeting emission reduction CO2 emission reduction period to begin, standard is set for NSPS and at the requirements. the final guidelines reflect that the source level at which compliance must In response to stakeholder comments additional time aligns with the adoption be achieved. on the first three building blocks and of lower-cost clean technology and, The EPA carefully considered these considerable data in the record, the EPA thus, its incorporation in the BSER at comments and while we believe that the has made refinements to the building higher levels. At the same time, the approach we took at proposal was well- blocks, and these are reflected in the 2022–2029 interim period will more founded and reflected a number of final BSER. Refinements include easily allow for companies to take important considerations, we have adoption of a modified approach to advantage of improved clean energy concluded that there is a way to address quantification of the RE component, technologies as potential least cost these concerns while expanding upon exclusion of the proposed nuclear options. the advantages offered by the proposal. generation components, and adoption of (3) Uniform emission performance Accordingly, the final guidelines a consistent regionalized approach to rates. establish uniform rates for the two quantification of all three building Some stakeholders commented that subcategories of sources—an approach blocks. The agency also recognizes the the proposal’s approach of expressing that is valuable for creating greater important functional relationship the BSER in terms of state-specific goals equity between and among utilities and between the period of time over which deviated from the requirements of CAA states with widely varying emission measures are deployed and the section 111 and from previous new levels and for expanding the flexibility stringency of emission limitations those source performance standards (NSPS). of the program, especially in ways that measures can achieve practically and at The effect, they stated, was that the have been identified as important to reasonable cost. Therefore, the final proposal created de facto emission utilities and states. Specifically, the BSER also reflects adjustments to the standards for all affected EGUs but that final guidelines express the BSER by stringency of the building blocks, after these de facto standards varied widely means of performance-based CO2 consideration of more and less stringent depending on the state in which a given emission rates that are uniform across levels, and refinements to the timeframe EGU happened to be located. Instead, each of two subcategories—fossil fuel- over which reductions must be these and other commenters stated, fired electric steam generating units and achieved. Sections V.C through V.E of section 111 requires that EPA establish stationary combustion turbines—for the this preamble provide further the BSER specifically for affected affected EGUs covered by the information on the refinements made to sources, rather than by means of merely guidelines. The rates are determined, in the building blocks and the rationale for setting state-specific goals, and that part, by applying the methodology doing so. these standards be uniform. Still other identified in the Notice of Data Commenters pointed out—and commenters observed that the effect of Availability (NODA) published on practical experience confirms—what is the approach taken in the proposal of October 30, 2014, which was based on widely known: That the utility power applying the BSER to each state’s fleet the proposal’s building block approach. sector operates over regional was to put a greater burden of The final guidelines also maintain the interconnections that are not reductions on lower-emitting or less approach adopted in the proposal of constrained by state borders. Across a carbon-intensive states and a lesser establishing state-level goals; in the final variety of issues raised in the proposal, emission reduction burden on sources rule, those goals are equal to the many commenters urged that the EPA and states that were higher-emitting or weighted aggregate of the two emission take that reality into account in more carbon-intensive. This, they performance rates as applied to the developing this final rule. argued, was both inequitable and at EGUs in each state. Consequently, the BSER determination odds with the way in which NSPS have This approach rectifies what would itself (as well as a number of new been applied in the past, where the have been an inefficient, unintended compliance features included in this higher-emitting sources have made the outcome of putting the greater reduction final rule) and the resulting subcategory- greater and more cost-effective burden on lower-emitting sources and specific emission performance rates take reductions, while lower-emitting states while exempting higher-emitting into account the grid-level operations of sources, whose reduction opportunities sources and states. Expressing the BSER the source category. tend to be less cost-effective, have been by means of these rates also augments The final guidelines’ BSER required to make fewer reductions to the range of options for both states and determination also takes into account meet the applicable standard. EGUs for securing needed flexibility. recent reductions in the cost of clean At the same time, state and utility Inclusion of state goals creates latitude energy technology, as well as commenters expressed concern that for states as to how they will meet the projections of continuing cost relying on state-specific goals and state- guidelines. States also may meet the reductions, and continuing increases in by-state planning could introduce guideline requirements by adopting the RE deployment. We also updated the complexity into the otherwise seamless CO2 emission performance rates as underlying analysis with the most integrated operation of affected EGUs emission standards that apply to the recent Energy Information across the multi-state grids on which affected EGUs in their jurisdiction. Such Administration (EIA) projections that system operators, states and utilities an approach would lend itself to the show lower growth in electricity currently rely and intend to continue to ready establishment of intra-state and demand between 2020 and 2030 than rely. Accordingly, they recommended interstate trading, with the uniform rate- previously projected. In keeping with that the final guidelines facilitate based standards of performance these recent EIA projections, we expect emissions trading, in particular established for each EGU as the basis for the final guidelines will be more interstate trading, which would enable such trading. At the same time, as at conducive to compliance, consistent EGU operators to integrate compliance proposal, each state also has the option with a strategy that allows for the with CO2 emissions limitations with of complying with these guidelines by cleanest power generation and greater facility and grid-level operations. These adopting a plan that takes a different CO2 reductions in 2030 than the sets of comments intersected at the approach to setting standards of proposal. With a date of 2022, instead point at which they focused on the fact performance for its EGUs and/or by of 2020, as proposed, for the mandatory that it is at the source level at which the applying complementary or alternative

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00014 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64675

measures to meet the state goal set by standards’’ approach, and a ‘‘state Stakeholders, particularly states, these guidelines—as either a rate or a measures’’ approach. Through the latter, provided compelling information mass total. states may adopt a set of policies and establishing that it could take longer During the outreach process and programs, which would not be federally than the agency initially anticipated for through comments, a number of state enforceable, except that any standards the states to develop and submit their officials and other stakeholders imposed on affected EGUs would be required plans. While the approach at expressed concern that the EPA’s federally enforceable. In addition, states proposal reflected the EPA’s conclusion approach at proposal necessitated or would be required to include federally that it was essential to the represented a significant intrusion into enforceable backstop measures environmental and economic purposes state-level energy policy-making, applicable to each affected EGU in the of this rulemaking that utilities and drawing the EPA well beyond the event that the measures included in the states establish the path towards bounds of its CAA authority and state plan failed to achieve the state emissions reductions as early as expertise. In fact, these final guidelines plan’s emissions reduction trajectory. possible, we recognize commenters’ are entirely respectful of the EPA’s Under these guidelines, states can concerns. To strike the proper balance, responsibility and authority to regulate implement the BSER through standards the EPA has developed a revised state sources of air pollution. Instead, by of performance incorporating the plan submittal schedule. For states that establishing and operating through uniform performance rates or alternative cannot submit a final plan by September uniform performance rates for the two but in the aggregate equivalent rates, or 6, 2016, the EPA is requiring those subcategories of sources that can be they can adopt plans that achieve in states to make an initial submittal by applied by states at the individual aggregate the equivalent of the that date to assure that states begin to source level and that can readily be subcategory-specific CO2 emission address the urgent needs for reductions implemented through emission performance rates by relying on other quickly, and is providing until standards that incorporate emissions measures undertaken by the state that September 6, 2018, for states to submit trading, these final guidelines align with complement source-specific a final plan, if an extension until that the approach Congress and the EPA requirements or, save for the contingent date is justified, to address the concern have consistently taken to regulating backstop requirement, supplant them that a submitting state needs more time emissions from this and other industrial entirely. This revision provides to develop comprehensive plans that sectors, namely setting source-level, consistency in the treatment of sources reflect the full range of the state’s and source category-wide standards that while still providing maximum its stakeholders’ interests. individual sources can meet through a flexibility for states to design their plans (7) Provisions to encourage early variety of technologies and measures. around reduction approaches that best action. Many commenters supported We emphasize, at the same time, that suit their policy objectives. while the final guidelines express the providing incentives for states and (5) Emission trading programs. BSER by means of source-level CO2 utilities to deploy CO2-reducing emission performance rates, as well as Many state and utility commenters investments, such as RE and demand- state-level goals, as at proposal, each supported the use of mass-based and side EE measures, as early as possible. state will have a goal reflecting its rate-based emission trading programs in We also received comments from particular mix of sources, and the final state plans, including interstate stakeholders regarding the guidelines retain the flexibility inherent emission trading programs, and either disproportionate burdens that some in the proposal’s state-specific goals pointed out obstacles to establishing communities already bear, and stating approach (and, as discussed in section such programs or suggested approaches that all communities should have equal VIII of this preamble, enhanced in that would enhance states’ and utilities’ access to the benefits of clean and various ways). Thus, in keeping with ability to create and participate in such affordable energy. The EPA recognizes the proposal’s flexibility, states may programs. the validity and importance of these choose to adopt either the emission Through a combination of features perspectives, and as a result has performance rates as emission standards retained from the proposal and changes determined to provide a program— for their sources, set different but, in the made to the proposal, these final called the CEIP—in which states may aggregate, equivalent rates, or fulfill guidelines provide states and utilities choose to participate. their obligations by meeting their with a panoply of tools that greatly The CEIP is designed to incentivize respective individual state goals. facilitate their putting in place and investment in certain RE and demand- (4) State plan approaches. participating in emissions trading side EE projects that commence Commenters expressed support for programs. These include: (1) Expressing construction, in the case of RE, or the objectives served by the ‘‘portfolio’’ BSER in uniform emission performance commence construction, in the case of option in the state plan approaches rates that states may rely on in setting demand-side EE, following the included at proposal, but many raised emission standards for affected EGUs submission of a final state plan to the concerns about its legality, with respect, such that EGUs operating under such EPA, or after September 6, 2018, for in particular, to the CAA’s standards readily qualify to trade with states that choose not to submit a final enforceability requirements. Some of affected EGUs in states that adopt the state plan by that date, and that generate these commenters identified a ‘‘state same approach, (2) promulgating state MWh (RE) or reduce end-use energy commitment approach’’ with backstop mass goals so that states can move demand (EE) during 2020 and/or 2021. measures as a variation of the quickly to establish mass-based State participation in the program is ‘‘portfolio’’ approach that would retain programs such that their affected EGUs optional. the benefits of the ‘‘portfolio’’ approach readily qualify to trade with affected Under the CEIP, a state may set aside while resolving legal and enforceability EGUs in states that adopt the same allowances from the CO2 emission concerns. In this final rule, in response approach, and (3) providing EPA budget it establishes for the interim plan to stakeholder comments on the resources and capacity to create a performance period or may generate portfolio approach and alternative tracking system to support state early action ERCs (ERCs are discussed approaches, the EPA is finalizing two emissions trading programs. in more detail in section VIII.K.2), and approaches: A source-based ‘‘emission (6) Extension of plan submittal date. allocate these allowances or ERCs to

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00015 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64676 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

eligible projects for the MWh those The EPA discusses the CEIP in the be remedied by amending the state plan. projects generate or the end-use energy proposed federal plan rule and will In addition, the final rule includes a savings they achieve in 2020 and/or address design and implementation reliability safety valve to address 2021. For each early action allowance or details of the CEIP in a subsequent situations where, because of an ERC a state allocates to such projects, action. Prior to doing so, the EPA will unanticipated catastrophic event, there the EPA will provide the state with an engage with states, utilities and other is a conflict between the requirements appropriate number of matching stakeholders to gather information imposed on an affected unit and the allowances or ERCs for the state to regarding their interests and priorities maintenance of reliability. allocate to the project. The EPA will with regard to implementation of the (9) Approaches for addressing match state-issued early action ERCs CEIP. employment concerns. and allowances up to an amount that (8) Provisions for electric system Some commenters brought to our represents the equivalent of 300 million reliability. attention the concerns of workers, their short tons of CO2 emissions. A number of commenters stressed the families and communities, particularly For a state to be eligible for a importance of final guidelines that in coal-producing regions and states, matching award of allowances or ERCs addressed the need to ensure that EGUs that the ongoing shift toward lower- from the EPA, it must demonstrate that could meet their emission reduction carbon electricity generation that the it will award allowances or ERCs only requirements without being compelled final rule reflects will cause harm to to ‘‘eligible’’ projects. These are projects to take actions that would undermine communities that are dependent on that: electric system reliability. As noted coal. Others had concerns about • Are located in or benefit a state that above, the EPA has consulted whether new jobs created as a result of has submitted a final state plan that extensively with federal, regional and actions taken pursuant to the final rule includes requirements establishing its state energy agencies, utilities and many will allow for overall economic participation in the CEIP; others about reliability concerns and development. In the final rule, the EPA • Are implemented following the ways to address them. The final encourages states, in designing their submission of a final state plan to the guidelines support electric system state plans, to consider the effects of EPA, or after September 6, 2018, for a reliability in a number of ways, some their plans on employment and overall state that chooses not to submit a inherent in the improvements made in economic development to assure that complete state plan by that date; the program’s design and some through the opportunities for economic growth • For RE: Generate metered MWh specific provisions we have included in and jobs that the plans offer are from any type of wind or solar the final rule. Most important are the manifest. We also identify federal resources; two key changes we made to the interim programs, including the multi-agency • For EE: Result in quantified and goal: Establishing 2022, instead of 2020, Partnerships for Opportunity and verified electricity savings (MWh) as the period for mandatory emission Workforce and Economic Revitalization through demand-side EE implemented reductions begin and phasing in, over (POWER) Initiative.15 The POWER in low-income communities; and the 8-year period, emission performance • Initiative is competitively awarding Generate or save MWh in 2020 and/ rates such that the level of stringency of planning assistance and implementation or 2021. the emission performance rates in 2022– grants with funding from the The following provisions outline how 2024 is significantly less than that for Department of Commerce, Department a state may award early action ERCs and the years 2028 and 2029. Since states of Labor (DOL), Small Business allowances to eligible projects, and how and utilities need only to meet their Administration, and the Appalachian the EPA will provide matching ERCs or interim goal ‘‘on average’’ over the 8- Regional Commission,16 whose mission allowances to states. year period, these changes provide them is to assist communities affected by • For RE projects that generate with a great deal of latitude in changes in the coal industry and the metered MWh from any type of wind or determining for themselves their utility power sector. solar resources: For every two MWh emission reduction trajectory—and they (10) Community and environmental generated, the project will receive one have additional time to do so. As a justice considerations. early action ERC (or the equivalent result, the final guidelines provide the Many community leaders, number of allowances) from the state, ingredients that commenters, reliability environmental justice advocates, faith- and the EPA will provide one matching entities and expert agencies told the based organizations and others ERC (or the equivalent number of EPA were essential to ensuring electric commented that the benefits of this rule allowances) to the state to award to the system reliability: Time and flexibility must be shared broadly across society project. sufficient to allow for planning, and that undue burdens should not be • For EE projects implemented in implementation and the integration of imposed on low-income ratepayers. We low-income communities: For every two actions needed to address reliability agree. The federal government is taking MWh in end-use demand savings while achieving the required emissions significant steps to help low-income achieved, the project will receive two reductions. families and individuals gain access to early action ERCs (or the equivalent In addition, the final guidelines add a RE and demand-side EE through new number of allowances) from the state, requirement, based on substantial input initiatives involving, for example, and the EPA will provide two matching from experts in the energy field, for increasing solar energy systems in ERCs (or the equivalent number of states to demonstrate that they have federally subsidized homes and allowances) to the state to award to the considered electric system reliability in supporting solar systems for others with project. developing their state plans. The final Early action allowances or ERCs rule also offers additional opportunities low incomes. The final rule ensures that awarded by the state, and matching that support electric system reliability, bill-lowering measures such as demand- allowances or ERCs awarded by the EPA including opportunities for trading side EE continue to be a major pursuant to the CEIP, may be used for within and between states. The final 15 http://www.eda.gov/power/. compliance by an affected EGU with its guidelines also make clear that states 16 https://www.whitehouse.gov/the-press-office/ emission standards and are fully can adjust their plans in the event that 2015/03/27/fact-sheet-partnerships-opportunity- transferrable prior to such use. reliability challenges arise that need to and-workforce-and-economic-revitaliz.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00016 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64677

compliance option. The CEIP will climate change impacts are already GHG emissions from fossil fuel-fired encourage early investment in these manifesting themselves and imposing EGUs. This CAA section 111(d) action types of projects as well. In addition to losses and costs. The report documents builds on actions states and utilities are carbon reduction benefits, we expect increases in extreme weather and already taking to move toward cleaner significant near- and long-term public climate events in recent decades, with generation of electric power. health benefits in communities as resulting damage and disruption to The utility power sector is unlike conventional air pollutants are reduced human well-being, infrastructure, other industrial sectors. In other sectors, along with GHGs. However, some ecosystems, and agriculture, and sources effectively operate stakeholders expressed concerns about projects continued increases in impacts independently and on a local-site scale, the possibility of localized increases in across a wide range of communities, with control of their physical operations emissions from some power plants as sectors, and ecosystems. New scientific resting in the hands of their respective the utility industry complies with state assessments since 2009, when the EPA owners and operators. Pollution control plans, in particular in communities determined that GHGs pose a threat to standards, which focus on each source already disproportionately affected by human health and the environment (the in a non-utility industrial source air pollution. This rule sets expectations ‘‘Endangerment Finding’’), highlight the category, have reflected the standalone for states to engage with vulnerable urgency of addressing the rising character of individual source communities as they develop their concentration of CO2 in the atmosphere. investment decision-making and plans, so that impacts on these Certain groups, including children, the operations. communities are considered as plans are elderly, and the poor, are most In stark contrast, the utility power designed. The EPA also encourages vulnerable to climate-related effects. sector comprises a unique system of states to engage with workers in the Recent studies also find that certain electricity resources, including the utility power and related sectors, as well communities, including low-income EGUs affected under these guidelines, as their worker representatives, so that communities and some communities of that operate in a complex and impacts on their communities may be color (more specifically, populations interconnected grid where electricity considered. The EPA commits, once defined jointly by ethnic/racial generally flows freely (e.g., portions of implementation is under way, to assess characteristics and geographic location), the system cannot be easily isolated the impacts of this rule. Likewise, we are disproportionately affected by through the use of switches or valves as encourage states to evaluate the effects certain climate change related impacts— can be done in other networked systems of their plans to ensure that there are no including heat waves, degraded air like trains and pipeline systems). That disproportionate adverse impacts on quality, and extreme weather events— grid is physically interconnected and their communities. which are associated with increased operated on an integrated basis across deaths, illnesses, and economic large regions. In this interconnected 5. Additional Context for This Final challenges. Studies also find that system, system operators, whose Rule climate change poses particular threats decisions, protocols, and actions, to a a. Climate change impacts. This final to the health, well-being, and ways of significant extent, dictate the operations rule is an important step in an essential life of indigenous peoples in the U.S. of individual EGUs and large ensembles series of long-term actions that are b. The utility power sector. One of the of EGUs, must reliably balance supply achieving and must continue to achieve strategies of the President’s Climate and demand using available generation the GHG emission reductions needed to Action Plan is to reduce CO2 emissions and demand-side resources, including address the serious threat of climate from power plants.20 This is because EE, demand response and a wide range change, and constitutes a major fossil fuel-fired EGUs are by far the of low- and zero-emitting sources. These commitment—and international largest emitters of GHGs, primarily in resources are managed to meet the leadership-by-doing—on the part of the the form of CO2. Among stationary system needs in a reliable and efficient U.S., one of the world’s largest GHG sources in the U.S. and among fossil manner. Each aspect of this emitters. GHG pollution threatens the fuel-fired EGUs, coal-fired units are by interconnected system is highly American public by leading to damaging far the largest emitters of GHGs. To regulated and coordinated, with supply and long-lasting changes in our climate accomplish the goal of reducing CO2 and demand constantly being balanced that can have a range of severe negative emissions from power plants, President to meet system needs. Each step of the effects on human health and the Obama issued a Presidential process from the electric generator to environment. CO2 is the primary GHG Memorandum 21 that recognized the the end user is highly regulated by pollutant, accounting for nearly three- importance of significant and prompt multiple entities working in quarters of global GHG emissions17 and action. The Memorandum directed the coordination and considering overall 82 percent of U.S. GHG emissions.18 EPA to complete carbon pollution system reliability. For example, in an The May 2014 report of the National standards, regulations or guidelines, as independent system operator (ISO) or Climate Assessment 19 concluded that appropriate, for new, modified, regional transmission organization reconstructed and existing power (RTO) with a centralized, organized 17 Intergovernmental Panel on Climate Change plants, and in doing so to build on state capacity market, electric generators are (IPCC) report, ‘‘Contribution of Working Group I to paid to be available to run when the Fourth Assessment Report of the leadership in moving toward a cleaner Intergovernmental Panel on Climate Change,’’ 2007. power sector. In this action and the needed, must bid into energy markets, Available at http://epa.gov/climatechange/ concurrent CAA section 111(b) rule, the must respond to dispatch instructions, ghgemissions/global.html. EPA is finalizing regulations to reduce and must have permission to schedule 18 From Table ES–2 ‘‘Inventory of U.S. maintenance. The ISO/RTO dispatches Greenhouse Gas Emissions and Sinks: 1990–2013’’, Report EPA 430–R–15–004, United States 20 The President’s Climate Action Plan, June resources in a way that maintains Environmental Protection Agency, April 15, 2015. 2013. http://www.whitehouse.gov/sites/default/ electric system reliability. Available at http://epa.gov/climatechange/ files/image/president27sclimateactionplan.pdf. The approach we take in the final ghgemissions/usinventoryreport.html. 21 Presidential Memorandum—Power Sector guidelines—both in the way we defined 19 U.S. Global Change Research Program, Climate Carbon Pollution Standards, June 25, 2013. http:// the BSER and established the resulting Change Impacts in the United States: The Third www.whitehouse.gov/the-press-office/2013/06/25/ National Climate Assessment, May 2014. Available presidential-memorandum-power-sector-carbon- emission performance rates, and in the at http://nca2014.globalchange.gov/. pollution-standards. ranges of options we created for states

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00017 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64678 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

and affected EGUs—is consistent with, The uniqueness of the utility power tailored to the unique characteristics of and in some ways mirrors, the sector inevitably affects the way in the utility power sector. interconnected, interdependent and which environmental regulations are The way that power is produced, highly regulated nature of the utility designed. When the EPA promulgates distributed and used in the U.S. is power sector, the daily operation of environmental regulations that affect the already changing as a result of affected EGUs within this framework, utility power sector, as we have done advancements in innovative power and the critical role of utilities in numerous times over the past four sector technologies and in the providing reliable, affordable electricity decades, we do so with the awareness availability and cost of low-carbon fuel, at all times and in all places within this of the importance of the efficient and RE and demand-side EE technologies, as complex, regulated system. Thus, not continuous, uninterrupted operation of well as economic conditions. These only do these guidelines put a premium the interconnected electricity system in changes are taking place at a time when on providing as much flexibility and which EGUs participate. We also keep the average age of the coal-fired latitude as possible for states and in mind the unique product that this generating fleet is approaching that at utilities, they also recognize that a given interconnected system provides— which utilities and states undertake EGU’s operations are determined by the electricity services—and the critical role significant new investments to address availability and use of other generation of this sector to the U.S. economy and aging assets. In 2025, the average age of resources to which it is physically to the fundamental well-being of all the coal-fired generating fleet is connected and by the collective Americans. projected to be 49 years old, and 20 operating regime that integrates that In the context of environmental percent of those units would be more individual EGU’s activity with other regulation, Congress, the EPA and the than 60 years old if they remain in resources across the grid. states all have recognized—as we do in operation at that time. Therefore, even In this integrated system, numerous these final guidelines—that electricity in the absence of additional entities have both the capability and the production takes place, at least to some environmental regulation, states and responsibility to maintain a reliable extent, interchangeably between and utilities can be expected to be, and electric system. FERC, DOE, state public among multiple generation facilities and already are, making plans for and utility commissions, ISOs, RTOs, other different types of generation. This is investing in the next generation of planning authorities, and the North evidenced in the enactment or power production, simply because of American Electric Reliability promulgation of pollution reduction the need to take account of the age of Corporation (NERC), all contribute to programs, such as Title IV of the CAA, current assets and infrastructure. ensuring the reliability of the electric Historically, the industry has invested the NOX state implementation plan (SIP) system in the U.S. Critical to this Call, the Cross-State Air Pollution Rule about $100 billion a year in capital function are dispatch tools, applied (CSAPR), and the Regional Greenhouse improvements. These guidelines will primarily by RTOs, ISOs, and balancing Gas Initiative (RGGI). As these actions help ensure that, as those necessary authorities, that operate such that show, both Congress and the EPA have investments are being made, they are actions taken or costs incurred at one consistently tailored legislation and integrated with the need to address GHG source directly affect or cause actions to regulations affecting the utility power pollution from the sector. At the same time, owners/operators of occur at other sources. Generation, sector to its unique characteristics. For affected EGUs are already pursuing the outages, and transmission changes in example, in Title IV of the Clean Air Act types of measures contemplated in this one part of the synchronous grid can Amendments of 1990, Congress 22 rule. Out of 404 entities identified as affect the entire interconnected grid. established a pollution reduction owners or operators of affected EGUs, The interconnection is such that ‘‘[i]f a program specifically for fossil fuel-fired representing ownership of 82 percent of generator is lost in New York City, its EGUs and designed the SO portion of 2 the total capacity of the affected EGUs, effect is felt in Georgia, Florida, that program with express recognition of 178 already own RE generating capacity Minneapolis, St. Louis, and New the sector’s ability to shift generation 23 in addition to fossil fuel-fired generating Orleans.’’ The U.S. Supreme Court among various EGUs, which enabled capacity. In fact, these entities already has explicitly recognized the pollution reduction by increasing own aggregate amounts of RE generating interconnected nature of the electricity reliance on natural gas-fired units and 24 capacity equal to 25 percent of the grid. RE. Similarly, in the NO SIP Call, the X aggregate amounts of their affected EGU Clean Air Interstate Rule (CAIR), and 22 capacity.25 In addition, funding for Casazza, J. and Delea, F., Understanding CSAPR, the EPA established pollution Electric Power Systems, IEEE Press, at 159 (2d ed. utility EE programs has been growing reduction programs focused on fossil 2010). rapidly, increasing from $1.6 billion in 23 fuel-fired EGUs and designed those Casazza, J. and Delea, F., Understanding 2006 to $6.3 billion in 2013. Electric Power Systems, IEEE Press, at 160 (2d ed. programs with express recognition of The final guidelines are based on, and 2010). the sector’s ability to shift generation 24 reinforce, the actions already being Federal Power Comm’n v. Florida Power & among various EGUs. In this action, we Light Co., 404 U.S. 453, at 460 (1972) (quoting a taken by states and utilities to upgrade continue that approach. Both the Federal Power Commission hearing examiner, ‘‘ ‘If aging electricity infrastructure with 21st a housewife in Atlanta on the Georgia system turns subcategory-specific emission century technologies. The guidelines on a light, every generator on Florida’s system performance rates, and the pathways will ensure that these trends continue in almost instantly is caused to produce some quantity offered to achieve them, reflect and are of additional electric energy which serves to ways that are consistent with the long- maintain the balance in the interconnected system term planning and investment processes between generation and load.’ ’’) (citation omitted). place solely in California, was under Federal Power See also New York v. FERC, 535 U.S. 1, at 7–8 Commission jurisdiction because some of the already used in the utility power sector. (2002) (stating that ‘‘any electricity that enters the electricity that Southern California Edison marketed This final rule provides flexibility for grid immediately becomes a part of a vast pool of came from out of state. The Supreme Court stated states to build upon their progress, and energy that is constantly moving in interstate that, ‘‘ ‘federal jurisdiction was to follow the flow the progress of cities and towns, in commerce.’’) (citation omitted). In Federal Power of electric energy, an engineering and scientific, Comm’n v. Southern California Edison Co., 376 rather than a legalistic or governmental, test.’ ’’ Id. addressing GHGs, and minimizes U.S. 205 (1964), the Supreme Court found that a at 210, quoting Connecticut Light & Power Co. v. sale for resale of electricity from Southern Federal Power Commission, 324 U.S. 515, 529 25 SNL Energy. Data used with permission. California Edison to the City of Colton, which took (1945) (emphasis omitted). Accessed on June 9, 2015.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00018 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64679

additional requirements for existing implemented. Thus, all costs and are approximately $2.5 billion (2011$) programs where possible. It also allows benefits reported for this action are under the rate-based approach and $1.4 states to pursue policies to reduce illustrative estimates. The illustrative billion (2011$) under the mass-based carbon pollution that: (1) Continue to costs and benefits are based upon approach. In 2025, total compliance rely on a diverse set of energy resources; compliance approaches that reflect a costs of the final guidelines are (2) ensure electric system reliability; (3) range of measures consisting of approximately $1.0 billion (2011$) provide affordable electricity; (4) improved operations at EGUs, under the rate-based approach and $3.0 recognize investments that states and dispatching lower-emitting EGUs and billion (2011$) under the mass-based power companies are already making; zero-emitting energy sources, and approach. In 2030, total compliance and (5) tailor plans to meet their increasing levels of end-use EE. costs of the final guidelines are respective energy, environmental and Because of the range of choices approximately $8.4 billion (2011$) economic needs and goals, and those of available to states and the lack of a under the rate-based approach and $5.1 their local communities. Thus, the final priori knowledge about the specific billion (2011$) under the mass-based guidelines will achieve meaningful CO2 choices states will make in response to approach. emission reductions while maintaining the final goals, the RIA for this final The quantified net benefits (the the reliability and affordability of action presents two scenarios designed difference between monetized benefits electricity in the U.S. to achieve these goals, which we term and compliance costs) in 2020 are 6. Projected National-Level Emission the ‘‘rate-based’’ illustrative plan estimated to range from $1.0 billion to Reductions approach and the ‘‘mass-based’’ $2.1 billion (2011$) using a 3 percent illustrative plan approach. Under the final guidelines, the EPA discount rate (model average) under the In summary, we estimate the total rate-based approach and from $3.9 projects annual CO2 reductions of 22 to 23 percent below 2005 levels in 2020, combined climate benefits and health billion to $6.7 billion (2011$) using a 3 28 to 29 percent below 2005 levels in co-benefits for the rate-based approach percent discount rate (model average) 2025, and 32 percent below 2005 levels to be $3.5 to $4.6 billion in 2020, $18 under the mass-based approach. In in 2030. These guidelines will also to $28 billion in 2025, and $34 to $54 2025, the quantified net benefits (the result in important reductions in billion in 2030 (3 percent discount rate, difference between monetized benefits emissions of criteria air pollutants, 2011$). Total combined climate benefits and compliance costs) in 2025 are and health co-benefits for the mass- including SO2, NOX, and directly- estimated to range from $17 billion to based approach are estimated to be $5.3 emitted fine particulate matter (PM2.5). $27 billion (2011$) using a 3 percent A thorough discussion of the EPA’s to $8.1 billion in 2020, $19 to $29 discount rate (model average) under the analysis is presented in Section XI.A of billion in 2025, and $32 to $48 billion rate-based approach and from $16 this preamble and in Chapter 3 of the in 2030 (3 percent discount rate, 2011$). billion to $26 billion (2011$) using a 3 Regulatory Impact Analysis (RIA) A summary of the emission reductions percent discount rate (model average) included in the docket for this and monetized benefits estimated for under the mass-based approach. In rulemaking. this rule at all discount rates is provided 2030, the quantified net benefits (the in Tables 15 through 22 of this difference between monetized benefits 7. Costs and Benefits preamble. and compliance costs) in 2030 are Actions taken to comply with the The annual compliance costs are estimated to range from $26 billion to final guidelines will reduce emissions of estimated using the Integrated Planning $45 billion (2011$) using a 3 percent CO2 and other air pollutants, including Model (IPM) and include demand-side discount rate (model average) under the SO2, NOX, and directly emitted PM2.5 EE program and participant costs as rate-based approach and from $26 from the utility power sector. States will well as monitoring, reporting and billion to $43 billion (2011$) using a 3 make the ultimate determination as to recordkeeping costs. In 2020, total percent discount rate (model average) how the emission guidelines are compliance costs of the final guidelines under the mass-based approach.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00019 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64680 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

TABLE 1—SUMMARY OF THE MONETIZED BENEFITS, COMPLIANCE COSTS, AND NET BENEFITS FOR THE FINAL GUIDELINES IN 2020, 2025, AND 2030 a UNDER THE RATE-BASED ILLUSTRATIVE PLAN APPROACH [Billions of 2011$]

Rate-based approach, 2020 7% Discount 3% Discount rate rate

Climate benefits b ...... $2.8

Air pollution health co-benefits c ...... $0.70 to $1.8 ...... $0.64 to $1.7. Total Compliance Costs d ...... $2.5 ...... $2.5. Net Monetized Benefits e ...... $1.0 to $2.1 ...... $1.0 to $2.0.

Non-monetized Benefits ...... Non-monetized climate benefits. Reductions in exposure to ambient NO2 and SO2. Reductions in mercury deposition. Ecosystem benefits associated with reductions in emissions of NOX, SO2, PM, and mercury. Visibility impairment.

Rate-based approach, 2025

Climate benefits b ...... $10

Air pollution health co-benefits c ...... $7.4 to $18 ...... $6.7 to $16. Total Compliance Costs d ...... $1.0 ...... $1.0. Net Monetized Benefits e ...... $17 to $27 ...... $16 to $25.

Non-monetized Benefits ...... Non-monetized climate benefits. Reductions in exposure to ambient NO2 and SO2. Reductions in mercury deposition. Ecosystem benefits associated with reductions in emissions of NOX, SO2, PM, and mercury. Visibility impairment.

Rate-based approach, 2030

Climate benefits b ...... $20

Air pollution health co-benefits c ...... $14 to $34 ...... $13 to $31. Total Compliance Costs d ...... $8.4 ...... $8.4. Net Monetized Benefits e ...... $26 to $45 ...... $25 to $43.

Non-monetized Benefits ...... Non-monetized climate benefits. Reductions in exposure to ambient NO2 and SO2. Reductions in mercury deposition. Ecosystem benefits associated with reductions in emissions of NOX, SO2, PM, and mercury. Visibility impairment. a All are rounded to two significant figures, so figures may not sum. b The climate benefit estimate in this summary table reflects global impacts from CO2 emission changes and does not account for changes in non-CO2 GHG emissions. Also, different discount rates are applied to SC–CO2 than to the other estimates because CO2 emissions are long-lived and subsequent damages occur over many years. The benefit estimates in this table are based on the average SCC estimated for a 3 percent discount rate, however we emphasize the importance and value of considering the full range of SC–CO2 values. As shown in the RIA, climate benefits are also estimated using the other three SC–CO2 estimates (model average at 2.5 percent discount rate, 3 percent, and 5 percent; 95th percentile at 3 percent). The SC–CO2 estimates are year-specific and increase over time. c The air pollution health co-benefits reflect reduced exposure to PM2.5 and ozone associated with emission reductions of directly emitted PM2.5, SO2 and NOX. The range reflects the use of concentration-response functions from different epidemiology studies. The reduction in pre- mature fatalities each year accounts for over 98 percent of total monetized co-benefits from PM2.5 and ozone. These models assume that all fine particles, regardless of their chemical composition, are equally potent in causing premature mortality because the scientific evidence is not yet sufficient to allow differentiation of effect estimates by particle type. d Total costs are approximated by the illustrative compliance costs estimated using the Integrated Planning Model for the final guidelines and a discount rate of approximately 5%. This estimate includes monitoring, recordkeeping, and reporting costs and demand-side EE program and par- ticipant costs. e The estimates of net benefits in this summary table are calculated using the global SC–CO2 at a 3 percent discount rate (model average). The RIA includes combined climate and health estimates based on additional discount rates.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00020 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64681

TABLE 2—SUMMARY OF THE MONETIZED BENEFITS, COMPLIANCE COSTS, AND NET BENEFITS FOR THE FINAL GUIDELINES IN 2020, 2025 AND 2030 a UNDER THE MASS-BASED ILLUSTRATIVE PLAN APPROACH [Billions of 2011$]

Mass-based approach, 2020 7% Discount 3% Discount rate rate

Climate benefits b ...... $3.3

Air pollution health co-benefits c ...... $2.0 to $4.8 ...... $1.8 to $4.4. Total Compliance Costs d ...... $1.4 ...... $1.4. Net Monetized Benefits e ...... $3.9 to $6.7 ...... $3.7 to $6.3.

Non-monetized Benefits ...... Non-monetized climate benefits. Reductions in exposure to ambient NO2 and SO2. Reductions in mercury deposition. Ecosystem benefits associated with reductions in emissions of NOX, SO2, PM, and mercury. Visibility impairment.

Mass-based approach, 2025

Climate benefits b $12

Air pollution health co-benefits c ...... $7.1 to $17 ...... $6.5 to $16. Total Compliance Costs d ...... $3.0 ...... $3.0. Net Monetized Benefits e ...... $16 to $26 ...... $15 to $24.

Non-monetized Benefits ...... Non-monetized climate benefits. Reductions in exposure to ambient NO2 and SO2. Reductions in mercury deposition. Ecosystem benefits associated with reductions in emissions of NOX, SO2, PM, and mercury. Visibility impairment.

Mass-based approach, 2030

Climate benefits b ...... $20

Air pollution health co-benefits c ...... $12 to $28 ...... $11 to $26. Total Compliance Costs d ...... $5.1 ...... $5.1. Net Monetized Benefits e ...... $26 to $43 ...... $25 to $40.

Non-monetized Benefits ...... Non-monetized climate benefits. Reductions in exposure to ambient NO2 and SO2. Reductions in mercury deposition. Ecosystem benefits associated with reductions in emissions of NOX, SO2, PM, and mercury. Visibility impairment. a All are rounded to two significant figures, so figures may not sum. b The climate benefit estimate in this summary table reflects global impacts from CO2 emission changes and does not account for changes in non-CO2 GHG emissions. Also, different discount rates are applied to SC–CO2 than to the other estimates because CO2 emissions are long-lived and subsequent damages occur over many years. The benefit estimates in this table are based on the average SC–CO2 estimated for a 3 per- cent discount rate, however we emphasize the importance and value of considering the full range of SC–CO2 values. As shown in the RIA, cli- mate benefits are also estimated using the other three SC–CO2 estimates (model average at 2.5 percent discount rate, 3 percent, and 5 percent; 95th percentile at 3 percent). The SC–CO2 estimates are year-specific and increase over time. c The air pollution health co-benefits reflect reduced exposure to PM2.5 and ozone associated with emission reductions of directly emitted PM2.5, SO2 and NOX. The range reflects the use of concentration-response functions from different epidemiology studies. The reduction in pre- mature fatalities each year accounts for over 98 percent of total monetized co-benefits from PM2.5 and ozone. These models assume that all fine particles, regardless of their chemical composition, are equally potent in causing premature mortality because the scientific evidence is not yet sufficient to allow differentiation of effect estimates by particle type. d Total costs are approximated by the illustrative compliance costs estimated using the Integrated Planning Model for the final guidelines and a discount rate of approximately 5 percent. This estimate includes monitoring, recordkeeping, and reporting costs and demand-side EE program and participant costs. e The estimates of net benefits in this summary table are calculated using the global SC–CO2 at a 3 percent discount rate (model average). The RIA includes combined climate and health estimates based on additional discount rates.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00021 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64682 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

There are additional important we present a summary of the rule on stakeholder outreach and benefits that the EPA could not requirements and the legal basis for consultations and the comments that the monetize. Due to current data and these. Section IV explains the EPA EPA received prior to issuing this final modeling limitations, our estimates of authority to regulate CO2 and EGUs, rulemaking. the benefits from reducing CO2 identifies affected EGUs, and describes A. Climate Change Impacts From GHG emissions do not include important the proposed treatment of source Emissions impacts like ocean acidification or categories. Section V describes the potential tipping points in natural or agency’s determination of the BSER According to the National Research managed ecosystems. The unquantified using three building blocks and our key Council, ‘‘Emissions of CO2 from the benefits also include climate benefits considerations in making the burning of fossil fuels have ushered in from reducing emissions of non-CO2 determination. Section VI provides the a new epoch where human activities GHGs (e.g., nitrous oxide and subcategory-specific emission will largely determine the evolution of methane) 26 and co-benefits from performance rates, and section VII Earth’s climate. Because CO2 in the reducing direct exposure to SO2, NOX, provides equivalent statewide rate- atmosphere is long lived, it can and HAP (e.g., mercury and hydrogen based and mass-based goals. Section effectively lock Earth and future chloride), as well as from reducing VIII then describes state plan generations into a range of impacts, ecosystem effects and visibility approaches and the requirements, and some of which could become very impairment. flexibilities, for state plans, followed by severe. Therefore, emission reduction We project employment gains and section IX, in which considerations for choices made today matter in losses relative to base case for different communities are described. Interactions determining impacts experienced not types of labor, including construction, between this final rule and other EPA just over the next few decades, but in plant operation and maintenance, coal programs and rules are discussed in the coming centuries and millennia.’’ 29 and natural gas production, and section X. Impacts of the proposed In 2009, based on a large body of demand-side EE. In 2030, we project a action are then described in section XI, robust and compelling scientific net decrease in job-years of about 31,000 followed by a discussion of statutory evidence, the EPA Administrator issued under the rate-based approach and and executive order reviews in section the Endangerment Finding under CAA 30 34,000 under the mass-based XII and the statutory authority for this section 202(a)(1). In the Endangerment approach 27 for construction, plant action in section XIII. Finding, the Administrator found that operation and maintenance, and coal We note that this rulemaking is being the current, elevated concentrations of and natural gas and a gain of 52,000 to promulgated concurrently with two GHGs in the atmosphere—already at 83,000 jobs in the demand-side EE related actions in this issue of the levels unprecedented in human sector under either approach. Actual Federal Register: The final NSPS for history—may reasonably be anticipated employment impacts will depend upon CO2 emissions from newly constructed, to endanger public health and welfare of measures taken by states in their state modified, and reconstructed EGUs, current and future generations in the plans and the specific actions sources which is being promulgated under CAA U.S. We summarize these adverse take to comply. section 111(b), and the proposed federal effects on public health and welfare Based upon the foregoing, it is clear plan and model rules. These briefly here. that the monetized benefits of this rule rulemakings have their own rulemaking 1. Public Health Impacts Detailed in the are substantial and far outweigh the dockets. 2009 Endangerment Finding costs. II. Background Climate change caused by human B. Organization and Approach for This In this section, we discuss climate emissions of GHGs threatens the health Rule change impacts from GHG emissions, of Americans in multiple ways. By This final rule establishes the EPA’s both on public health and public raising average temperatures, climate emission guidelines for states to follow welfare. We also present information change increases the likelihood of heat in developing plans to reduce CO2 about GHG emissions from fossil fuel- waves, which are associated with emissions from the utility power sector. fired EGUs, the challenges associated increased deaths and illnesses. While Section II of this preamble provides with controlling carbon dioxide climate change also increases the background information on climate emissions, the uniqueness of the utility likelihood of reductions in cold-related change impacts from GHG emissions, power sector, and recent and continuing mortality, evidence indicates that the GHG emissions from fossil fuel-fired trends and transitions in the utility increases in heat mortality will be larger EGUs, the utility power sector, the CAA power sector. In addition, we briefly than the decreases in cold mortality in section 111(d) requirements, EPA describe CAA regulations for power the U.S. Compared to a future without actions prior to this final action, plants, provide highlights of climate change, climate change is outreach and consultations, and the Congressional awareness of climate expected to increase ozone pollution number and extent of comments change and international agreements over broad areas of the U.S., especially received. In section III of the preamble, and actions, and summarize statutory on the highest ozone days and in the and regulatory requirements relevant to largest metropolitan areas with the 26 Although CO2 is the predominant greenhouse this rulemaking. In addition, we provide worst ozone problems, and thereby gas released by the power sector, electricity background information on the EPA’s increase the risk of morbidity and generating units also emit small amounts of nitrous mortality. Climate change is also oxide and methane. For more detail about power June 18, 2014 Clean Power Plan sector emissions, see RIA Chapter 2 and the U.S. proposal, the November 4, 2014 Greenhouse Gas Reporting Program’s power sector supplemental proposal, and other of emission rate-based CO2 goals to mass-based summary, http://www.epa.gov/ghgreporting/ equivalents (79 FR 67406; November 13, 2014). ghgdata/reported/powerplants.html. actions associated with this 29 National Research Council, Climate 28 27 A job-year is not an individual job; rather, a rulemaking, followed by information Stabilization Targets, p.3. job-year is the amount of work performed by the 30 ‘‘Endangerment and Cause or Contribute equivalent of one full-time individual for one year. 28 The EPA also published in the Federal Register Findings for Greenhouse Gases Under Section For example, 20 job-years in 2025 may represent 20 a notice of data availability (79 FR 64543; 202(a) of the Clean Air Act,’’ 74 FR 66496 (Dec. 15, full-time jobs or 40 half-time jobs. November 8, 2014) and a notice on the translation 2009) (‘‘Endangerment Finding’’).

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00022 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64683

expected to cause more intense Additionally, a number of major health, and illnesses transmitted by hurricanes and more frequent and scientific assessments have been food, water, and disease-carriers such as intense storms and heavy precipitation, released that improve understanding of mosquitoes and ticks.’’ The most recent with impacts on other areas of public the climate system and strengthen the assessments now have greater health, such as the potential for case that GHGs endanger public health confidence that climate change will increased deaths, injuries, infectious and welfare both for current and future influence production of pollen that and waterborne diseases, and stress- generations. These assessments, from exacerbates asthma and other allergic related disorders. Children, the elderly, the Intergovernmental Panel on Climate respiratory diseases such as allergic and the poor are among the most Change (IPCC), the U.S. Global Change rhinitis, as well as effects on vulnerable to these climate-related Research Program (USGCRP), and the conjunctivitis and dermatitis. Both the health effects. National Research Council (NRC), NCA3 and the IPCC AR5 found that include: IPCC’s 2012 Special Report on increasing temperature has lengthened 2. Public Welfare Impacts Detailed in Managing the Risks of Extreme Events the allergenic pollen season for the 2009 Endangerment Finding and Disasters to Advance Climate ragweed, and that increased CO2 by Climate change impacts touch nearly Change Adaptation (SREX) and the itself can elevate production of plant- every aspect of public welfare. Among 2013–2014 Fifth Assessment Report based allergens. the multiple threats caused by human (AR5), the USGCRP’s 2014 National The NCA3 also finds that climate emissions of GHGs, climate changes are Climate Assessment, Climate Change change, in addition to chronic stresses expected to place large areas of the Impacts in the United States (NCA3), such as extreme poverty, is negatively country at serious risk of reduced water and the NRC’s 2010 Ocean affecting indigenous peoples’ health in supplies, increased water pollution, and Acidification: A National Strategy to the U.S. through impacts such as increased occurrence of extreme events Meet the Challenges of a Changing reduced access to traditional foods, such as floods and droughts. Coastal Ocean (Ocean Acidification), 2011 decreased water quality, and increasing areas are expected to face a multitude of Report on Climate Stabilization Targets: exposure to health and safety hazards. increased risks, particularly from rising Emissions, Concentrations, and Impacts The IPCC AR5 finds that climate sea level and increases in the severity of over Decades to Millennia (Climate change-induced warming in the Arctic storms. These communities face storm Stabilization Targets), 2011 National and resultant changes in environment and flooding damage to property, or Security Implications for U.S. Naval (e.g., permafrost thaw, effects on even loss of land due to inundation, Forces (National Security Implications), traditional food sources) have erosion, wetland submergence and 2011 Understanding Earth’s Deep Past: significant impacts, observed now and habitat loss. Lessons for Our Climate Future projected, on the health and well-being Impacts of climate change on public (Understanding Earth’s Deep Past), 2012 of Arctic residents, especially welfare also include threats to social Sea Level Rise for the Coasts of indigenous peoples. Small, remote, and ecosystem services. Climate change California, Oregon, and Washington: predominantly-indigenous communities is expected to result in an increase in Past, Present, and Future, 2012 Climate are especially vulnerable given their peak electricity demand. Extreme and Social Stress: Implications for ‘‘strong dependence on the environment weather from climate change threatens Security Analysis (Climate and Social for food, culture, and way of life; their energy, transportation, and water Stress), and 2013 Abrupt Impacts of political and economic marginalization; resource infrastructure. Climate change Climate Change (Abrupt Impacts) existing social, health, and poverty may also exacerbate ongoing assessments. disparities; as well as their frequent environmental pressures in certain The EPA has carefully reviewed these close proximity to exposed locations settlements, particularly in Alaskan recent assessments in keeping with the along ocean, lake, or river indigenous communities, and is very same approach outlined in Section shorelines.’’ 31 In addition, increasing likely to fundamentally rearrange U.S. VIII.A of the 2009 Endangerment temperatures and loss of Arctic sea ice ecosystems over the 21st century. Finding, which was to rely primarily increases the risk of drowning for those Though some benefits may balance upon the major assessments by the engaged in traditional hunting and adverse effects on agriculture and USGCRP, the IPCC, and the NRC of the fishing. forestry in the next few decades, the National Academies to provide the The NCA3 concludes that children’s body of evidence points towards technical and scientific information to unique physiology and developing increasing risks of net adverse impacts inform the Administrator’s judgment bodies contribute to making them on U.S. food production, agriculture and regarding the question of whether GHGs particularly vulnerable to climate forest productivity as temperature endanger public health and welfare. change. Impacts on children are continues to rise. These impacts are These assessments addressed the expected from heat waves, air pollution, global and may exacerbate problems scientific issues that the EPA was infectious and waterborne illnesses, and outside the U.S. that raise humanitarian, required to examine, were mental health effects resulting from trade, and national security issues for comprehensive in their coverage of the extreme weather events. The IPCC AR5 the U.S. GHG and climate change issues, and indicates that children are among those underwent rigorous and exacting peer especially susceptible to most allergic 3. New Scientific Assessments and review by the expert community, as diseases, as well as health effects Observations well as rigorous levels of U.S. Since the administrative record government review. 31 IPCC, 2014: Climate Change 2014: Impacts, concerning the Endangerment Finding The findings of the recent scientific Adaptation, and Vulnerability. Part B: Regional Aspects. Contribution of Working Group II to the closed following the EPA’s 2010 assessments confirm and strengthen the Fifth Assessment Report of the Intergovernmental Reconsideration Denial, the climate has conclusion that GHGs endanger public Panel on Climate Change [Barros, V.R., C.B. Field, continued to change, with new records health, now and in the future. The D.J. Dokken, M.D. Mastrandrea, K.J. Mach, T.E. being set for a number of climate NCA3 indicates that human health in Bilir, M. Chatterjee, K.L. Ebi, Y.O. Estrada, R.C. Genova, B. Girma, E.S. Kissel, A.N. Levy, S. indicators such as global average surface the U.S. will be impacted by ‘‘increased MacCracken, P.R. Mastrandrea, and L.L. White temperatures, Arctic sea ice retreat, CO2 extreme weather events, wildfire, (eds.)]. Cambridge University Press, Cambridge, p. concentrations, and sea level rise. decreased air quality, threats to mental 1581. https://www.ipcc.ch/report/ar5/wg2/.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00023 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64684 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

associated with heat waves, storms, and categorized a decrease in ocean oxygen see more precipitation, while the dry floods. The IPCC finds that additional content (with attendant threats to subtropics are expected to expand health concerns may arise in low aerobic marine life); increase in (colloquially, this has been summarized income households, especially those intensity, frequency, and duration of as wet areas getting wetter and dry with children, if climate change reduces heat waves; and increase in frequency regions getting drier). In particular, the food availability and increases prices, and intensity of extreme precipitation NCA3 notes that the western U.S., and leading to food insecurity within events (droughts, floods, hurricanes, especially the Southwest, is expected to households. and major storms) as climate impacts become drier. This projection is Both the NCA3 and IPCC AR5 with moderate risk of an abrupt change consistent with the recent observed conclude that climate change will within this century. The NRC Abrupt drought trend in the West. At the time increase health risks facing the elderly. Impacts report also analyzed the threat of publication of the NCA, even before Older people are at much higher risk of of rapid state changes in ecosystems and the last 2 years of extreme drought in mortality during extreme heat events. species extinctions as examples of an California, tree ring data was already Pre-existing health conditions also make irreversible impact that is expected to be indicating that the region might be older adults susceptible to cardiac and exacerbated by climate change. Species experiencing its driest period in 800 respiratory impacts of air pollution and at most risk include those whose years. Similarly, the NCA3 projects that to more severe consequences from migration potential is limited, whether heavy downpours are expected to infectious and waterborne diseases. because they live on mountaintops or increase in many regions, with Limited mobility among older adults fragmented habitats with barriers to precipitation events in general can also increase health risks associated movement, or because climatic becoming less frequent but more with extreme weather and floods. conditions are changing more rapidly intense. This trend has already been The new assessments also confirm than the species can move or adapt. observed in regions such as the and strengthen the conclusion that While the NRC determined that it is not Midwest, Northeast, and upper Great GHGs endanger public welfare, and presently possible to place exact Plains. Meanwhile, the NRC Climate emphasize the urgency of reducing GHG probabilities on the added contribution Stabilization Targets assessment found emissions due to their projections that of climate change to extinction, they did that the area burned by wildfire is show GHG concentrations climbing to find that there was substantial risk that expected to grow by 2 to 4 times for 1 ever-increasing levels in the absence of impacts from climate change could, °C (1.8 °F) of warming. For 3 °C of mitigation. The NRC assessment within a few decades, drop the warming, the assessment found that 9 Understanding Earth’s Deep Past populations in many species below out of 10 summers would be warmer projected that, without a reduction in sustainable levels thereby committing than all but the 5 percent of warmest emissions, CO2 concentrations by the the species to extinction. Species within summers today, leading to increased end of the century would increase to tropical and subtropical rainforests such frequency, duration, and intensity of levels that the Earth has not experienced as the Amazon and species living in heat waves. Extrapolations by the NCA for more than 30 million years.32 In fact, coral reef ecosystems were identified by also indicate that Arctic sea ice in that assessment stated that ‘‘the the NRC as being particularly vulnerable summer may essentially disappear by magnitude and rate of the present GHG to extinction over the next 30 to 80 mid-century. Retreating snow and ice, increase place the climate system in years, as were species in high latitude and emissions of carbon dioxide and what could be one of the most severe and high elevation regions. Moreover, methane released from thawing increases in radiative forcing of the due to the time lags inherent in the permafrost, will also amplify future global climate system in Earth Earth’s climate, the NRC Climate warming. history.’’ 33 Because of these Stabilization Targets assessment notes Since the 2009 Endangerment unprecedented changes, several that the full warming from any given Finding, the USGCRP NCA3, and assessments state that we may be concentration of CO2 reached will not multiple NRC assessments have approaching critical, poorly understood be fully realized for several centuries, projected future rates of sea level rise thresholds. As stated in the assessment, underscoring that emission activities that are 40 percent larger to more than ‘‘As Earth continues to warm, it may be today carry with them climate twice as large as the previous estimates approaching a critical climate threshold commitments far into the future. from the 2007 IPCC 4th Assessment beyond which rapid and potentially Future temperature changes will Report due in part to improved permanent—at least on a human depend on what emission path the understanding of the future rate of melt timescale—changes not anticipated by world follows. In its high emission of the Antarctic and Greenland Ice climate models tuned to modern scenario, the IPCC AR5 projects that sheets. The NRC Sea Level Rise conditions may occur.’’ The NRC global temperatures by the end of the assessment projects a global sea level ° ° Abrupt Impacts report analyzed abrupt century will likely be 2.6 C to 4.8 C rise of 0.5 to 1.4 meters (1.6 to 4.6 feet) ° climate change in the physical climate (4.7 to 8.6 F) warmer than today. by 2100, the NRC National Security system and abrupt impacts of ongoing Temperatures on land and in northern Implications assessment suggests that changes that, when thresholds are latitudes will likely warm even faster ‘‘the Department of the Navy should crossed, can cause abrupt impacts for than the global average. However, expect roughly 0.4 to 2 meters [1.3 to 6.6 society and ecosystems. The report according to the NCA3, significant feet] global average sea-level rise by considered destabilization of the West reductions in emissions would lead to 2100,’’ 34 and the NRC Climate Antarctic Ice Sheet (which could cause noticeably less future warming beyond Stabilization Targets assessment states 3–4 m of potential sea level rise) as an mid-century, and therefore less impact that an increase of 3 °C will lead to a abrupt climate impact with unknown to public health and welfare. sea level rise of 0.5 to 1 meter (1.6 to but probably low probability of While rainfall may only see small 3.3 feet) by 2100. These assessments occurring this century. The report globally and annually averaged changes, continue to recognize that there is there are expected to be substantial 32 National Research Council, Understanding shifts in where and when that 34 NRC, 2011: National Security Implications of Earth’s Deep Past, p. 1. precipitation falls. According to the Climate Change for U.S. Naval Forces. The National 33 Id., p.138. NCA3, regions closer to the poles will Academies Press, p. 28.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00024 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64685

uncertainty inherent in accounting for people’s lives directly through impacts exceed the capacity of the affected ice sheet processes. Additionally, local on livelihoods, reductions in crop societies or global systems to manage sea level rise can differ from the global yields, or destruction of homes and and that have global security total depending on various factors: The indirectly through, for example, implications serious enough to compel east coast of the U.S. in particular is increased food prices and food international response.’’ The NRC expected to see higher rates of sea level insecurity.’’ 37 National Security Implications rise than the global average. For Carbon dioxide in particular has assessment recommends preparing for comparison, the NCA3 states that ‘‘five unique impacts on ocean ecosystems. increased needs for humanitarian aid; million Americans and hundreds of The NRC Climate Stabilization Targets responding to the effects of climate billions of dollars of property are assessment found that coral bleaching change in geopolitical hotspots, located in areas that are less than four will increase due both to warming and including possible mass migrations; and feet above the local high-tide level,’’ and ocean acidification. Ocean surface addressing changing security needs in the NCA3 finds that ‘‘[c]oastal waters have already become 30 percent the Arctic as sea ice retreats. infrastructure, including roads, rail more acidic over the past 250 years due In addition to future impacts, the lines, energy infrastructure, airports, to absorption of CO2 from the NCA3 emphasizes that climate change port facilities, and military bases, are atmosphere. According to the NCA3, driven by human emissions of GHGs is increasingly at risk from sea level rise this acidification will reduce the ability already happening now and it is and damaging storm surges.’’ 35 Also, of organisms such as corals, krill, happening in the U.S. According to the because of the inertia of the oceans, sea oysters, clams, and crabs to survive, IPCC AR5 and the NCA3, there are a level rise will continue for centuries grow, and reproduce. The NRC number of climate-related changes that after GHG concentrations have Understanding Earth’s Deep Past have been observed recently, and these stabilized (though more slowly than it assessment notes four of the five major changes are projected to accelerate in would have otherwise). Additionally, coral reef crises of the past 500 million the future. The planet warmed about there is a threshold temperature above years were caused by acidification and 0.85 °C (1.5 °F) from 1880 to 2012. It is which the Greenland ice sheet will be warming that followed GHG increases of extremely likely (>95 percent committed to inevitable melting: similar magnitude to the emissions probability) that human influence was According to the NCA, some recent increases expected over the next the dominant cause of the observed research has suggested that even present hundred years. The NRC Abrupt warming since the mid-20th century, day CO2 levels could be sufficient to Impacts assessment specifically and likely (>66 percent probability) that exceed that threshold. highlighted similarities between the human influence has more than doubled In general, climate change impacts are projections for future acidification and the probability of occurrence of heat expected to be unevenly distributed warming and the extinction at the end waves in some locations. In the across different regions of the U.S. and of the Permian which resulted in the Northern Hemisphere, the last 30 years have a greater impact on certain loss of an estimated 90 percent of were likely the warmest 30 year period populations, such as indigenous peoples known species. Similarly, the NRC of the last 1400 years. U.S. average and the poor. The NCA3 finds climate Ocean Acidification assessment finds temperatures have similarly increased change impacts such as the rapid pace that ‘‘[t]he chemistry of the ocean is by 1.3 to 1.9 degrees F since 1895, with of temperature rise, coastal erosion and changing at an unprecedented rate and most of that increase occurring since inundation related to sea level rise and magnitude due to anthropogenic carbon 1970. Global sea levels rose 0.19 m (7.5 storms, ice and snow melt, and dioxide emissions; the rate of change inches) from 1901 to 2010. Contributing permafrost thaw are affecting exceeds any known to have occurred for to this rise was the warming of the indigenous people in the U.S. at least the past hundreds of thousands oceans and melting of land ice. It is Particularly in Alaska, critical of years.’’ 38 The assessment notes that likely that 275 gigatons per year of ice infrastructure and traditional the full range of consequences is still melted from land glaciers (not including livelihoods are threatened by climate unknown, but the risks ‘‘threaten coral ice sheets) since 1993, and that the rate change and, ‘‘[i]n parts of Alaska, reefs, fisheries, protected species, and of loss of ice from the Greenland and Louisiana, the Pacific Islands, and other other natural resources of value to Antarctic ice sheets increased coastal locations, climate change society.’’ 39 substantially in recent years, to 215 impacts (through erosion and Events outside the U.S., as also gigatons per year and 147 gigatons per inundation) are so severe that some pointed out in the 2009 Endangerment year respectively since 2002. For communities are already relocating from Finding, will also have relevant context, 360 gigatons of ice melt is historical homelands to which their consequences. The NRC Climate and sufficient to cause global sea levels to traditions and cultural identities are Social Stress assessment concluded that rise 1 mm. Annual mean Arctic sea ice tied.’’ 36 The IPCC AR5 notes, ‘‘Climate- it is prudent to expect that some climate has been declining at 3.5 to 4.1 percent related hazards exacerbate other events ‘‘will produce consequences that per decade, and Northern Hemisphere stressors, often with negative outcomes snow cover extent has decreased at for livelihoods, especially for people 37 IPCC, 2014: Climate Change 2014: Impacts, Adaptation, and Vulnerability. Part A: Global and about 1.6 percent per decade for March living in poverty (high confidence). Sectoral Aspects. Contribution of Working Group II and 11.7 percent per decade for June. Climate-related hazards affect poor to the Fifth Assessment Report of the Permafrost temperatures have increased Intergovernmental Panel on Climate Change [Field, in most regions since the 1980s, by up 35 Melillo, Jerry M., Terese (T.C.) Richmond, and C.B., V.R. Barros, D.J. Dokken, K.J. Mach, M.D. to 3 °C (5.4 °F) in parts of Northern Gary W. Yohe, Eds., 2014: Climate Change Impacts Mastrandrea, T.E. Bilir, M. Chatterjee, K.L. Ebi, Y.O. in the United States: The Third National Climate Estrada, R.C. Genova, B. Girma, E.S. Kissel, A.N. Alaska. Winter storm frequency and Assessment. U.S. Global Change Research Program, Levy, S. MacCracken, P.R. Mastrandrea, and L.L. intensity have both increased in the p. 9. White (eds.)]. Cambridge University Press, p. 796. Northern Hemisphere. The NCA3 states 36 Melillo, Jerry M., Terese (T.C.) Richmond, and https://www.ipcc.ch/report/ar5/wg2/. that the increases in the severity or Gary W. Yohe, Eds., 2014: Climate Change Impacts 38 NRC, 2010: Ocean Acidification: A National in the United States: The Third National Climate Strategy to Meet the Challenges of a Changing frequency of some types of extreme Assessment. U.S. Global Change Research Program, Ocean. The National Academies Press, p. 5. weather and climate events in recent p. 17. 39 Ibid. decades can affect energy production

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00025 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64686 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

and delivery, causing supply sensitivity of the climate to GHGs is on million people living within the 100- disruptions, and compromise other the higher end of the estimated range. year coastal flood zone who are essential infrastructure such as water • Waiting for unacceptable impacts to expected to experience more frequent and transportation systems. occur before taking action is imprudent floods due to sea level rise and tropical- In addition to the changes because the effects of GHG emissions do storm induced storm-surge. The NCA documented in the assessment not fully manifest themselves for also highlighted infrastructure literature, there have been other climate decades and, once manifest, many of vulnerable to inundation in coastal milestones of note. In 2009, the year of these changes will persist for hundreds metropolitan areas, potential the Endangerment Finding, the average or even thousands of years. agricultural impacts from increased rain • concentration of CO2 as measured on In the committee’s judgment, the in the spring delaying planting or top of Mauna Loa was 387 parts per risks associated with doing business as damaging crops or increased heat in the million, far above preindustrial usual are a much greater concern than summer leading to decreased yields and concentrations of about 280 parts per the risks associated with engaging in increased water demand, and shifts in million.40 The average concentration in strong response efforts. ecosystems leading to declines in iconic 2013, the last full year before this rule 4. Observed and Projected U.S. Regional species in some regions, such as cod was proposed, was 396 parts per Changes and lobster south of Cape Cod. million. The average concentration in In the Southeast, average annual 2014 was 399 parts per million. And the The NCA3 assessed the climate temperature during the last century monthly concentration in April of 2014 impacts in 8 regions of the U.S., noting cycled between warm and cool periods. was 401 parts per million, the first time that changes in physical climate A warm peak occurred during the 1930s a monthly average has exceeded 400 parameters such as temperatures, and 1940s followed by a cool period and parts per million since record keeping precipitation, and sea ice retreat were temperatures then increased again from began at Mauna Loa in 1958, and for at already having impacts on forests, water 1970 to the present by an average of least the past 800,000 years.41 Arctic sea supplies, ecosystems, flooding, heat 2 °F. There have been increasing ice has continued to decline, with waves, and air quality. Moreover, the numbers of days above 95 °F and nights September of 2012 marking a new NCA3 found that future warming is above 75 °F, and decreasing numbers of record low in terms of Arctic sea ice projected to be much larger than recent extremely cold days since 1970. Daily extent, 40 percent below the 1979–2000 observed variations in temperature, with and five-day rainfall intensities have median. Sea level has continued to rise precipitation likely to increase in the also increased, and summers have been at a rate of 3.2 mm per year (1.3 inches/ northern states, decrease in the southern either increasingly dry or extremely wet. decade) since satellite observations states, and with the heaviest Louisiana has already lost 1,880 square started in 1993, more than twice the precipitation events projected to miles of land in the last 80 years due to average rate of rise in the 20th century increase everywhere. sea level rise and other contributing 42 In the Northeast, temperatures factors. prior to 1993. And 2014 was the ° warmest year globally in the modern increased almost 2 F from 1895 to The Southeast is exceptionally global surface temperature record, going 2011, precipitation increased by about 5 vulnerable to sea level rise, extreme heat back to 1880; this now means 19 of the inches (10 percent), and sea level rise of events, hurricanes, and decreased water 20 warmest years have occurred in the about a foot has led to an increase in availability. Major consequences of past 20 years, and except for 1998, the coastal flooding. The 70 percent further warming include significant ten warmest years on record have increase in the amount of rainfall falling increases in the number of hot days occurred since 2002.43 The first months in the 1 percent of the most intense (95 °F or above) and decreases in of 2015 have also been some of the events is a larger increase in extreme freezing events, as well as exacerbated warmest on record. precipitation than experienced in any ground-level ozone in urban areas. These assessments and observed other U.S. region. Although projected warming for some changes make it clear that reducing In the future, if emissions continue parts of the region by the year 2100 are increasing, the Northeast is expected to generally smaller than for other regions emissions of GHGs across the globe is ° necessary in order to avoid the worst experience 4.5 to 10 F of warming by of the U.S., projected warming for impacts of climate change, and the 2080s. This will lead to more heat interior states of the region are larger underscore the urgency of reducing waves, coastal and river flooding, and than coastal regions by 1 °F to 2 °F. emissions now. The NRC Committee on intense precipitation events. The Projections further suggest that globally America’s Climate Choices listed a southern portion of the region is there will be fewer tropical storms, but projected to see 60 additional days per that they will be more intense, with number of reasons ‘‘why it is imprudent ° to delay actions that at least begin the year above 90 F by mid-century. Sea more Category 4 and 5 storms. The NCA process of substantially reducing levels in the Northeast are expected to identified New Orleans, Miami, Tampa, emissions.’’ 44 For example: increase faster than the global average Charleston, and Virginia Beach as being • The faster emissions are reduced, because of subsidence, and changing specific cities that are at risk due to sea the lower the risks posed by climate ocean currents may further increase the level rise, with homes and infrastructure change. Delays in reducing emissions rate of sea level rise. Specific increasingly prone to flooding. could commit the planet to a wide range vulnerabilities highlighted by the NCA Additional impacts of sea level rise are of adverse impacts, especially if the include large urban populations expected for coastal highways, particularly vulnerable to climate- wetlands, fresh water supplies, and 40 ftp://aftp.cmdl.noaa.gov/products/trends/co2/ related heat waves and poor air quality energy infrastructure. co2_annmean_mlo.txt. episodes, prevalence of climate In the Northwest, temperatures 41 http://www.esrl.noaa.gov/gmd/ccgg/trends/. sensitive vector-borne diseases like increased by about 1.3 °F between 1895 42 Blunden, J., and D. S. Arndt, Eds., 2014: State Lyme and West Nile Virus, usage of and 2011. A small average increase in of the Climate in 2013. Bull. Amer. Meteor. Soc., 95 (7), S1–S238. combined sewer systems that may lead precipitation was observed over this 43 http://www.ncdc.noaa.gov/sotc/global/2014/13. to untreated water being released into time period. However, warming 44 NRC, 2011: America’s Climate Choices, The local water bodies after climate-related temperatures have caused increased National Academies Press. heavy precipitation events, and 1.6 rainfall relative to snowfall, which has

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00026 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64687

altered water availability from Alaska, by 8 to 10 °F in the interior, and on the high-value specialty crops grown snowpack across parts of the region. by 6 to 8 °F across the rest of the state. in the region as a drier climate will Snowpack in the Northwest is an These increases will exacerbate ongoing increase demands for irrigation, more important freshwater source for the arctic sea ice loss, glacial melt, frequent heat waves will reduce yields, region. More precipitation falling as rain permafrost thaw and increased wildfire, and decreased winter chills may impair instead of snow has reduced the and threaten humans, ecosystems, and fruit and nut production for trees in snowpack, and warmer springs have infrastructure. Precipitation is expected California. Increased drought, higher corresponded to earlier snowpack to increase to varying degrees across the temperatures, and bark beetle outbreaks melting and reduced streamflows during state, however warmer air temperatures are likely to contribute to continued summer months. Drier conditions have and a longer growing season are increases in wildfires. The highly increased the extent of wildfires in the expected to result in drier conditions. urbanized population of the Southwest region. Native Alaskans are expected to is vulnerable to heat waves and water Average annual temperatures are experience declines in economically, supply disruptions, which can be projected to increase by 3.3 °F to 9.7 °F nutritionally, and culturally important exacerbated in cases where high use of by the end of the century (depending on wildlife and plant species. Health air conditioning triggers energy system future global GHG emissions), with the threats will also increase, including loss failures. greatest warming expected during the of clean water, saltwater intrusion, The rate of warming in the Midwest summer. Continued increases in global sewage contamination from thawing has markedly accelerated over the past GHG emissions are projected to result in permafrost, and northward extension of few decades. Temperatures rose by more up to a 30 percent decrease in summer diseases. Wildfires will increasingly than 1.5 °F from 1900 to 2010, but precipitation. Earlier snowpack melt pose threats to human health as a result between 1980 and 2010 the rate of and lower summer stream flows are of smoke and direct contact. Areas warming was three times faster than expected by the end of the century and underlain by ice-rich permafrost across from 1900 through 2010. will affect drinking water supplies, the state are likely to experience ground Precipitation generally increased over agriculture, ecosystems, and subsidence and extensive damage to the last century, with much of the hydropower production. Warmer waters infrastructure as the permafrost thaws. increase driven by intensification of the are expected to increase disease and Important ecosystems will continue to heaviest rainfalls. Several types of mortality in important fish species, be affected. Surface waters and wetlands extreme weather events in the Midwest including Chinook and sockeye salmon. that are drying provide breeding habitat (e.g., heat waves and flooding) have Ocean acidification also threatens for millions of waterfowl and shorebirds already increased in frequency and/or species such as oysters, with the that winter in the lower 48 states. intensity due to climate change. Northwest coastal waters already being Warmer ocean temperatures, In the future, if emissions continue some of the most acidified worldwide acidification, and declining sea ice will increasing, the Midwest is expected to due to coastal upwelling and other local contribute to changes in the location experience 5.6 to 8.5 °F of warming by factors. Forest pests are expected to and availability of commercially and the 2080s, leading to more heat waves. spread and wildfires burn larger areas. culturally important marine fish. Though projections of changes in total Other high-elevation ecosystems are In the Southwest, temperatures are precipitation vary across the regions, projected to be lost because they can no now about 2 °F higher than the past more precipitation is expected to fall in longer survive the climatic conditions. century, and are already the warmest the form of heavy downpours across the Low lying coastal areas, including the that region has experienced in at least entire region, leading to an increase in cities of Seattle and Olympia, will 600 years. The NCA notes that there is flooding. Specific vulnerabilities experience heightened risks of sea level evidence that climate-change induced highlighted by the NCA include long- rise, erosion, seawater inundation and warming on top of recent drought has term decreases in agricultural damage to infrastructure and coastal influenced tree mortality, wildfire productivity, changes in the ecosystems. frequency and area, and forest insect composition of the region’s forests, In Alaska, temperatures have changed outbreaks. Sea levels have risen about 7 increased public health threats from faster than anywhere else in the U.S. or 8 inches in this region, contributing heat waves and degraded air and water Annual temperatures increased by about to inundation of Highway 101 and quality, negative impacts on 3 °F in the past 60 years. Warming in backup of seawater into sewage systems transportation and other infrastructure the winter has been even greater, rising in the San Francisco area. associated with extreme rainfall events by an average of 6 °F. Arctic sea ice is Projections indicate that the and flooding, and risks to the Great thinning and shrinking in area, with the Southwest will warm an additional 5.5 Lakes including shifts in invasive summer minimum ice extent now to 9.5 °F over the next century if species, increases in harmful algal covering only half the area it did when emissions continue to increase. Winter blooms, and declining beach health. satellite records began in 1979. Glaciers snowpack in the Southwest is projected High temperatures (more than 100 °F in Alaska are melting at some of the to decline (consistent with the record in the Southern Plains and more than 95 fastest rates on Earth. Permafrost soils lows from this past winter), reducing °F in the Northern Plains) are projected are also warming and beginning to thaw. the reliability of surface water supplies to occur much more frequently by mid- Drier conditions have contributed to for cities, agriculture, cooling for power century. Increases in extreme heat will more large wildfires in the last 10 years plants, and ecosystems. Sea level rise increase heat stress for residents, energy than in any previous decade since the along the California coast will worsen demand for air conditioning, and water 1940s, when recordkeeping began. coastal erosion, increase flooding risk losses. North Dakota’s increase in Climate change impacts are harming the for coastal highways, bridges, and low- annual temperatures over the past 130 health, safety and livelihoods of Native lying airports, pose a threat to years is the fastest in the contiguous Alaskan communities. groundwater supplies in coastal cities U.S., mainly driven by warming By the end of this century, continued such as Los Angeles, and increase winters. Specific vulnerabilities increases in GHG emissions are vulnerability to floods for hundreds of highlighted by the NCA include expected to increase temperatures by 10 thousands of residents in coastal areas. increased demand for water and energy, to 12 °F in the northernmost parts of Climate change will also have impacts changes to crop growth cycles and

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00027 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64688 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

agricultural practices, and negative limited on many islands. Saltwater B. GHG Emissions From Fossil Fuel- impacts on local plant and animal intrusion associated with sea level rise Fired EGUs 45 species from habitat fragmentation, will reduce the quantity and quality of Fossil fuel-fired electric utility wildfires, and changes in the timing of freshwater in coastal aquifers, especially generating units (EGUs) are by far the flowering or pest patterns. Communities on low islands. In areas where largest emitters of GHGs among that are already the most vulnerable to precipitation does not increase, stationary sources in the U.S., primarily weather and climate extremes will be freshwater supplies will be adversely in the form of CO2, and among fossil stressed even further by more frequent affected as air temperature rises. fuel-fired EGUs, coal-fired units are by extreme events occurring within an far the largest emitters. This section already highly variable climate system. Warmer oceans are leading to increased coral bleaching events and describes the amounts of these In Hawaii, other Pacific islands, and disease outbreaks in coral reefs, as well emissions and places these amounts in the Caribbean, rising air and ocean as changed distribution patterns of tuna the context of the U.S. Inventory of temperatures, shifting rainfall patterns, 46 fisheries. Ocean acidification will Greenhouse Gas Emissions and Sinks changing frequencies and intensities of (the U.S. GHG Inventory). storms and drought, decreasing reduce coral growth and health. Warming and acidification, combined The EPA implements a separate baseflow in streams, rising sea levels, program under 40 CFR part 98 called with existing stresses, will strongly and changing ocean chemistry will the Greenhouse Gas Reporting affect coral reef fish communities. For affect ecosystems on land and in the Program 47 (GHGRP) that requires oceans, as well as local communities, Hawaii and the Pacific islands, future emitting facilities over threshold livelihoods, and cultures. Low islands sea surface temperatures are projected to ° ° amounts of GHGs to report their are particularly at risk. increase 2.3 F by 2055 and 4.7 F by emissions to the EPA annually. Using Rising sea levels, coupled with high 2090 under a scenario that assumes data from the GHGRP, this section also water levels caused by tropical and continued increases in emissions. Ocean places emissions from fossil fuel-fired extra-tropical storms, will incrementally acidification is also taking place in the EGUs in the context of the total increase coastal flooding and erosion, region, which adds to ecosystem stress emissions reported to the GHGRP from damaging coastal ecosystems, from increasing temperatures. Ocean facilities in the other largest-emitting infrastructure, and agriculture, and acidity has increased by about 30 industries. negatively affecting tourism. Ocean percent since the pre-industrial era and The EPA prepares the official U.S. temperatures in the Pacific region is projected to further increase by 37 GHG Inventory to comply with exhibit strong year-to-year and decadal percent to 50 percent from present commitments under the United Nations fluctuations, but since the 1950s, they levels by 2100. Framework Convention on Climate have exhibited a warming trend, with The NCA also discussed impacts that Change (UNFCCC). This inventory, temperatures from the surface to a depth occur along the coasts and in the oceans which includes recent trends, is of 660 feet rising by as much as 3.6 °F. adjacent to many regions, and noted that organized by industrial sectors. It As a result of current sea level rise, the provides the information in Table 3 other impacts occur across regions and coastline of Puerto Rico around Rinco´n below, which presents total U.S. landscapes in ways that do not follow is being eroded at a rate of 3.3 feet per anthropogenic emissions and sinks 48 of political boundaries. year. Freshwater supplies are already GHGs, including CO2 emissions, for the constrained and will become more years 1990, 2005 and 2013.

TABLE 3—U.S. GHG EMISSIONS AND SINKS BY SECTOR 49 [Million metric tons carbon dioxide equivalent (MMT CO2 Eq.)]

Sector 1990 2005 2013

Energy 50 ...... 5,290.5 6,273.6 5,636.6 Industrial Processes and Product Use ...... 342.1 367.4 359.1 Agriculture ...... 448.7 494.5 515.7 Land Use, Land-Use Change and Forestry ...... 13.8 25.5 23.3 Waste ...... 206.0 189.2 138.3

Total Emissions ...... 6,301.1 7,350.2 6,673.0 Land Use, Land-Use Change and Forestry (Sinks) ...... (775.8) (911.9) (881.7)

Net Emissions (Sources and Sinks) ...... 5,525.2 6,438.3 5,791.2

Total fossil energy-related CO2 and mobile sources) are the largest representing 77.3 percent of total 2013 emissions (including both stationary contributor to total U.S. GHG emissions, GHG emissions.51 In 2013, fossil fuel

45 The emission data presented in this section of Agency, April 15, 2015. http://epa.gov/climate Report EPA 430–R–15–004, U.S. Environmental the preamble (Section II.B) are in metric tons, in change/ghgemissions/usinventoryreport.html. Protection Agency, April 15, 2015. http://epa.gov/ keeping with reporting requirements for the GHGRP 47 U.S. EPA Greenhouse Gas Reporting Program climatechange/ghgemissions/ and the U.S. GHG Inventory. Note that the mass- Dataset, see http://www.epa.gov/ghgreporting/ghg usinventoryreport.html. based state goals presented in section VII of this data/reportingdatasets.html. 50 The energy sector includes all greenhouse gases preamble, and discussed elsewhere in this 48 Sinks are a physical unit or process that stores resulting from stationary and mobile energy preamble, are presented in short tons. GHGs, such as forests or underground or deep sea activities, including fuel combustion and fugitive 46 ‘‘Inventory of U.S. Greenhouse Gas Emissions reservoirs of carbon dioxide. fuel emissions. and Sinks: 1990—2013’’, Report EPA 430–R–15– 49 From Table ES–4 of ‘‘Inventory of U.S. 51 From Table ES–2 ‘‘Inventory of U.S. 004, United States Environmental Protection Greenhouse Gas Emissions and Sinks: 1990–2013’’, Greenhouse Gas Emissions and Sinks: 1990–2013’’,

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00028 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64689

combustion by the utility power generation of electricity—accounted for total CO2 emissions from fossil fuel- sector—entities that burn fossil fuel and 38.3 percent of all energy-related CO2 fired EGUs, for years 1990, 2005 and whose primary business is the emissions.52 Table 4 below presents 2013.

TABLE 4—U.S. GHG EMISSIONS FROM GENERATION OF ELECTRICITY FROM COMBUSTION OF FOSSIL FUELS 53 [MMT CO2]

GHG emissions 1990 2005 2013

Total CO2 from fossil fuel-fired EGUs ...... 1,820.8 2,400.9 2,039.8 —from coal ...... 1,547.6 1,983.8 1,575.0 —from natural gas ...... 175.3 318.8 441.9 —from petroleum ...... 97.5 97.9 22.4

In addition to preparing the official TABLE 5—DIRECT GHG EMISSIONS typically utilized within an existing U.S. GHG Inventory to present REPORTED TO GHGRP BY LARGEST power plant. Measures that may be used comprehensive total U.S. GHG EMITTING INDUSTRIAL SECTORS to limit CO2 emissions would include emissions and comply with 54 efficiency improvements, which have [MMT CO2e] commitments under the UNFCCC, the thermodynamic limitations and carbon EPA collects detailed GHG emissions Industrial sector 2013 capture and sequestration (CCS), which data from the largest emitting facilities is energy resource intensive. in the U.S. through its Greenhouse Gas Petroleum Refineries ...... 176.7 Onshore Oil & Gas Production ... 94.8 Unlike other air pollutants which are Reporting Program (GHGRP). Data Municipal Solid Waste Landfills .. 93.0 results of trace impurities in the fuel, collected by the GHGRP from large Iron & Steel Production ...... 84.2 products of incomplete or inefficient Cement Production ...... 62.8 stationary sources in the industrial combustion, or combustion byproducts, sector show that the utility power sector Natural Gas Processing Plants .. 59.0 Petrochemical Production ...... 52.7 CO2 is an inherent product of clean, emits far greater CO2 emissions than any Hydrogen Production ...... 41.9 efficient combustion of fossil fuels, and other industrial sector. Table 5 below Underground Coal Mines ...... 39.8 Food Processing Facilities ...... 30.8 therefore is an unavoidable product presents total GHG emissions in 2013 generated in enormous quantities, far for the largest emitting industrial sectors greater than any other air pollutant.55 In as reported to the GHGRP. As shown in C. Challenges in Controlling Carbon Dioxide Emissions fact, CO2 is emitted in far greater Table 4 and Table 5, respectively, CO2 quantities than all other air pollutants emissions from fossil fuel-fired EGUs Carbon dioxide is a unique air combined. Total emissions of all non- are nearly three times as large as the pollutant and controlling it presents GHG air pollutants in the U.S., from all unique challenges. CO is emitted in total reported GHG emissions from the 2 sources, in 2013, were 121 million enormous quantities, and those next ten largest emitting industrial metric tons.56 57 sectors in the GHGRP database quantities, coupled with the fact that combined. CO2 is relatively unreactive, make it much more difficult to mitigate by measures or technologies that are

2013 tons Pollutant (million short tons) Reference

CO ...... 69.758 Trends file (http://www.epa.gov/ttnchie1/trends/). NOX ...... 13.072 ″ PM10 ...... 20.651 ″ SO2 ...... 5.098 ″ VOC ...... 17.471 ″ NH3 ...... 4.221 ″ HAPS ...... 3.641 2011 NEI version 2 (http://www.epa.gov/ttn/chief/net/2011inventory.html).

Total ...... 133.912

54 57 Report EPA 430–R–15–004, United States U.S. EPA Greenhouse Gas Reporting Program In addition, emissions of non-CO2 GHGs totaled Environmental Protection Agency, April 15, 2015. Dataset as of August 18, 2014. http:// 1.168 billion metric tons of carbon-dioxide http://epa.gov/climatechange/ghgemissions/ ghgdata.epa.gov/ghgp/main.do. equivalents (CO2e) in 2013. See Table ES–2, usinventoryreport.html. 55 Lackner et al., ‘‘Comparative Impacts of Fossil Executive Summary, 1990–2013 Inventory of U.S. Greenhouse Gas Emissions and Sinks. http:// 52 From Table 3–1 ‘‘Inventory of U.S. Greenhouse Fuels and Alternative Energy Sources’’, Issues in www.epa.gov/climatechange/Downloads/ Gas Emissions and Sinks: 1990–2013’’, Report EPA Environmental Science and Technology (2010). ghgemissions/US-GHG-Inventory-2015-Chapter- 430–R–15–004, United States Environmental 56 This includes NAAQS and HAPs, based on the Executive-Summary.pdf. This includes emissions of Protection Agency, April 15, 2015. http://epa.gov/ following table: (see table above). methane, nitrous oxide, and fluorinated GHGs

climatechange/ghgemissions/ It should be noted that PM2.5 is included in the (hydrofluorocarbons, perfluorocarbons, sulfur usinventoryreport.html. amounts for PM10. Lead, another NAAQS pollutant, hexafluoride, and nitrogen trifluoride). In the total, 53 From Table 3–5 ‘‘Inventory of U.S. Greenhouse is emitted in the amounts of approximately 1,000 the emissions of each non-CO2 GHG have been translated from metric tons of that gas into metric Gas Emissions and Sinks: 1990–2013’’, Report EPA tons per year, and, in light of that relatively small tons of CO e by multiplying the metric tons of the 430–R–15–004, United States Environmental quantity, was excluded from this analysis. 2 gas by the global warming potential (GWP) of the Protection Agency, April 15 2015. http://epa.gov/ Ammonia (NH3) is included because it is a gas. (The GWP of a gas is a measure of the ability climatechange/ghgemissions/usinventory precursor to PM2.5 secondary formation. Note that of one kilogram of that gas to trap heat in earth’s report.html. one short ton is equivalent to 0.907185 metric ton. atmosphere compared to one kilogram of CO2.)

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00029 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64690 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

As noted above, total emissions of CO2 contaminant in the fuel, and, as a result, governments initially regulated these from coal-fired power plants alone—the it can be reduced by using low-sulfur growing electricity systems with federal largest stationary source emitter—were coal or by using flue-gas desulfurization regulation coming later in response to 58 1.575 billion metric tons in that year, (FGD) technologies. Emissions of NOX public concerns about rising electricity 67 and total emissions of CO2 from all can be mitigated relatively easily using costs. sources were 5.5 billion metric tons.59 60 combustion control techniques (e.g., Initially, states had broad authority to Carbon makes up the majority of the low-NOX burners) and by using regulate public utilities, but gradually mass of coal and other fossil fuels, and downstream controls such as selective federal regulation increased. In 1920, for every ton of carbon burned, more catalytic reduction (SCR) and selective Congress passed the Federal Water 61 than 3 tons of CO2 is produced. In non-catalytic reduction (SNCR) Power Act, creating the Federal Power addition, unlike many of the other air technologies. PM can be effectively Commission (FPC) and providing for the pollutants that react with sunlight or mitigated using fabric filters, PM licensing of hydroelectric facilities on chemicals in the atmosphere, or are scrubbers, or electrostatic precipitators. U.S. government lands and navigable 68 rained out or deposited on surfaces, CO2 Lead is part of particulate matter waters of the U.S. During this time is relatively unreactive and difficult to emissions and is controlled through the period, the U.S. Supreme Court found remove directly from the same devices. Carbon monoxide and that state authority to regulate public atmosphere.62 63 VOCs are the products of incomplete utilities is limited, holding that the CO2’s huge quantities and lack of combustion and can therefore be abated Commerce Clause does not allow state reactivity make it challenging to remove by more efficient combustion regulation to directly burden interstate from the smokestack. Retrofitted conditions, and can also be destroyed in commerce.69 For example, in Public equipment is required to capture the the smokestack by the use of oxidation Utilities Commission of Rhode Island v. CO2 before transporting it to a storage catalysts which complete the Attleboro Steam & Electric Company, site. However, the scale of infrastructure combustion process. Many air toxics are Rhode Island sought to regulate the required to directly mitigate CO2 VOCs, such as polyaromatic electricity rates that a Rhode Island emissions from existing EGUs through hydrocarbons, and therefore can be generator was charging to a company in CCS can be quite large and difficult to abated in the same ways just described. Massachusetts that resold the electricity integrate into the existing fossil fuel But in every case, these pollutants can to Attleboro, Massachusetts.70 The infrastructure. These CCS techniques be controlled at the source much more Supreme Court found that Rhode are discussed in more depth elsewhere readily than CO2 primarily because of Island’s regulation was impermissible in the preamble for this rule and for the the comparatively lower quantities that because it imposed a ‘‘direct burden section 111(b) rule for new sources that are produced, and also due to other upon interstate commerce.’’ 71 The accompanies this rule. attributes such as relatively greater Supreme Court held that this kind of The properties of CO2 can be reactivity and solubility. interstate transaction was not subject to contrasted with those of a number of state regulation. However, because D. The Utility Power Sector other pollutants which have more Congress had not yet passed legislation accessible mitigation options. For 1. A Brief History to make these types of transactions subject to federal regulation, this example, the NAAQS pollutants— The modern American electricity became known as the ‘‘Attleboro gap’’ in which generally are emitted in the system is one of the greatest engineering regulation. In 1935, Congress passed the largest quantities of any of the other air achievements of the past 100 years. pollutants, except for CO2—each have Federal Power Act (FPA), giving the Since the invention of the incandescent FPC jurisdiction over ‘‘the transmission more accessible mitigation options. light bulb in the 1870s,64 electricity has Sulfur dioxide (SO2) is the result of a of electric energy in interstate become one of the major foundations for commerce’’ and ‘‘the sale of electric modern American life. Beginning with 58 energy at wholesale in interstate From Table 3–5 ‘‘Inventory of U.S. Greenhouse the first power station in New York City Gas Emissions and Sinks: 1990–2013’’, Report EPA commerce.’’ 72 Under FPA section 205, 430–R–15–004, United States Environmental in 1882, each power station initially the FPC was tasked with ensuring that Protection Agency, April 15, 2015. http://epa.gov/ served a discrete set of consumers, rates for jurisdictional services are just, climatechange/ghgemissions/ resulting in small and localized reasonable, and not unduly usinventoryreport.html. electricity systems.65 During the early 59 U.S. EPA, Greenhouse Gas Inventory Data discriminatory or preferential.73 FPA Explorer, http://www.epa.gov/climatechange/ 1900s, smaller systems consolidated, section 206 authorized the FPC to ghgemissions/inventoryexplorer/#allsectors/allgas/ allowing generation resources to be determine, after a hearing upon its own gas/current. shared over larger areas. Interconnecting motion or in response to a complaint 60 As another point of comparison, except for systems have reduced generation carbon dioxide, SO2 and NOX are the largest air pollutant emissions from coal-fired power plants. investment costs and improved Handbook of Energy Market Basics, at 38 (2012), 66 Over the past decade, U.S. power plants have reliability. Local and state available at http://www.ferc.gov/market-oversight/ emitted more than 200 times as much CO2 as they guide/energy-primer.pdf. 67 have emitted SO2 and NOX. See de Gouw et al., 64 Regulatory Assistance Project (RAP), Electricity Burn, An Energy Journal, The Electricity Grid: ‘‘Reduced emissions of CO2, NOX, and SO2 from Regulation in the US: A Guide, at 1 (2011), available A History, available at http:// U.S. power plants owing to switch from coal to at http://www.raponline.org/document/download/ burnanenergyjournal.com/the-electric-grid-a- natural gas with combined cycle technology,’’ id/645. history/ (last visited Mar. 9, 2015). 68 Earth’s Future (2014). 65 Casazza, J. and Delea, F., Understanding The FPC became an independent Commission 61 Each atom of carbon in the fuel combines with Electric Power Systems, IEEE Press, at 2–4 (2d ed. in 1930. United States Government Manual 1945: 2 atoms of oxygen in the air. 2010). First Edition, at 486, available at http:// www.ibiblio.org/hyperwar/ATO/USGM/FPC.html. 62 Seinfeld J. and Pandis S., Atmospheric 66 Casazza, J. and Delea, F., Understanding 69 Chemistry and Physics: From Air Pollution to Electric Power Systems, IEEE Press, at 5–6 (2d ed. New York v. Federal Energy Regulatory Climate Change (1998). 2010). Investment in electric generation is Commission, 535 U.S. 1, 5 (2002) (citation omitted). 70 63 Public Utils. Comm’n of Rhode Island v. The fact that CO2 is unreactive means that it extremely capital intensive, with generation is primarily removed from the atmosphere by potentially accounting for 65 percent of customer Attleboro Steam & Elec. Co., 273 U.S. 83 (1927). dissolving in oceans or by being converted into costs. If these costs can be spread to more 71 Public Utils. Comm’n of Rhode Island v. biomass by plants. Herzog, H., ‘‘Scaling up carbon customers, then this can reduce the amount that Attleboro Steam & Elec. Co., 273 U.S. 83, 89 (1927). dioxide capture and storage: From megatons to each individual customer pays. Federal Energy 72 16 U.S.C. 824(b)(1). gigatons’’, Energy Economics (2011). Regulatory Commission, Energy Primer: A 73 16 U.S.C. 824d.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00030 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64691

filed at the Commission, whether operator.82 Some power pools evolved some states remain vertically integrated jurisdictional rates are just, reasonable, into today’s RTOs and ISOs. without retail competition from IPPs. and not unduly discriminatory or In the past, electric utilities generally Today, there are over 3,000 public, preferential.74 In 1938, Congress passed operated as state regulated monopolies, private, and cooperative utilities in the the Natural Gas Act (NGA), giving the supplying end-use customers with U.S.90 These utilities include both FPC jurisdiction over the transmission generation, distribution, and investor-owned utilities 91 and 83 92 or sale of natural gas in interstate transmission service. However, the consumer-owned utilities. commerce.75 The NGA also gave the ability of electric utilities to operate as Over time, the grid slowly evolved natural monopolies came with into a complex, interconnected FPC the jurisdiction to ‘‘grant consumer protection safeguards.84 ‘‘In transmission system that allows electric certificates allowing construction and exchange for a franchised, monopoly generators to produce electricity that is operation of facilities used in interstate service area, utilities accept an then fed onto transmission lines at high gas transmission and authorizing the obligation to serve—meaning there must voltages.93 These larger transmission 76 provision of services.’’ In 1977, the be adequate supply to meet customers’ lines are able to access generation that FPC became FERC after Congress passed needs regardless of the cost.’’ 85 Under is located more remotely, with the Department of Energy Organization this obligation to serve, the utility transmission lines crossing many miles, Act. agreed to provide service to any including state borders.94 Closer to end By the 1930s, regulated electric customer located within its service users, electricity is transformed into a utilities that provided the major jurisdiction. lower voltage that is transported across components of the electrical system— On both a federal and state level, generation, transmission, and competition has entered the electricity 90 Regulatory Assistance Project (RAP), Electricity Regulation in the US: A Guide, at 9 (2011), available distribution—were common.77 These sector to varying degrees in the last few decades.86 In the early 1990s, some at http://www.raponline.org/document/download/ regulated monopolies are referred to as id/645. states began to consider allowing vertically-integrated utilities. 91 Investor-owned utilities are private companies competition to enter retail electric that are financed by a combination of shareholder As utilities built larger and larger service.87 Federal and state efforts to equity and bondholder debt. Regulatory Assistance electric generation plants, the cost per allow competition in the electric utility Project (RAP), Electricity Regulation in the US: A 78 Guide, at 9 (2011), available at http:// unit to generate electricity decreased. industry have resulted in independent www.raponline.org/document/download/id/645. 88 However, these larger plants were power producers (IPPs) producing 92 Consumer-owned utilities include municipal extremely capital intensive for any one approximately 37 percent of net utilities, public utility districts, cooperatives, and a company to fund.79 Some neighboring generation in 2013.89 Electric utilities in variety of other entities such as irrigation districts. Regulatory Assistance Project (RAP), Electricity utilities solved this issue by agreeing to Regulation in the US: A Guide, at 9–10 (2011), 82 share electricity reserves when Shively, B, Ferrare, J, Understanding Today’s available at http://www.raponline.org/document/ needed.80 These utilities began building Electricity Business, Enerdynamics, at 94 (2012). download/id/645. 83 Maryland Department of Natural Resources, larger transmission lines to deliver 93 Peter Fox-Penner, Electric Utility Restructuring: Maryland Power Plants and the Environment: A A Guide to the Competitive Era, Public Utility power in times when large generators Review of the Impacts of Power Plants and Reports, Inc., at 5, 34 (1997). ‘‘The extent of the experienced outages.81 Eventually, some Transmission Lines on Maryland’s Natural power system’s short-run physical interdependence Resources, at 2–5 (2006), available at http:// is remarkable, if not entirely unique. No other large, utilities that were in reserve sharing esm.versar.com/pprp/ceir13/toc.htm. multi-stage industry is required to keep every single agreements formed electric power pools 84 Pacific Power, Utility Regulation, at 1, available producer in a region—whether or not owned by the to balance electric load over a larger at https://www.pacificpower.net/content/dam/ _ _ _ same company—in immediate synchronization area. Participating utilities gave control pacific power/doc/About Us/Newsroom/Media with all other producers.’’ Id. at 34. ‘‘At an early Resources/Regulation.PP.08.pdf. over scheduling and dispatch of their date, those providing electric power recognized that 85 Pacific Power, Utility Regulation, at 1, available peak use for one system often occurred at a different electric generation units to a system at https://www.pacificpower.net/content/dam/ time from peak use in other systems. They also _ _ _ pacific power/doc/About Us/Newsroom/Media recognized that equipment failures occurred at 74 Resources/Regulation.PP.08.pdf. different times in various systems. Analyses 16 U.S.C. 824e. 86 75 For example, in 1978, Congress passed the showed significant economic benefits from Energy Information Administration, Natural Public Utilities Regulatory Policies Act (PURPA) Gas Act of 1938, available at http://www.eia.gov/ interconnecting systems to provide mutual _ _ _ which allowed non-utility owned power plants to assistance; the investment required for generating oil gas/natural gas/analysis publications/ sell electricity. Burn, An Energy Journal, The ngmajorleg/ngact1938.html. capacity could be reduced and reliability could be Electricity Grid: A History, available at http:// improved. This lead [sic] to the development of 76 Energy Information Administration, Natural burnanenergyjournal.com/the-electric-grid-a- local, then regional, and subsequently three Gas Act of 1938, available at http://www.eia.gov/ history/ (last visited Mar. 9, 2015). PURPA, the transmission grids that covered the U.S. and parts oil_gas/natural_gas/analysis_publications/ Energy Policy Act of 1992 (EPAct 1992), and the of Canada.’’ Casazza, J. and Delea, F., ngmajorleg/ngact1938.html. Energy Policy Act of 2005 (EPAct 2005) ‘‘promoted Understanding Electric Power Systems, IEEE Press, 77 Burn, An Energy Journal, The Electricity Grid: competition by lowering entry barriers and at 5–6 (2d ed. 2010). A History, available at http:// increasing transmission access.’’ The Electric 94 Burn, An Energy Journal, The Electricity Grid: burnanenergyjournal.com/the-electric-grid-a- Energy Market Competition Task Force, Report to A History, available at http:// history/ (last visited Mar. 9, 2015). Congress on Competition in Wholesale and Retail burnanenergyjournal.com/the-electric-grid-a- 78 Federal Energy Regulatory Commission, Energy Markets for Electric Energy, at 2, available at history/ (last visited Mar. 9, 2015). Because of the Primer: A Handbook of Energy Market Basics, at 38 http://www.ferc.gov/legal/fed-sta/ene-pol-act/epact- ease and low cost of converting voltages in an (2012), available at http://www.ferc.gov/market- final-rpt.pdf (last visited Mar. 20, 2015). alternating current (AC) system from one level to oversight/guide/energy-primer.pdf. 87 The Electric Energy Market Competition Task another, the bulk power system is predominantly an 79 Federal Energy Regulatory Commission, Energy Force, Report to Congress on Competition in AC system rather than a direct current (DC) system. Primer: A Handbook of Energy Market Basics, at 38 Wholesale and Retail Markets for Electric Energy, at In an AC system, electricity cannot be controlled (2012), available at http://www.ferc.gov/market- 2, available at http://www.ferc.gov/legal/fed-sta/ like a gas or liquid by utilizing a valve in a pipe. oversight/guide/energy-primer.pdf. ene-pol-act/epact-final-rpt.pdf (last visited Mar. 20, Instead, absent the presence of expensive control 80 Federal Energy Regulatory Commission, Energy 2015). devices, electricity flows freely along all available Primer: A Handbook of Energy Market Basics, at 38 88 These entities are also referred to as merchant paths, according to the laws of physics. U.S.-Canada (2012), available at http://www.ferc.gov/market- generators. Power System Outage Task Force, Final Report on oversight/guide/energy-primer.pdf. 89 Energy Information Administration, Electric the August 14, 2003 Blackout in the United States 81 Federal Energy Regulatory Commission, Energy Power Annual, Table 1.1 Total Electric Power and Canada: Causes and Recommendations, at 6 Primer: A Handbook of Energy Market Basics, at 38 Summary Statistics, 2013 and 2012 (2015), (Apr. 2004), available at http://www.ferc.gov/ (2012), available at http://www.ferc.gov/market- available at http://www.eia.gov/electricity/annual/ industries/electric/indus-act/reliability/blackout/ oversight/guide/energy-primer.pdf. html/epa_01_01.html. ch1-3.pdf.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00031 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64692 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

localized transmission lines to homes generate electricity that is transmitted Orleans.’’ 103 The U.S. Supreme Court and businesses.95 Localized and distributed through a complex has similarly recognized the transmission lines make up the system of interconnected components to interconnected nature of the electricity distribution system. These three industrial, business, and residential grid.104 components of the electricity system— consumers. Unlike other industries Today, federal, state, and local 105 generation, transmission, and where sources make operational entities regulate electricity providers. distribution—are closely related and decisions independently, the utility Overlaid on the physical electricity must work in coordination to deliver power sector is unique in that electricity network is a regulatory network that has developed over the last century or more. electricity from the point of generation system resources operate in a complex, to the point of consumption. This This regulatory network ‘‘plays a vital interconnected grid system that is interconnectedness is a fundamental role in the functioning of all other physically interconnected and operated aspect of the nation’s electricity system, networks, sometimes providing specific requiring a complicated integration of on an integrated basis across large rules for functioning while at other all components of the system to balance regions. Additionally, a federal, state, times providing restraints within which supply and demand and a federal, state, and local regulatory network oversees their operation must be conducted.’’ 106 and local regulatory network to oversee policies and practices that are applied to This unique regulatory network results the physically interconnected network. how the system is designed and in an electricity grid that is both Facilities planned and constructed in operates. In this interconnected system, physically interconnected and one segment can impact facilities and system operators must ensure that the connected through a network of operations in other segments and vice amount of electricity available is regulation on the local, state, and versa. precisely matched with the amount federal levels. This regulation seeks to The North American electric grid has needed in real time. System operators reconcile the fact that electricity is a developed into a large, interconnected have a number of resources potentially public good with the fact that facilities system.96 Electricity from a diverse set available to meet electricity demand, providing that electricity are privately of generation resources such as natural including electricity generated by owned.107 While this regulation began gas, nuclear, coal, and renewables is electric generation units such as coal, on the state and local levels, federal distributed over high-voltage nuclear, renewables, and natural gas, as regulation of the electricity system transmission lines divided across the well as demand-side resources,99 such increased over time. With the passage of continental U.S. into three synchronous as EE 100 and demand response.101 the EPAct 1992 and the EPAct 2005, the federal government’s role in electricity interconnections—the Eastern Generation, outages, and transmission regulation greatly increased.108 ‘‘The Interconnection, Western changes in one part of the synchronous role of the regulator now includes Interconnection, and the Texas grid can affect the entire interconnected 97 support for the development of open Interconnection. These three grid.102 The interconnection is such that synchronous systems each act like a ‘‘[i]f a generator is lost in New York 103 single machine.98 Diverse resources Casazza, J. and Delea, F., Understanding City, its affect is felt in Georgia, Florida, Electric Power Systems, IEEE Press, at 160 (2d ed. 2010). 95 Minneapolis, St. Louis, and New Peter Fox-Penner, Electric Utility Restructuring: 104 Federal Power Comm’n v. Florida Power & A Guide to the Competitive Era, Public Utility Light Co., 404 U.S. 453, at 460 (1972) (quoting a Reports, Inc., at 5 (1997). corresponding changes in the energy flows out of Federal Power Commission hearing examiner, ‘‘‘If 96 U.S.-Canada Power System Outage Task Force, each point.’’ Brief Amicus Curiae of Electrical a housewife in Atlanta on the Georgia system turns Final Report on the August 14, 2003 Blackout in the Engineers, Energy Economists and Physicists in on a light, every generator on Florida’s system United States and Canada: Causes and Support of Respondents at 2, 8–9, 11, New York v. almost instantly is caused to produce some quantity Recommendations, at 5 (Apr. 2004), available at FERC, 535 U.S. 1 (2001) (No. 00–568). of additional electric energy which serves to http://www.ferc.gov/industries/electric/indus-act/ 99 ‘‘Measures using demand-side resources maintain the balance in the interconnected system reliability/blackout/ch1-3.pdf. comprise actions taken on the customer’s side of the between generation and load.’’’) (citation omitted). 97 Regulatory Assistance Project (RAP), Electricity meter to change the amount and/or timing of See also New York v. FERC, 535 U.S. 1, at 7 (2002) Regulation in the US: A Guide, 2011, at 1, available electricity use in ways that will provide benefits to (stating that ‘‘any electricity that enters the grid at http://www.raponline.org/document/download/ the electricity supply system.’’ David Crossley, immediately becomes a part of a vast pool of energy id/645. Regulatory Assistance Project (RAP), Effective that is constantly moving in interstate commerce.’’) 98 Casazza, J. and Delea, F., Understanding Mechanisms to Increase the Use of Demand-Side (citation omitted). In Federal Power Comm’n v. Electric Power Systems, IEEE Press, at 159 (2d ed. Resources, at 9 (2013), available at Southern California Edison Co., 376 U.S. 205 (1964), the Supreme Court found that a sale for 2010). In an amicus brief to the Supreme Court, a www.raponline.org. resale of electricity from Southern California Edison group of electrical engineers, economists, and 100 Energy efficiency is using less energy to physicists specializing in electricity explained, to the City of Colton, which took place solely in provide the same or greater level of service. ‘‘Energy is transmitted, not electrons. Energy California, was under Federal Power Commission Demand-side energy efficiency refers to an transmission is accomplished through the jurisdiction because some of the electricity that extensive array of technologies, practices and propagation of an electromagnetic wave. The Southern California Edison marketed came from out measures that are applied throughout all sectors of electrons merely oscillate in place, but the energy— of state. The Supreme Court stated that, ‘‘‘federal the economy to reduce energy demand while the electromagnetic wave—moves at the speed of jurisdiction was to follow the flow of electric providing the same, and sometimes better, level and light. The energized electrons making the lightbulb energy, an engineering and scientific, rather than a quality of service. in a house glow are not the same electrons that were legalistic or governmental, test.’’’ Id. at 210 (quoting 101 induced to oscillate in the generator back at the Demand response involves ‘‘[c]hanges in Connecticut Light & Power Co. v. Federal Power power plant.... Energy flowing onto a power electric usage by demand-side resources from their Commission, 324 U.S. 515, 529 (1945) (emphasis network or grid energizes the entire grid, and normal consumption patterns in response to omitted)). consumers then draw undifferentiated energy from changes in the price of electricity over time, or to 105 Casazza, J. and Delea, F., Understanding that grid. A networked grid flexes, and electric incentive payments designed to induce lower Electric Power Systems, IEEE Press, at 214 (2d ed. current flows, in conformity with physical laws, electricity use at times of high wholesale market 2010). and those laws do not notice, let alone conform to, prices or when system reliability is jeopardized.’’ 106 Casazza, J. and Delea, F., Understanding political boundaries.... The path taken by Federal Energy Regulatory Commission, Reports on Electric Power Systems, IEEE Press, at 213 (2d ed. electric energy is the path of least resistance . . . Demand Response & Advanced Metering, (Dec. 23, 2010). or, more accurately, the paths of least 2014), available at http://www.ferc.gov/industries/ 107 Casazza, J. and Delea, F., Understanding resistance.... If a generator on the grid increases electric/indus-act/demand-response/dem-res-adv- Electric Power Systems, IEEE Press, at 213 (2d ed. its output, the current flowing from the generator metering.asp. 2010). on all paths on the grid increases. These increases 102 Casazza, J. and Delea, F., Understanding 108 Casazza, J. and Delea, F., Understanding affect the energy flowing into each point in the Electric Power Systems, IEEE Press, at 159 (2d ed. Electric Power Systems, IEEE Press, at 214 (2d ed. network, which in turn leads to compensating and 2010). 2010).

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00032 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64693

and fair wholesale electric markets, units, such as fossil-fuel generators, are Northeast, and Ontario, Canada.118 This ensuring equal access to the generally the first to be displaced. blackout was massive in scale impacting transmission system and more hands-on In states with cost-of-service an area with an estimated 50 million oversight and control of the planning regulation of vertically-integrated people and 61,800 megawatts of electric 109 and operating rules for the industry.’’ utilities, the utilities themselves form load.119 The U.S. and Canada formed a 2. Electric System Dispatch the balancing authorities who determine joint task force to investigate the causes dispatch based upon the lowest of the blackout and made System operators typically dispatch recommendations to avoid similar the electric system through a process marginal cost. These utilities sometimes outages in the future. One of the task known as Security Constrained arrange to buy and sell electricity with force’s major recommendations was that Economic Dispatch.110 Security other balancing authorities. RTOs and Constrained Economic Dispatch has two ISOs coordinate, control, and monitor the U.S. Congress should pass components—economic generation of electricity transmission systems to legislation making electric reliability generation facilities and ensuring that ensure cost-effective and reliable standards mandatory and 120 the electric system remains reliable.111 delivery of power, and they are enforceable. Electricity demand varies across independent from market participants. Congress responded to this geography and time in response to 3. Reliability Considerations recommendation in EPAct 2005, adding numerous conditions, such that electric a new section 215 to the Federal Power generators are constantly responding to The reliability of the electric system Act making reliability standards changes in the most reliable and cost- has long been a focus of the electric mandatory and enforceable and effective manner possible. The cost of industry and regulators. Industry authorizing the creation of a new operating electric generation varies developed a voluntary organization in Electric Reliability Organization (ERO). based on a number of factors, such as the early 1960s that assisted with bulk Under this new system, FERC certifies fuel and generator efficiency. power system coordination in the U.S. an entity as the ERO. The ERO develops The decision to dispatch any 113 and Canada. In 1965, the reliability standards, which are subject particular electric generator depends northeastern U.S. and southeastern to FERC review and approval. Once upon the relative operating cost, or Ontario, Canada experienced the largest FERC approves reliability standards the marginal cost, of generating electricity power blackout to date, impacting 30 ERO may enforce those standards or to meet the last increment of electric million people.114 In response to the 121 demand. Fuel is one common variable FERC can do so independently. In 1965 blackout and a Federal Power 2006, the Federal Energy Regulatory cost—especially for fossil-fueled Commission recommendation,115 generators. Coal plants will often have Commission (FERC) certified NERC as industry developed the National Electric the ERO.122 ‘‘NERC develops and considerable variable costs associated Reliability Council (NERC) and nine 112 enforces Reliability Standards; monitors with running pollution controls. reliability councils. The organization Renewables, hydroelectric, and nuclear the Bulk-Power System; assesses later became known as the North adequacy annually via a 10-year forecast have little to no variable costs. If American Electric Reliability Council to electricity demand decreases or 116 and winter and summer forecasts; audits recognize Canada’s participation. The owners, operators and users for additional generation becomes available North American Electric Reliability preparedness; and educates and trains on the system, this impacts how the Council became the North American industry personnel.’’ 123 system operator will dispatch the Electric Reliability Corporation in system. EGUs using technologies with 2007.117 The U.S., Canada, and part of Mexico relatively low variable costs, such as are divided up into eight reliability nuclear units and RE, are for economic In August 2003, North America experienced its worst blackout to date reasons generally operated at their 118 North American Electric Reliability maximum output whenever they are creating an outage in the Midwest, Corporation, History of NERC, at 3 (2013), available available. When lower cost units are at http://www.nerc.com/AboutNERC/Documents/ available to run, higher variable cost 113 North American Electric Reliability History%20AUG13.pdf. Corporation, History of NERC, at 1 (2013), available 119 U.S.-Canada Power System Outage Task Force, at http://www.nerc.com/AboutNERC/Documents/ Final Report on the August 14, 2003 Blackout in the 109 Casazza, J. and Delea, F., Understanding History%20AUG13.pdf. United States and Canada: Causes and Electric Power Systems, IEEE Press, at 214 (2d ed. 114 Recommendations, at 1 (Apr. 2004), available at 2010). Federal Energy Regulatory Commission, Energy Primer: A Handbook of Energy Market http://www.ferc.gov/industries/electric/indus-act/ 110 Economic Dispatch: Concepts, Practices and Basics, at 39 (2012), available at http:// reliability/blackout/ch1-3.pdf. The outage impacted Issues, FERC Staff Presentation to the Joint Board areas within Ohio, Michigan, Pennsylvania, New for the Study of Economic Dispatch, Palm Springs, www.ferc.gov/market-oversight/guide/energy- York, Vermont, Massachusetts, Connecticut, New California (Nov. 13, 2005), available at http://www. primer.pdf. 115 Jersey, and the Canadian province of Ontario. Id. ferc.gov/CalendarFiles/20051110172953-FERC%20 The Federal Power Commission, a precursor to 120 Staff%20Presentation.pdf. FERC, recommended ‘‘the formation of a council on U.S.-Canada Power System Outage Task Force, Final Report on the August 14, 2003 Blackout in the 111 Federal Energy Regulatory Commission, power coordination made up of representatives Security Constrained Economic Dispatch: from each of the nation’s regional coordinating United States and Canada: Causes and Definitions, Practices, Issues and organizations, to exchange and disseminate Recommendations, at 2 (Apr. 2004), available at Recommendations: A Report to Congress (July 31, information and to review, discuss and assist in http://www.ferc.gov/industries/electric/indus-act/ 2006). The Energy Policy Act of 2005 defined resolving interregional coordination matters.’’ North reliability/blackout/ch1-3.pdf. economic dispatch as ‘‘the operation of generation American Electric Reliability Corporation, History 121 Mandatory Reliability Standards for the Bulk- facilities to produce energy at the lowest cost to of NERC, at 1 (2013), available at http://www.nerc. Power System, Order No. 693, 118 FERC ¶ 61,218, reliably serve consumers, recognizing any com/AboutNERC/Documents/History%20 at P 3 (2007) (citing 16 U.S.C. 824o(e)(3)). operational limits of generation and transmission AUG13.pdf. 122 Rules Concerning Certification of the Electric facilities.’’ Energy Policy Act of 2005, Pub. L. 109– 116 North American Electric Reliability Reliability Organization; and Procedures for the 58, 119 Stat. 594 (2005), section 1234(b), available Corporation, History of NERC, at 2 (2013), available Establishment, Approval, and Enforcement of at http://www.ferc.gov/industries/electric/indus- at http://www.nerc.com/AboutNERC/Documents/ Electric Reliability Standards, Order No. 672, 114 act/joint-boards/final-cong-rpt.pdf. History%20AUG13.pdf. FERC ¶ 61,104 (2006). 112 Variable costs also include costs associated 117 North American Electric Reliability 123 North American Electric Reliability with operation and maintenance and costs of Corporation, History of NERC, at 4 (2013), available Corporation, Frequently Asked Questions, at 2 (Aug. operating a pollution control and/or emission at http://www.nerc.com/AboutNERC/Documents/ 2013), available at http://www.nerc.com/About allowance charges. History%20AUG13.pdf. NERC/Documents/NERC%20FAQs%20AUG13.pdf.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00033 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64694 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

regional entities.124 These regional other planning authorities also consider such as coal and petroleum generally entities include Florida Reliability the reliability of the electric system. experienced declines.134 Renewable Coordinating Council (FRCC), Midwest There are numerous remedies that can electricity generation, including from Reliability Organization (MRO), be utilized to solve a potential reliability large hydro-electric projects, grew from Northeast Power Coordinating Council problem, including long-term planning, 8 percent to 13 percent over that time (NPCC), Reliability First Corporation transmission system upgrades, period.135 Between 2000 and 2013, (RFC), SERC Reliability Corporation installation of new generating capacity, approximately 90 percent of new power (SERC), Southwest Power Pool, RE demand response, and other demand generation capacity built in the U.S. (SPP), Texas Reliability Entity (TRE), side actions. came in the form of natural gas or RE and Western Electricity Coordinating facilities.136 In 2015, the U.S. Energy 4. Modern Electric System Trends Council (WECC).125 Regional entity Information Administration (EIA) members come from all segments of the Today, the electricity sector is projected the need for 28.4 GW of electric industry.126 NERC delegates undergoing a period of intense change. additional base load or intermediate authority, with FERC approval, to these Fossil fuels—such as coal, natural gas, load generation capacity through regional entities to enforce reliability and oil—have historically provided a 2020.137 The vast majority of this new standards, both national and regional large percentage of electricity in the electric capacity (20.4 GW) is already reliability standards, and engage in U.S., along with nuclear power, with under development (under construction other standards-related duties delegated smaller amounts provided by other or in advanced planning), with to them by NERC.127 NERC ensures that types of generation, including approximately 0.7 GW of new coal-fired there is a consistency of application of renewables such as wind, solar, and capacity, 5.5 GW of new nuclear delegated functions with appropriate hydroelectric power. Coal provided the capacity, and 14.2 GW of new NGCC regional flexibility.128 NERC divides the largest percentage of the fossil fuel capacity already in development. country into assessment areas and generation.130 In recent years, the nation While the change in the resource mix annually analyzes the reliability, has seen a sizeable increase in has accelerated in recent years, wind, adequacy, and associated risks that may renewable generation such as wind and solar, other renewables, and affect the upcoming summer, winter, solar, as well as a shift from coal to EEresources have been reliably and long-term, 10-year period. Multiple natural gas.131 In 2013, fossil fuels participating in the electric sector for a other entities such as FERC, the supplied 67 percent of U.S. number of years. This rapid Department of Energy, state public electricity,132 but the amount of development of non-fossil fuel resources utility commissions, ISOs/RTOs,129 and renewable generation capacity is occurring as much of the existing continued to grow.133 From 2007 to power generation fleet in the U.S. is 124 Federal Energy Regulatory Commission, 2014, use of lower- and zero-carbon aging and in need of modernization and Energy Primer: A Handbook of Energy Market energy sources such as wind and solar replacement. In 2025, the average age of Basics, at 49–50 (2012), available at http:// grew, while other major energy sources the coal-fired generating fleet is www.ferc.gov/market-oversight/guide/energy- primer.pdf. projected to be 49 years old, and 20 reliability planning studies, which ‘‘are used to 125 Federal Energy Regulatory Commission, percent of those units would be more assess current reliability needs based on user trends Energy Primer: A Handbook of Energy Market than 60 years old if they remain in and historical energy use.’’ NYISO, Planning Basics, at 50 (2012), available at http:// Studies, available at http://www.nyiso.com/public/ operation at that time. In its 2013 Report www.ferc.gov/market-oversight/guide/energy- markets_operations/services/planning/planning_ Card for America’s Infrastructure, the primer.pdf. studies/index.jsp. See also PJM, Reliability 126 American Society for Civil Engineers North American Electric Reliability Assessments, available at https://www.pjm.com/ Corporation, Key Players, available at http:// planning/rtep-development/reliability- noted that ‘‘America relies on an aging www.nerc.com/AboutNERC/keyplayers/Pages/ assessments.aspx (stating that the PJM ‘‘Regional electrical grid and pipeline distribution default.aspx (last visited Mar. 12, 2015). ‘‘The Transmission Expansion Planning (RTEP) process systems, some of which originated in members of the regional entities come from all includes the development of periodic reliability the 1880s.’’ 138 While there has been an segments of the electric industry: investor-owned assessments to address specific system reliability utilities; federal power agencies; rural electric issues in addition to the ongoing expansion 134 cooperatives; state, municipal and provincial planning process for the interconnection process of U.S. Energy Information Administration, utilities; independent power producers; power generation and merchant transmission.’’). ‘‘Table 7.2b Electricity Net Generation: Electric marketers; and end-use customers.’’ Id. 130 U.S. Energy Information Administration, Power Sector’’ data from Monthly Energy Review 127 North American Electric Reliability May 2015, available at http://www.eia.gov/ ‘‘Table 7.2b Electricity Net Generation: Electric _ Corporation, Frequently Asked Questions, at 5 Power Sector’’ data from Monthly Energy Review totalenergy/data/monthly/pdf/sec7 6.pdf (last (2013), available at http://www.nerc.com/About May 2015, available at http://www.eia.gov/ visited May 26, 2015). NERC/Documents/NERC%20FAQs%20AUG13.pdf. totalenergy/data/monthly/pdf/sec7_6.pdf (last 135 Bloomberg New Energy Finance and the For example, a regional entity may propose visited May 26, 2015). Business Council for Sustainable Energy, 2015 reliability standards, including regional variances 131 U.S. Energy Information Administration, Factbook: Sustainable Energy in America, at 16 or regional reliability standards required to ‘‘Table 7.2b Electricity Net Generation: Electric (2015), available at http://www.bcse.org/images/ maintain and enhance electric service reliability, Power Sector’’ data from Monthly Energy Review 2015%20Sustainable%20Energy%20in adequacy, and security in the region. See, e.g., May 2015, release data April 25, 2014, available at %20America%20Factbook.pdf. Bloomberg gave Amended and Restated Delegation Agreement http://www.eia.gov/totalenergy/data/monthly/pdf/ projections for 2014 values, accounting for Between North American Reliability Corporation sec7_6.pdf (last visited May 26, 2015). seasonality, based on latest monthly values from and Midwest Reliability Organization, Bylaws of the 132 U.S. Energy Information Administration, EIA (data available through October 2014). 136 Midwest Reliability Organization, Inc., Section 2.2 ‘‘Table 7.2b Electricity Net Generation: Electric Energy Information Administration, (2012), available at http://www.nerc.com/Filings Power Sector’’ data from Monthly Energy Review Electricity: Form EIA–860 detailed data (Feb. 17, Orders/us/Regional%20Delegation%20Agreements May 2015, release data April 25, 2014, available at 2015), available at http://www.eia.gov/electricity/ _ _ _ %20DL/MRO RDA Effective 20130612.pdf. http://www.eia.gov/totalenergy/data/monthly/pdf/ data/eia860/. 128 North American Electric Reliability sec7_6.pdf (last visited May 26, 2015). 137 EIA, Annual Energy Outlook for 2015 with Corporation, Frequently Asked Questions, at 5 133 Based on Table 6.3 (New Utility Scale Projections to 2040, Final Release, available at (2013), available at http://www.nerc.com/ Generating Units by Operating Company, Plant, http://www.eia.gov/forecasts/AEO/pdf/ AboutNERC/Documents/NERC%20FAQs% Month, and Year) of the U.S. Energy Information 0383(2015).pdf. The AEO numbers include projects 20AUG13.pdf. Administration (EIA) Electric Power Monthly, data that are under development and model-projected 129 ISOs/RTOs plan for system needs by for December 2013, for the following RE sources: nuclear, coal, and NGCC projects. ‘‘effectively managing the load forecasting, solar, wind, hydro, geothermal, landfill gas, and 138 American Society for Civil Engineers, 2013 transmission planning, and system and resource biomass. Available at http://www.eia.gov/ Report Card for America’s Infrastructure (2013), planning functions.’’ For example, the New York electricity/monthly/epm_table_grapher.cfm?t= available at http://www.infrastructurereportcard Independent System Operator (NYISO) conducts epmt_6_03. .org/energy/.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00034 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64695

increased investment in electric Congress passed the Public Utilities encouraged by the significant amount of transmission infrastructure since 2005, Regulatory Policies Act (PURPA) which existing natural resources that can the report also found that ‘‘ongoing required local electric utilities to buy support RE production in the U.S.151 In permitting issues, weather events, and power from qualifying facilities the Energy Information Administration’s limited maintenance have contributed (QFs).143 QFs were either cogeneration Annual Energy Outlook 2015, RE to an increasing number of failures and facilities 144 or small generation generation grows substantially from power interruptions.’’ 139 However, resources that use renewables such as 2013 to 2040 in the reference case and innovative technologies have wind, solar, biomass, geothermal, or all alternative cases.152 In the reference increasingly entered the electric energy hydroelectric power as their primary case, RE generation increases by more space, helping to provide new answers fuels.145 Through PURPA, Congress than 70 percent from 2013 to 2040 and to how to meet the electricity needs of supported the development of more RE accounts for over one-third of new the nation. These new technologies can generation in the U.S. States have also generation capacity.153 enable the nation to answer not just taken a significant lead in requiring the Price pressures caused by oil questions as to how to reliably meet development of renewable resources. In embargoes in the 1970s also brought the electricity demand, but also how to particular, a number of states have issues of conservation and EE to the meet electricity demand reliably and adopted renewable portfolio standards forefront of U.S. energy policy.154 This cost-effectively with the lowest possible (RPS). As of 2013, 29 states and the trend continued in the early 1990s. EE emissions and the greatest efficiency. District of Columbia have enforceable has been utilized to meet energy Natural gas has a long history of RPS or similar laws.146 demand to varying levels since that meeting electricity demand in the U.S., Use of RE continues to grow rapidly time. As of April 2014, 25 states 155 have with a rapidly growing role as domestic in the U.S. In 2013, electricity generated ‘‘enacted long-term (3+ years), binding supplies of natural gas have from renewable technologies, including energy savings targets, or energy dramatically increased. Natural gas net conventional hydropower, represented efficiency resource standards 156 generation increased by approximately 13 percent of total U.S. electricity, up (EERS).’’ Funding for EE programs 32 percent between 2005 and 2014.140 from 9 percent in 2005.147 In 2013, U.S. has grown rapidly in recent years, with In 2014, natural gas accounted for non-hydro RE capacity for the total budgets for electric efficiency programs 157 approximately 27 percent of net electric power industry exceeded 80,000 totaling $5.9 billion in 2012. generation.141 EIA projects that this MW, reflecting a fivefold increase in just 151 demand growth will continue with its 15 years.148 In particular, there has been Lopez et al., NREL, ‘‘U.S. Renewable Energy Technical Potentials: A GIS-Based Analysis,’’ (July Annual Energy Outlook 2015 (AEO substantial growth in the wind and 2012). 2015) Reference case forecasting that photovoltaic (PV) markets in the past 152 Energy Information Administration, Annual natural gas will produce 31 percent of decade. Since 2009, U.S. wind Energy Outlook 2015 with Projections to 2040, at U.S. electric generation in 2040.142 generation has tripled and solar 25 (2015), available at http://www.eia.gov/ generation has grown twenty-fold.149 forecasts/aeo/pdf/0383(2015).pdf. Renewable sources of electric 153 Energy Information Administration, Annual generation also have a history of The global market for RE is projected Energy Outlook 2015 with Projections to 2040, at meeting electricity demand in the U.S. to grow to $460 billion per year by ES–6 (2015), available at http://www.eia.gov/ and are expected to have an increasing 2030.150 RE growth is further forecasts/aeo/pdf/0383(2015).pdf (last visited May 27, 2015). role going forward. A series of energy 154 Edison Electric Institute, Making a Business of crises provided the impetus for RE 143 Casazza, J. and Delea, F., Understanding Electric Power Systems, IEEE Press, at 220–221 (2d Energy Efficiency: Sustainable Business Models for development in the early 1970s. The ed. 2010). Utilities, at 1 (2007), available at http:// www.eei.org/whatwedo/PublicPolicyAdvocacy/ OPEC oil embargo in 1973 and oil crisis 144 Cogeneration facilities utilize a single source StateRegulation/Documents/Making_Business_ of fuel to produce both electricity and another form of 1979 caused oil price spikes, more Energy_Efficiency.pdf. Congress passed legislation frequent energy shortages, and of energy such as heat or steam. Casazza, J. and in the 1970s that jumpstarted energy efficiency in significantly affected the national and Delea, F., Understanding Electric Power Systems, the U.S. For example, President Ford signed the IEEE Press, at 220–221 (2d ed. 2010). Energy Policy and Conservation Act (EPCA) of global economy. In 1978, partly in 145 Casazza, J. and Delea, F., Understanding 1975—the first law on the issue. EPCA authorized response to fuel security concerns, Electric Power Systems, IEEE Press, at 220–221 (2d the Federal Energy Administration (FEA) to ed. 2010). ‘‘develop energy conservation contingency plans, 139 American Society for Civil Engineers, 2013 146 U.S. Energy Information Administration (EIA), established vehicle fuel economy standards, and Report Card for America’s Infrastructure (2013), Annual Energy Outlook 2014 with Projections to authorized the creation of efficiency standards for available at http://www.infrastructurereportcard 2040, at LR–5 (2014), available at http:// major household appliances.’’ Alliance to Save .org/energy/. www.eia.gov/forecasts/aeo/pdf/0383(2014).pdf (last Energy, History of Energy Efficiency, at 6 (2013) 140 U.S. Energy Information Administration (EIA), visited May 26, 2015). (citing Anders, ‘‘The Federal Energy Electric Power Monthly: Table 1.1 Net Generation 147 Energy Information Administration, Annual Administration,’’ 5; Energy Policy and Conservation by Energy Source: Total (All Sectors), 2005- Energy Outlook 2015 with Projections to 2040, at Act, S. 622, 94th Cong. (1975–1976)), available at February 2015 (2015), available athttp:// ES–6 (2014) and Energy Information https://www.ase.org/sites/ase.org/files/resources/ www.eia.gov/electricity/monthly/epm_table_ Administration, Monthly Energy Review, May 2015, Media%20browser/ee_commission_history_report_ grapher.cfm?t=epmt_1_1 (last visited May 26, Table 7.2b, available at http://www.eia.gov/ 2–1–13.pdf. 2015). totalenergy/data/monthly/pdf/sec7_6.pdf. 155 American Council for an Energy-Efficient 141 Id. 148 Non-hydro RE capacity for the total electric Economy, State Energy Efficiency Resource 142 U.S. Energy Information Administration (EIA), power industry was more than 16,000 megawatts Standards (EERS) (2014), available at http:// Annual Energy Outlook 2015 with Projections to (MW) in 1998. Energy Information Administration, aceee.org/files/pdf/policy-brief/eers-04–2014.pdf. 2040, at 24–25 (2015), available at http:// 1990–2013 Existing Nameplate and Net Summer ACEEE did not include Indiana (EERS eliminated), www.eia.gov/forecasts/aeo/pdf/0383(2015).pdf. Capacity by Energy Source Producer Type and State Delaware (EERS pending), Florida (programs According to the EIA, the reference case assumes, (EIA–860), available at http://www.eia.gov/ funded at levels far below what is necessary to meet ‘‘Real gross domestic product (GDP) grows at an electricity/data/state/. targets), Utah, or Virginia (voluntary standards) in average annual rate of 2.4% from 2013 to 2040, 149 Energy Information Administration, Monthly its calculation. under the assumption that current laws and Energy Review, May 2015, Table 7.2b, available at 156 American Council for an Energy-Efficient regulations remain generally unchanged throughout http://www.eia.gov/totalenergy/data/monthly/pdf/ Economy, State Energy Efficiency Resource the projection period. North Sea Brent crude oil sec7_6.pdf. Standards (EERS) (2014), available at http:// prices rise to $141/barrel (bbl) (2013 dollars) in 150 ‘‘Global Renewable Energy Market Outlook.’’ aceee.org/files/pdf/policy-brief/eers-04–2014.pdf. 2040.’’ Id. at 1. The EIA provides complete Bloomberg New Energy Finance (Nov. 16, 2011), 157 American Council for an Energy-Efficient projection tables for the reference case in Appendix available at http://bnef.com/WhitePapers/ Economy, The 2013 State Energy Efficiency A of its report. download/53. Continued

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00035 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64696 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

Advancements and innovation in 1.2 lbs/mmBtu multiplied by the unit’s emissions with both interim and final power sector technologies provide the baseline and divided by 2000.163 goals. opportunity to address CO2 emission However, bonus allowances could be a. NOX SIP Call. In 1998, the EPA levels at affected power plants while at awarded to certain units. promulgated the NOX SIP Call, which the same time improving the overall Title IV also required the EPA to hold required 23 upwind states to reduce power system in the U.S. by lowering or sponsor annual auctions and sales of emissions of NOX that would impact the carbon intensity of power allowances for a small portion of the downwind areas with ozone problems. generation, and ensuring a reliable total allowances allocated each year. The EPA determined emission supply of power at a reasonable cost. This ensured that some allowances reduction requirements based on would be directly available for new reductions achievable through ‘‘highly E. Clean Air Act Regulations for Power sources, including independent power cost-effective’’ controls—i.e., controls Plants production facilities.164 that would cost on average no more than In this section, we provide a general The provisions of the EPA’s Acid Rain $2,000 per ton of emissions reduced.172 description of major CAA regulations Program are implemented through The EPA determined that a uniform for power plants. We refer to these in permits issued under the EPA’s Title V emission rate on large EGUs coupled later sections of this preamble. Operating Permit Program.165 In with a cap-and-trade program was one such set of highly cost-effective 1. Title IV Acid Rain Program accordance with Title IV, moreover, each Title V permit application must controls.173 Accordingly, the EPA The EPA’s Acid Rain Program, include a compliance plan for the established an interstate cap-and-trade established in 1990 under Title IV of the affected source that details how that program—the NOX Budget Trading CAA, addresses the presence of acidic source expects to meet the requirements Program—as a mechanism for states to compounds and their precursors (i.e., of Title IV.166 reduce emissions from EGUs and other SO2 and NOX), in the atmosphere by sources in a highly cost-effective targeting ‘‘the principal sources’’ of 2. Transport Rulemakings manner. The D.C. Circuit upheld the these pollutants through an SO2 cap- CAA section 110(a)(2)(D)(i)(I), the NOX SIP Call in most significant and-trade program for fossil-fuel fired ‘‘Good Neighbor Provision,’’ requires respects, including its use of costs to power plants and through a technology SIPs to prohibit emissions that apportion emission reduction 174 based NOX emission limit for certain ‘‘contribute significantly to responsibilities. utility boilers. Altogether, Title IV was nonattainment . . . or interfere with b. Clean Air Interstate Rule (CAIR). In designed to achieve reductions of ten maintenance’’ of the NAAQS in any 2005, the EPA promulgated CAIR, million tons of annual SO2 emissions, other state.167 If the EPA finds that a which required 28 upwind states to and, in combination with other state has failed to submit an approvable reduce emissions of NOX and SO2 that provisions of the CAA, two million tons SIP, the EPA must issue a federal would impact downwind areas with 158 projected nonattainment and of annual NOX emissions. implementation plan (FIP) to prohibit maintenance problems for ozone and The SO2 cap-and-trade program was those emissions ‘‘at any time’’ within implemented in two phases. The first the next two years.168 PM2.5. The EPA determined emission reduction requirements based on phase, beginning in 1995, targeted one- In three major rulemakings—the NOX hundred and ten named power plants, 169 ‘‘controls that are known to be highly SIP Call, the Clean Air Interstate Rule 175 including specific generator units at (CAIR),170 and the Cross State Air cost effective for EGUs.’’ The EPA each plant, requiring the plants to Pollution Rule (CSAPR) 171—the EPA established cap-and-trade programs for reduce their cumulative emissions to a has attempted to delineate the scope of sources of NOX and SO2 in states that specific level.159 Under certain the Good Neighbor Provision. These chose to participate in the trading programs via their SIPs and for states conditions, the owner or operator of a rulemakings have several features in ultimately subject to a FIP.176 As named power plant could reassign an common. Although the Good Neighbor relevant here, the D.C. Circuit remanded affected unit’s reduction requirement to Provision does not speak specifically CAIR in North Carolina v. EPA due to another unit and/or request an about EGUs, in all three rulemakings, in part the structure of its interstate extension of two years for meeting the the EPA set state emission ‘‘budgets’’ for trading provisions and the way in which requirement.160 Congress also upwind states based in part on EPA applied the cost-effective standard, established an energy conservation and emissions reductions achievable by but kept the rule in place while the EPA RE reserve from which up to 300,000 EGUs through application of cost- 177 allowances could be allocated for developed an acceptable substitute. effective controls. Each rule also c. Cross-state Air Pollution Rule qualified energy conservation measures adopted a phased approach to reducing (CSAPR). In 2011, the EPA promulgated or qualified RE.161 CSAPR, which required 27 upwind The second phase, beginning in 2000, 163 See 42 U.S.C. 7651d. states to reduce emissions of NO and 164 42 U.S.C. 7651o. X expanded coverage to more than 2,000 SO that would impact downwind areas generating units and set a national cap 165 42 U.S.C. 7651g. 2 166 with projected nonattainment and at 8.90 million tons.162 Generally, Such plans may simply state that the owner or operator expects to hold sufficient allowances or, allowances were allocated at a rate of in the case of alternative compliance methods, must 172 63 FR at 57377–78. provide a ‘‘comprehensive description of the 173 63 FR at 57377–78. In addition to EGUs, the Scorecard, at 17 (Nov. 2013), available at http:// schedule and means by which the unit will rely on NOX SIP Call also set budgets based on highly cost- aceee.org/sites/default/files/publications/ one or more alternative methods of compliance in effective emission reductions from certain other researchreports/e13k.pdf. the manner and time authorized under [Title IV].’’ large sources. Id. 158 42 U.S.C. 7651(b). 42 U.S.C. 7651g(b). 174 Michigan v. EPA, 213 F.3d 663 (D.C. Cir. 159 42 U.S.C. 7651c (Table A). 167 42 U.S.C. 7410(a)(2)(D)(i)(I). 2000). 160 42 U.S.C. 7651c(b) and (d). 168 EPA v. EME Homer City Generation, L.P., 134 175 70 FR at 25163. 161 42 U.S.C. 7651c(f) and (g). S. Ct. 1584, 1600–01 (2014) (citing 42 U.S.C. 176 70 FR at 25273–75; 71 FR 25328 (April 28, 162 U.S. Dept. of Energy, Energy Information 7410(c)). 2006). Administration, ‘‘The Effects of Title IV of the Clean 169 63 FR 57356 (Oct. 27, 1998). 177 531 F.3d 896, 917–22 (D.C. Cir. 2008), Air Act Amendments of 1990 on Electric Utilities: 170 70 FR 25162 (May 12, 2005). modified on rehearing 550 F.3d 1176, 1178 (D.C. An Update,’’ p. vii. (March 1997). 171 76 FR 48208 (Aug. 8, 2011). Cir. 2008).

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00036 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64697

maintenance problems for ozone and and take additional steps to address the electricity market, and are closing. The PM2.5. The EPA determined emission remaining Hg reduction requirements final MATS rule provided a foundation reduction requirements based in part on under CAA section 111, including on which states and other permitting the reductions achievable at certain cost adding Hg-specific control technologies authorities could rely in granting an thresholds by EGUs in each state, with (model applies ACI [activated carbon additional, fourth year for compliance certain provisions developed to account injection]), additional scrubbers and provided for by the CAA. States report for the need to ensure reliability of the SCR, dispatch changes, and coal that these fourth year extensions are electric generating system.178 In the switching.’’ 184 Based on this analysis, being granted. In addition, the EPA same action establishing these emission EPA determined that the BSER ‘‘refers issued an enforcement policy that reduction requirements, the EPA to the combination of the cap-and-trade provides a clear pathway for reliability- promulgated FIPs that subjected states mechanism and the technology needed critical units to receive an to trading programs developed to to achieve the chosen cap level.’’ 185 administrative order that includes a achieve the necessary reductions within To accompany the nationwide compliance schedule of up to an each state.179 The U.S. Supreme Court emissions cap, the EPA also assigned a additional year, if it is needed to ensure upheld the EPA’s use of cost to set statewide emissions budget for mercury. electricity reliability. emission reduction requirements, as Pursuant to CAA section 111(d), states Following promulgation of the MATS well as its authority to issue the FIPs.180 would be required to submit plans to rule, industry, states and environmental the EPA ‘‘detailing the controls that will organizations challenged many aspects 3. Clean Air Mercury Rule be implemented to meet its specified of the EPA’s threshold determination On March 15, 2005, the EPA issued a budget for reductions from coal-fired that regulation of EGUs is ‘‘appropriate rule to control mercury (Hg) emissions Utility Units.’’ 186 Of course, states were and necessary’’ and the final standards from new and existing fossil fuel-fired ‘‘not required to adopt and implement’’ regulating hazardous air pollutants from power plants under CAA section 111(b) the emission trading program, ‘‘but they EGUs. The U.S. Court of Appeals for the and (d). The rule, known as the Clean [were] required to be in compliance D.C. Circuit upheld all aspects of the Air Mercury Rule (CAMR), established, with their statewide Hg emission MATS rule. White Stallion Energy in relevant part, a nationwide cap-and- budget.’’ 187 Center v. EPA, 748 F.3d 1222 (D.C. Cir. 2014). In Michigan v. EPA, case no. 14– trade program under CAA section 4. Mercury Air Toxics Rule 111(d), which was designed to 46, the U.S. Supreme Court reversed the complement the cap-and-trade program On February 16, 2012, the EPA issued portion of the D.C. Circuit decision the MATS rule (77 FR 9304) to reduce for SO2 and NOX emissions under the finding the EPA was not required to Clean Air Interstate Rule (CAIR), emissions of toxic air pollutants from consider cost when determining discussed above.181 Though CAMR was new and existing coal- and oil-fired whether regulation of EGUs was later vacated by the D.C. Circuit on EGUs. The MATS rule will reduce ‘‘appropriate’’ pursuant to section account of the EPA’s flawed CAA emissions of heavy metals, including 112(n)(1). The Supreme Court section 112 delisting rule, the court mercury, arsenic, chromium, and nickel; considered only the narrow question of declined to reach the merits of the and acid gases, including hydrochloric whether the EPA erred in not EPA’s interpretation of CAA section acid and hydrofluoric acid. These toxic considering cost when making this 111(d).182 Accordingly, CAMR air pollutants, also known as hazardous threshold determination. The Court’s continues to be an informative model air pollutants or air toxics, are known to decision did not disturb any of the other for a cap-and-trade program under CAA cause, or suspected of causing, nervous holdings of the D.C. Circuit. The Court system damage, cancer, and other section 111(d). remanded the case to the D.C. Circuit for The cap-and-trade program in CAMR serious health effects. The MATS rule further proceedings, and the MATS rule was designed to take effect in two will also reduce SO2 and fine particle remains in place at this time. pollution, which will reduce particle phases: in 2010, the cap was set at 38 5. Regional Haze Rule tons of mercury per year, and in 2018, concentrations in the air and prevent the cap would be lowered to 15 tons per thousands of premature deaths and tens Under CAA section 169A, Congress year. The Phase I cap was set at a level of thousands of heart attacks, bronchitis ‘‘declare[d] as a national goal the cases and asthma episodes. reflecting the co-benefits of CAIR as prevention of any future, and the New or reconstructed EGUs (i.e., determined through economic and remedying of any existing, impairment 183 sources that commence construction or of visibility’’ in national parks and environmental modeling. For the reconstruction after May 3, 2011) more stringent Phase II cap, the EPA wilderness areas that results from subject to the MATS rule are required to 188 projected that sources would ‘‘install anthropogenic emissions. To achieve comply by April 16, 2012 or upon this goal, Congress directed the EPA to SCR [selective catalytic reduction] to startup, whichever is later. meet their SO and NO requirements promulgate regulations directing states 2 X Existing sources subject to the MATS to submit SIPs that ‘‘contain such rule were required to begin meeting the emission limits, schedules of 178 76 FR at 48270. The EPA adopted this rule’s requirements on April 16, 2015. approach in part to comport with the D.C. Circuit’s compliance and other measures as may opinion in North Carolina v. EPA remanding CAIR. Controls that will achieve the MATS be necessary to make reasonable Id. at 48270–71. performance standards are being progress toward meeting the national 179 76 FR at 48209–16. installed on many units. Certain units, goal. . . .’’ 189 One such measure that 180 EPA v. EME Homer City Generation, L.P., 134 especially those that operate Congress deemed necessary to make S. Ct. 1584 (2014). infrequently, may be considered not 181 reasonable progress was a requirement See 70 FR 28606 (May 18, 2005). worth investing in given today’s 182 New Jersey v. EPA, 517 F.3d 574 (D.C. Cir. that certain older stationary sources that 2008). cause or contribute to visibility 184 183 70 FR 28606, at 28617. The EPA’s projections 70 FR 28606, at 28619. impairment ‘‘procure, install, and under CAIR showed a significant number of 185 70 FR 28606, at 28620. 186 operate, as expeditiously as practicable affected sources would install scrubbers for SO2 and 70 FR 28606, at 28621. selective catalytic reduction for NOX on coal-fired 187 70 FR 28606, at 28621. That said, states could power plants, which had the co-benefit of capturing ‘‘require reductions beyond those required by the 188 42 U.S.C. 7491(a)(1). mercury emissions. Id. at 28619. [s]tate budget.’’ Id. at 28621. 189 42 U.S.C. 7491(b)(2).

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00037 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64698 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

. . . the best available retrofit F. Congressional Awareness of Climate atmosphere.’’ 204 He concluded that technology,’’ more commonly referred Change in the Context of the Clean Air ‘‘[w]hat we are trying to do, however, in to as BART.190 When determining BART Act Amendments 199 terms of our air pollution effort should for large fossil-fuel fired utility power During its deliberations on the 1970 have a very salutary effect on either of 205 plants, Congress required states to Clean Air Act Amendments, Congress these.’’ adhere to guidelines to be promulgated learned that ongoing pollution, Scientific reports on climatic change by the EPA.191 As with other SIP-based including from manmade carbon continued to gain traction in Congress programs, the EPA is required to issue dioxide, could ‘‘threaten irreversible through the mid-1970s, including while a FIP within two years if a state fails to atmospheric and climatic changes.’’ 200 Congress was considering the 1977 CAA submit a regional haze SIP or if the EPA At that time, Congress heard the views Amendments. However, uncertainty continued as to whether the increased disapproves such SIP in whole or in of scientists that carbon dioxide warming brought about by carbon part.192 emissions tended to increase global dioxide emissions would be offset by In 1999, the EPA promulgated the temperatures, but that there was uncertainty as to the extent to which cooling brought about by particulate Regional Haze Rule to satisfy Congress’ 206 those increases would be offset by the emissions. Congress ordered, as part mandate that EPA promulgate decreases in temperatures brought about of the 1977 CAA Amendments, the regulations directing states to address National Oceanic and Atmospheric 193 by emissions of particulates. President visibility impairment. Among other Nixon’s Council on Environmental Administration to research and monitor things, the Regional Haze Rule allows Quality (CEQ) reported that ‘‘the the stratosphere ‘‘for the purpose of states to satisfy the Act’s BART addition of particulates and carbon early detection of changes in the requirement either by adopting source- stratosphere and climatic effects of such dioxide in the atmosphere could have 207 specific emission limitations or by dramatic and long-term effects on world changes.’’ Between the 1977 and 1990 Clean Air adopting alternatives, such as climate.’’ 201 The CEQ’s First Annual Act Amendments, scientific uncertainty emissions-trading programs, that Report, which was transmitted to yielded to the predominant view that achieve greater reasonable progress than Congress, devoted a chapter to ‘‘Man’s global warming ‘‘was likely to dominate would source-specific BART.194 The Inadvertent Modification of Weather on time scales that would be significant Ninth Circuit and D.C. Circuit have both and Climate.’’ 202 Moreover, Charles to human societies.’’ 208 In fact, as part upheld the EPA’s interpretation that Johnson, Jr., Administrator of the of the 1990 Clean Air Act Amendments, CAA section 169A(b)(2) allows for Consumer Protection and Congress specifically required the EPA Environmental Health Service, testified BART alternatives in lieu of source- to collect data on carbon dioxide 195 before the House Subcommittee on specific BART. In 2005, the EPA emissions—the most significant of the Public Health that ‘‘the carbon dioxide promulgated BART Guidelines to assist GHGs—from all sources subject to the states in determining which sources are balance might result in the heating up of the atmosphere whereas the subject to BART and what emission 204 Testimony of Charles Johnson, Jr., limitations to impose at those reduction of the radiant energy through Administrator of the Consumer Protection and sources.196 particulate matter released to the Environmental Health Service (Administration atmosphere might cause reduction in Testimony), Hearing of the House Subcommittee on The Regional Haze Rule set a goal of radiation that reaches the earth.’’ 203 Public Health and Welfare (Mar. 16, 1970), 1970 CAA Legis. Hist. at 1381. achieving natural visibility conditions Administrator Johnson explained that by 2064 and requires states to revise 205 Testimony of Charles Johnson, Jr., the Nixon Administration was Administrator of the Consumer Protection and their regional haze SIPs every ten ‘‘concerned . . . that neither of these Environmental Health Service (Administration years.197 The first planning period, things happen’’ and that they were Testimony), Hearing of the House Subcommittee on which ends in 2018, focused heavily on ‘‘watching carefully the kind of Public Health and Welfare (Mar. 16, 1970), 1970 the BART requirement. States (or the CAA Legis. Hist. at 1381. prognosis, the kind of calculations that 206 For instance, while scientists, such as Stephen EPA in the case of FIPs) made numerous the scientists make to look at the Schneider of the National Center for Atmospheric source-specific BART determinations, continuous balance between heat and Research, testified that ‘‘manmade pollutants will and developed several BART cooling of the total earth’s affect the climate,’’ they believed that we would ‘‘see a general cooling of the Earth’s atmosphere.’’ alternatives, for utility power plants. For Rep. Scheuer, H. Debates on H.R. 10498 (Sept. 15, the next planning period, states will 199 The following discussion is not meant to be 1976), 1977 CAA Legis. Hist. at 6477. Additionally, need to determine whether additional exhaustive. There are many other instances outside the Department of Transportation’s climatic impact controls are necessary at these plants the context of the CAA, before and after 1970, when assessment program and the Climatic Impact Congress discussed or was presented with evidence Committee of the National Research Council, (and others that were not subject to on climate change. National Academies of Science and Engineering BART) in order to make reasonable 200 Sen. Scott, S. Debate on S. 4358 (Sept. 21, both reported that ‘‘warming or cooling’’ could progress towards the national visibility 1970), 1970 CAA Legis. Hist. at 349. occur. Id. at 6476. See also Sen. Bumpers, S. goal.198 201 Council on Environmental Quality, ‘‘The First Debates on S. 3219 (August 3, 1976), 1977 CAA Annual Report of the Council on Environmental Legis. Hist. at 5368 (inserting ‘‘Summary of Quality,’’ p. 110 (Aug. 1970) (recognizing also that Statements Received [in the Subcommittee on the 190 42 U.S.C. 7491(b)(2)(A). ‘‘[man] can increase the carbon dioxide content of Environment and the Atmosphere] from 191 42 U.S.C. 7491(b)(2). the atmosphere by burning fossil fuels’’ and Professional Societies for the Hearings on Effects of Chronic Pollution’’ into the record, which noted 192 42 U.S.C. 7410(c); 7491(b)(2)(A). postulating that an increase in the earth’s average temperature by about 2° to 3° F ‘‘could in a period that ‘‘there is near unamity [sic] that carbon dioxide 193 64 FR 35714 (July 1, 1999) (codified at 40 CFR of decades, lead to the start of substantial melting concentrations in the atmosphere are increasing 51.308–309). of ice caps and flooding of coastal regions.’’). rapidly.’’). 194 40 CFR 51.308(e)(1) & (2). 202 Council on Environmental Quality, ‘‘The First 207 ‘‘Clean Air Act Amendments of 1977,’’ § 125, 195 See Utility Air Regulatory Grp. v. EPA, 471 Annual Report of the Council on Environmental 91 Stat. at 728. F.3d 1333 (D.C. Cir. 2006); Ctr. for Econ. Dev. v. Quality,’’ p. 93–104 (Aug. 1970) 208 Peterson, Thomas C., William M. Connolley, EPA, 398 F.3d 653 (D.C. Cir. 2005); Cent. Ariz. 203 Testimony of Charles Johnson, Jr., and John Fleck, ‘‘The Myth of the 1970s Global Water Dist. v. EPA, 990 F.2d 1531 (9th Cir. 1993). Administrator of the Consumer Protection and Cooling Scientific Consensus,’’ Bulletin of the 196 70 FR 39104 (July 6, 2005) (codified at 40 CFR Environmental Health Service (Administration American Meteorological Society, p. 1326 pt. 51, app. Y). Testimony), Hearing of the House Subcommittee on (September 2008), available at http:// 197 See 40 CFR 51.308(d)(1)(i)(B), (f). Public Health and Welfare (Mar. 16, 1970), 1970 journals.ametsoc.org/doi/pdf/10.1175/ 198 See 42 U.S.C. 7491(b)(2); 40 CFR 51.308(d)(3). CAA Legis. Hist. at 1381. 2008BAMS2370.1.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00038 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64699

newly enacted operating permit U.S. The Conference of the Parties climate pollutants (below business as program under Title V.209 Although (COP) meets annually and is currently usual) for the year 2030. This Congress did not require the EPA to take considering commitments countries can commitment implies a 22 percent immediate action to address climate make to limit emissions after 2020. The reduction of GHG emissions and a 51 change, Congress did identify certain 2015 COP will be in Paris and is percent reduction of black carbon tools that were particularly helpful in expected to represent an historic step emissions. addressing climate change in the utility for climate change mitigation. The Brazil has reduced its net CO2 power sector. The Senate report Parties to the UNFCC will meet to emissions more than any other country discussing the acid rain provisions of establish a climate agreement that through a historic effort to slow forest Title IV noted that some of the measures applies to all countries and focuses on loss. The deforestation rate in Brazil in that would reduce coal-fired power reducing GHG emissions. Such an 2014 was roughly 75 percent below the plant emissions of the precursors to acid outcome would send a beneficial signal average for 1996 to 2005.217 rain would also reduce those facilities’ to the markets and civil society about Together, countries that have already emissions of CO2. The report stated: global action to address climate change. announced their intended post-2020 Energy efficiency is a crucial tool for Many countries have announced their commitments, including the U.S., controlling the emissions of carbon dioxide, intended post-2020 commitments China, European Union, Mexico, the gas chiefly responsible for the already, and other countries are Russian Federation and Brazil, make up intensification of the atmospheric expected to do so before December. In a large majority of global emissions. ‘greenhouse effect.’ In the last several years, April 2015, the U.S. announced its President Obama’s Climate Action the Committee has received extensive commitment to reduce GHG emissions Plan contains a number of policies and scientific testimony that increases in the 26–28 percent below 2005 levels by programs that are intended to cut carbon human-caused emissions of carbon dioxide 2025.214 pollution that causes climate change and other greenhouse gases will lead to As Parties to both the UNFCCC and and affects public health. The Clean catastrophic shocks in the global climate 215 system. Accordingly, new title IV shapes an the Kyoto Protocol, the European Power Plan is a key component of the acid rain reduction policy that encourages Union (EU) and member countries have plan, addressing the nation’s largest energy efficiency and other policies aimed at taken aggressive action to reduce GHG source of emissions in a comprehensive controlling greenhouse gases.210 emissions.216 EU initiatives to reduce manner. Collectively, these policies will Similarly, Title IV provisions to GHG emissions include the EU help spark business innovation, result encourage RE were justified because Emissions Trading System, legislation to in cleaner forms of energy, create jobs, ‘‘renewables not only significantly increase the adoption of RE sources, and cut dependence on foreign oil. They curtail sulfur dioxide emissions, but strengthened EE targets, vehicle also demonstrate to the rest of the world they emit little or no nitrogen oxides emission standards, and support for the that the U.S. is contributing its share of and carbon dioxide’’.211 development of CCS technology for use the global effort that is needed to by the power sector and other industrial address climate change.218 This G. International Agreements and sources. In 2009, the EU announced its demonstration encourages other major Actions ‘‘20–20–20 targets,’’ including a 20 economies to take on similar In this final rule, the U.S. is taking percent reduction in GHG emissions contributions, which is critical given the action to limit GHGs from one of its from 1990 levels by 2020, an increase of global impact of GHG emissions. The largest emission sources. Climate 20 percent in the share of energy State Department Special Envoy for change is a global problem, and the U.S. consumption produced by renewable Climate Change Todd Stern, the lead is not alone in taking action to address resources, and a 20 percent U.S. climate change negotiator, noted it. The UNFCCC 212 is the international improvement in EE. In March 2015, the the connection between domestic and treaty under which countries (called EU announced its commitment to international action to address climate ‘‘Parties’’) cooperatively consider what reduce domestic GHG emissions by at change in his speech at Yale University can be done to limit anthropogenic least 40% from 1990 levels by 2030. on October 14, 2014: climate change 213 and adapt to climate Recently, China has also agreed to take action to address climate change. In This mobilization of American effort change impacts. Currently, there are 195 matters. Enormously. It matters because the Parties to the UNFCCC, including the November 2014, in a joint United States is the biggest economy and announcement by President Obama and largest historic emitter of greenhouse gases. 209 ‘‘Clean Air Act Amendments of 1990,’’ § 820, China’s President Xi, China pledged to Because, here, as in so many areas, we feel 104 Stat. at 2699. curtail GHG emissions, with emissions a responsibility to lead. And because here, as 210 Sen. Chafee, S. Debate on S. 1630 (Jan. 24, peaking in 2030 and then declining in so many areas, we find that American 1990), 1990 CAA Legis. Hist. at 8662. thereafter, and to increase the share of commitment is indispensable to effective 211 Additional Views of Rep. Markey and Rep. international action. Moorhead, H.R. Rep. No. 101–490, at 674 (May 17, energy from non-carbon sources (solar, wind, hydropower, nuclear) to 20 And make no mistake—other countries see 1990). what we are doing and are taking note. As 212 http://unfccc.int/2860.php. percent by 2030. I travel the world and meet with my 213 Article 2, Objective, The ultimate objective of Mexico is committed to reduce this Convention and any related legal instruments unconditionally 25 percent of its 217 http://www.nature.com/news/stopping- that the Conference of the Parties may adopt is to emissions of GHGs and short-lived achieve, in accordance with the relevant provisions deforestation-battle-for-the-amazon-1.17223. of the Convention, stabilization of greenhouse gas 218 President Obama stated, in announcing the concentrations in the atmosphere at a level that 214 United States Cover Note to Intended Climate Action Plan: would prevent dangerous anthropogenic Nationally Determined Contribution (INDC). ‘‘The actions I’ve announced today should send interference with the climate system. Such a level Available online at: http://www4.unfccc.int/ a strong signal to the world that America intends should be achieved within a time frame sufficient submissions/INDC/Published%20Documents/ to take bold action to reduce carbon pollution. We to allow ecosystems to adapt naturally to climate United%20States%20of%20America/1/ will continue to lead by the power of our example, change, to ensure that food production is not U.S.%20Cover%20Note%20INDC% because that’s what the United States of America threatened and to enable economic development to 20and%20Accompanying%20Information.pdf. has always done.’’ President Obama, Climate Action proceed in a sustainable manner. http://unfccc.int/ 215 http://unfccc.int/kyoto_protocol/items/ Plan speech, Georgetown University, 2013. files/essential_background/convention/background/ 2830.php. Available at https://www.whitehouse.gov/the-press- application/pdf/convention_text_with_annexes_ 216 http://ec.europa.eu/clima/policies/brief/eu/ office/2013/06/25/remarks-president-climate- english_for_posting.pdf index_en.htm. change.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00039 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64700 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

counterparts, the palpable engagement of these provisions, states would have the designed to ‘‘provide a greater role for President Obama and his team has put us in primary responsibility for assuring air the [s]tates in standards setting under a stronger, more credible position than ever quality within their entire geographic the [CAA],’’ ‘‘protect [s]tates from before. area but would submit plans to the ‘environmental blackmail’ as they This final rule demonstrates to other Administrator for ‘‘implementation, attempt to regulate mobile and countries that the U.S. is taking action maintenance, and enforcement’’ of competitive industries,’’ and lastly to limit GHG emissions from its largest national ambient air quality standards. ‘‘provide a check on the Administrator’s emission sources, in line with our These plans would include ‘‘emission inaction or failure to control emissions international commitments. The impact limitations, schedules, and timetables adequately.’’ 230 of GHGs is global, and U.S. action to for compliance . . . and such other At bottom, CAA section 111 rests on reduce GHG emissions complements measures as may be necessary to insure the definition of a standard of and encourages ongoing programs and attainment and maintenance’’ of the performance under CAA section efforts in other countries. national ambient air quality 111(a)(1), which reads nearly the same 224 H. Legislative and Regulatory standards. now as it did when it was first adopted Background for CAA Section 111 The second prong—CAA section in the 1970 CAA Amendments. In 1970, 111—addressed pollutants on a source Congress defined standard of In the final days of December 1970, category-wide basis. Under CAA section performance—a term which had not Congress enacted sweeping changes to 111(b), the EPA lists source categories previously appeared in the CAA—as the Air Quality Act of 1967 to confront which ‘‘contribute significantly to air 219 a standard for emissions of air pollutants an ‘‘environmental crisis.’’ The Air pollution which causes or contributes to which reflects the degree of emission Quality Act—which expanded federal the endangerment of public health or limitation achievable through the application air pollution control efforts after the welfare,’’ And then establishes of the best system of emission reduction enactment of the Clean Air Act of ‘‘standards of performance’’ for the new which (taking into account the cost of 1963—prioritized the adoption of sources in the listed category.225 For achieving such reduction) the Administrator ambient air standards but failed to target determines has been adequately existing sources in a listed source 231 stationary sources of air pollution. As a category, CAA section 111(d) set out demonstrated. result, ‘‘[c]ities up and down the east procedures for the establishment of Despite significant changes to this coast were living under clouds of smoke federally enforceable ‘‘emission definition in 1977, Congress reversed and daily air pollution alerts.’’ 220 In standards’’ of any pollutant not course in 1990 and largely reinstated the fact, ‘‘[o]ver 200 million tons of otherwise controlled under the CAA’s original definition.232 As presently contaminants . . . spilled into the air’’ SIP provisions or CAA section 112. defined, the term applies to the each year.221 The 1970 CAA Lastly, the third prong—CAA section regulation of new and existing sources Amendments were designed to face this 112—addressed hazardous air under CAA sections 111(b) and (d).233 crisis ‘‘with urgency and in candor.’’ 222 pollutants through the establishment of The level of control reflected in the For the most part, Congress gave EPA national ‘‘emission standards’’ at a level definition is generally referred to as the and the states flexible tools to which ‘‘provides an ample margin of ‘‘best system of emission reduction,’’ or implement the CAA. This is best safety to protect the public health’’.226 the BSER. The BSER, however, is not exhibited by the newly enacted All new or modified sources of any further defined, and only appeared after programs regulating stationary sources. hazardous air pollutant would be conference between the House and For these sources, Congress crafted a required to meet these emission Senate in late 1970, and was neither three-legged regime upon which the standards. Existing sources were discussed in the conference report nor regulation of stationary sources was required to meet the same standards or openly debated in either chamber. intended to sit. would be shut down unless they Nevertheless, the originating bills from The first prong—CAA sections 107– obtained a temporary EPA waiver or both houses shed light on its 110—addressed what are commonly Presidential exemption.227 construction. referred to as criteria pollutants, ‘‘the At its inception, CAA section 111 was The BSER grew out of proposed presence of which in the ambient air intended to bear a significant weight language in two bills, which, for the first results from numerous or diverse mobile under this three-legged regime. Indeed, time, targeted air pollution from or stationary sources’’ and are by 1977, the EPA had promulgated six stationary sources. The House bill determined to have ‘‘an adverse effect times as many performance standards sought to establish national emission on public health or welfare’’.223 Under under CAA section 111 than emission standards to ‘‘prevent and control . . . standards under CAA section 112.228 emissions [of non-hazardous pollutants] 219 Sen. Muskie, S. Debate on S. 4358 (Sept. 21, That said, states, including Texas and to the fullest extent compatible with the 1970), 1970 CAA Legis. Hist. at 224. New Jersey, levied ‘‘substantial available technology and economic 220 Sen. Muskie, S. Consideration of H.R. Conf. feasibility.’’ 234 The House also Rep. No. 91–1783 (Dec. 18, 1970), 1970 CAA Legis. criticisms’’ against the EPA for not Hist.pa at 123. moving rapidly enough.229 Accordingly, 221 Sen. Muskie, S. Debate on S. 4358 (Sept. 21, the 1977 CAA Amendments were 230 H.R. Rep. No. 95–294, at 195 (May 12, 1977). 1970), 1970 CAA Legis. Hist. at 224. These 231 ‘‘Clean Air Act Amendments of 1970,’’ § 4, 84 pollutants fell into five main classes of pollutants: Stat. at 1683. used under the current CAA section 111. See 42 Carbon monoxide, particulates, sulfur oxides, 232 ‘‘Clean Air Act Amendments of 1990,’’ Pub. L. U.S.C. 7411(b)(1)(A). hydrocarbons, and nitrogen oxides. See Sen. Boggs, 101–549, § 403, 104 Stat. 2399, 2631 (Nov. 15, 1990) 224 id. at 244. ‘‘Clean Air Act Amendments of 1970,’’ § 4, 84 (retaining only the obligation to account for ‘‘any Stat. at 1680. 222 Sen. Muskie, S. Consideration of H.R. Conf. nonair quality health and environmental impact 225 Rep. No. 91–1783 (Dec. 18, 1970), 1970 CAA Legis. ‘‘Clean Air Act Amendments of 1970,’’ § 4, 84 and energy requirements’’ that was added in 1977). Hist. at 123. Stat. at 1684. 233 As CAA section 111(d) was originally adopted, 226 223 ‘‘Clean Air Act Amendments of 1970,’’ Pub. L. ‘‘Clean Air Act Amendments of 1970,’’ § 4, 84 state plans would have established ‘‘emission 91–604, § 4, 84 Stat. 1676, 1678 (Dec. 31, 1970). The Stat. at 1685. standards’’ instead of ‘‘standards of performance.’’ ‘‘adverse effect’’ criterion was later amended to 227 ‘‘Clean Air Act Amendments of 1970,’’ § 4, 84 This distinction was later abandoned in 1977 and refer to pollutants ‘‘which may reasonably be Stat. at 1685. the same term is used in both CAA sections 111(b) anticipated to endanger public health or welfare’’. 228 H.R. Rep. No. 95–294, at 194 (May 12, 1977). and (d). See 42 U.S.C. 7408(a)(1)(A). Similar language is also 229 H.R. Rep. No. 95–294, at 194 (May 12, 1977). 234 H.R. 17255, 91st Cong. § 5 (1970).

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00040 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64701

proposed to prohibit the construction or emissions that pose any significant Despite these first steps taken under operation of new sources of ‘‘extremely danger to public health or welfare.’’ 240 CAA sections 111(b) and (d), Congress hazardous’’ pollutants.235 The Senate The term ‘‘emission standards,’’ revisited the CAA in 1977 to address bill, on the other hand, authorized however, was not expressly defined in growing concerns with the nation’s ‘‘Federal standards of performance,’’ the 1970 CAA Amendments (save for response to the 1973 oil embargo (noted which would ‘‘reflect the greatest degree purposes of citizen suit enforcement) above), to respond to new of emission control which the Secretary even though the term was also used environmental problems such as [later, the Administrator] determines to under the CAA’s SIP provisions and stratospheric ozone depletion, and to be achievable through application of the CAA section 112.241 That said, under resolve other issues associated with latest available control technology, the newly enacted ‘‘ambient air quality implementing the 1970 CAA 248 processes, operating methods, or other and emission standards’’ sections, Amendments. Most notably, an alternatives.’’ 236 The Senate also would Congress directed the EPA to provide increase in coal use as a result of the oil have authorized ‘‘national emission states with information ‘‘on air crisis meant that ‘‘vigorous and effective pollution control techniques,’’ including control’’ of air emissions was ‘‘even standards’’ for hazardous air pollution 249 and other ‘‘selected air pollution data on ‘‘available technology and more urgent.’’ Thus, to curb the projected surge in air emissions, agents.’’ 237 alternative methods of prevention and control of air pollution’’ and on Congress enacted several new After conference, CAA section 111 ‘‘alternative fuels, processes, and provisions to the CAA. These new emerged as one of the CAA’s three operating methods which will result in provisions include the prevention of programs for regulating stationary elimination or significant reduction of significant deterioration (PSD) program, sources. In defining the newly formed emissions.’’ 242 Similarly, the visibility protections, and requirements ‘‘standards of performance,’’ Congress Administrator would ‘‘issue information for nonattainment areas.250 appeared to merge the various ‘‘means on pollution control techniques for air Congress also made significant of preventing and controlling air pollutants’’ in conjunction with changes to CAA section 111. For pollution’’ under the Senate bill with establishing emission standards under example, Congress amended the the consideration of costs that was CAA section 112. However, analogous definition of a standard of performance central to the House bill into the BSER. text is absent from CAA section 111(d). (including by requiring the At the time, however, this definition After the enactment of the 1970 CAA consideration of ‘‘nonair quality health only applied to new sources under CAA Amendments, the EPA proposed and environmental impact and energy section 111(b). standards of performance for an ‘‘initial requirements’’), authorized alternative (e.g., work practice or design) standards To regulate existing sources, Congress list of five stationary source categories in limited circumstances, provided collapsed section 114 of the Senate bill which contribute significantly to air 243 states with authority to petition the into CAA section 111(d).238 Section 114 pollution’’ in August 1971. The first Administrator for new or revised (and of the Senate bill established emission category listed was for fossil-fuel fired steam generators, for which EPA more stringent) standards, and imposed standards for ‘‘selected air pollution a strict regulatory schedule for agents,’’ and was intended to bridge the proposed and promulgated standards for 244 establishing standards of performance gap between criteria pollutants and particulate matter, SO2, and NOX. Several years later, the EPA proposed for categories of major stationary hazardous air pollutants. As proposed, sources that had not yet been listed.251 the Senate identified fourteen its implementing regulations for CAA section 111(d).245 These regulations substances for regulation under section were finalized in November 1975, and Final Guideline Document Availability,’’ 42 FR 114 and only four substances for provided for the publication of emission 12022 (Mar. 1, 1977). regulation under Senate bill 4358, 248 For example, Congress recognized that many guidelines.246 The first emission section 115, the predecessor of CAA air pollutants had not been regulated despite guidelines were proposed in May 1976 section 112.239 ‘‘mounting evidence’’ that these pollutants ‘‘are and finalized in March 1977.247 associated with serious health hazards’’. H.R. Rep. As adopted, CAA section 111(d) No. 94–1175, 22 (May, 15, 1976). Because EPA ‘‘failed to promulgate regulations to institute requires states to submit plans to the 240 S. Rep. No. 91–1196, at 20 (Sept. 17, 1970) adequate control measures,’’ Congress ordered EPA (discussing the relationship between sections 114 Administrator establishing ‘‘emission to regulate four specific pollutants that had ‘‘been (addressing emission standards for ‘‘selected air standards’’ for certain existing sources found to be cancer-causing or cancer-promoting’’. pollution agents’’) and 115 (addressing hazardous Id. at 23. This directive, reflected in CAA section of air pollutants that were not otherwise air pollutants) of the Senate bill). 122, specifically added radioactive pollutants, regulated as criteria pollutants or 241 See ‘‘Clean Air Act Amendments of 1970,’’ cadmium, arsenic, and polycyclic organic matter hazardous air pollutants. This ensured § 12, 84 Stat. at 1706. ‘‘under the various provisions of the Clean Air Act that there would be ‘‘no gaps in control 242 ‘‘Clean Air Act Amendments of 1970,’’ § 4, 84 and allows their regulation as criteria pollutants activities pertaining to stationary source Stat. at 1679. under ambient air quality standards, as hazardous 243 ‘‘Standards of Performance for New Stationary air pollutants, or under new source performance Sources: Proposed Standards for Five Categories,’’ standards, as appropriate.’’ H.R. Conf. Rep. No. 95– 235 H.R. 17255, 91st Cong. § 5 (1970). 36 FR 15704 (Aug. 17, 1971). See ‘‘Clean Air Act 564, 142 (Aug. 3, 1977), 1977 CAA Legis. Hist. at 236 S. 4358, 91st Cong. § 6 (1970) (emphasis Amendments of 1970,’’ § 4, 84 Stat. at 1684 522. At the same time, Congress made sure that added). The breadth of the Senate bill is further (requiring the Administrator to publish a list of these commands would have no effect on the emphasized in the conference report, which categories of stationary sources within 90 days of Administrator’s discretion to address ‘‘any explains that a standard of performance ‘‘refers to the enactment of the 1970 CAA Amendments). substance (whether or not enumerated [under CAA the degree of emission control which can be 244 36 FR at 15704–706; and ‘‘Standards of section 122(a))’’ under CAA sections 108, 112, or achieved through process changes, operation Performance for New Stationary Sources,’’ 36 FR 111. 42 U.S.C. 7422(b). changes, direct emission control, or other methods’’ 24876, 24879 (Dec. 23, 1971). 249 See Statement of EPA Administrator Costle, S. and also includes ‘‘other means of preventing or 245 See ‘‘State Plans for the Control of Existing Hearings on S. 272, S. 273, S. 977, and S. 1469 (Apr. controlling air pollution.’’ S. Rep. No. 91–1196, at Facilities,’’ 39 FR 36102 (Oct. 7, 1974). 5, 7, May 25, June 24 and 30, 1977), 1977 CAA 15–16 (Sept. 17, 1970). 246 See ‘‘State Plans for the Control of Certain Legis. Hist. at 3532. 237 S. 4358, 91st Cong. § 6 (1970). Pollutants from Existing Facilities,’’ 40 FR 53340 250 See ‘‘Clean Air Act Amendments of 1977,’’ 238 The House bill did not provide for the direct (Nov. 17, 1975). Pub. L. 95–95, §§ 127–129, 91 Stat. 685 (Aug. 7, regulation of existing sources. 247 See ‘‘Phosphate Fertilizer Plants; Draft 1977). 239 See S. Rep. No. 91–1196, at 18 and 20 (Sept. Guideline Document; Availability,’’ 41 FR 19585 251 ‘‘Clean Air Act Amendments of 1977,’’ § 109, 17, 1970). (May 12, 1976); and ‘‘Phosphate Fertilizer Plants; 91 Stat. at 697.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00041 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64702 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

The 1977 definition for a standard of CAA. In particular, Congress again source performance standards (NSPS), performance required ‘‘all new sources added to the NAAQS program, and they are national requirements that to meet emission standards based on the completely revised CAA section 112, apply directly to the sources subject to reductions achievable through the use of added a new title to target existing fossil them. the ‘best technological system of fuel-fired stationary sources and address When the EPA establishes NSPS for continuous emission reduction.’ ’’ 252 growing concerns with acid rain, new sources in a particular source For fossil-fuel fired stationary sources, imported an operating permit modeled category, the EPA is also required, Congress further required a percentage off the Clean Water Act, and established under CAA section 111(d)(1), to reduction in emissions from the use of a phase out of certain ozone depleting prescribe regulations for states to submit fuels.253 Together, this was designed to substances. plans regulating existing sources in that ‘‘force new sources to burn high-sulfur All told, however, there was minimal source category for any air pollutant fuel thus freeing low-sulfur fuel for use debate on changes to CAA section 111. that, in general, is not regulated under in existing sources where it is harder to In fact, the only discussion centered on the CAA section 109 requirements for control emissions and where low-sulfur the repeal of the percentage reduction the NAAQS or regulated under the CAA fuel is needed for compliance.’’ 254 requirement, which became seen as section 112 requirements for HAP. CAA Congress also clarified that with unduly restrictive. Accordingly, section 111(d)’s mechanism for respect to CAA section 111(d), Congress reverted the definition of regulating existing sources differs from standards of performance (now ‘‘standard of performance’’ to the the one that CAA section 111(b) applicable in lieu of emission standards) definition agreed to in the 1970 CAA provides for new sources because CAA ‘‘would be based on the best available Amendments, but retained the section 111(d) contemplates states means (not necessarily requirement to consider nonair quality submitting plans that establish technological)’’.255 This was intended to environmental impacts and energy ‘‘standards of performance’’ for the distinguish existing source standards requirements added in 1977.260 affected sources and that contain other from new source standards, for which However, the repeal would only apply measures to implement and enforce ‘‘the requirement for [the BSER] has so long as the SO2 cap under CAA those standards. been more narrowly redefined as best section 403(e) of the newly established ‘‘Standards of performance’’ are technological system of continuous acid rain program remained in effect.261 defined under CAA section 111(a)(1) as emission reduction.’’ 256 Additionally, Lastly, Congress instructed the EPA to standards for emissions that reflect the Congress clarified that states could revise its new source performance emission limitation achievable from the consider ‘‘the remaining useful life’’ of standards for SO2 emissions from fossil ‘‘best system of emission reduction,’’ a source when applying a standard of fuel-fired power plants but required that considering costs and other factors, that performance to a particular existing the revised emission rate be no less ‘‘the Administrator determines has been source.257 stringent than before.262 adequately demonstrated.’’ CAA section In the twenty years since the 1970 111(d)(1) grants states the authority, in I. Statutory and Regulatory applying a standard of performance to a CAA Amendments and in spite of the Requirements refinements of the 1977 CAA particular source, to take into account Amendments, ‘‘many of the Nation’s Clean Air Act section 111, which the source’s remaining useful life or most important air pollution problems Congress enacted as part of the 1970 other factors. [had] failed to improve or [had] grown Clean Air Act Amendments, establishes Under CAA section 111(d), a state more serious.’’ 258 Indeed, in 1989, mechanisms for controlling emissions of must submit its plan to the EPA for President George Bush said that air pollutants from stationary sources. approval, and the EPA must approve the 266 ‘‘ ‘progress has not come quickly enough This provision requires the EPA to state plan if it is ‘‘satisfactory.’’ If a and much remains to be done.’ ’’ 259 This promulgate a list of categories of state does not submit a plan, or if the time, with the 1990 CAA Amendments, stationary sources that the EPA does not approve a state’s plan, Congress substantially overhauled the Administrator, in his or her judgment, then the EPA must establish a plan for finds ‘‘causes, or contributes that state.267 Once a state receives the 252 H.R. Rep. No. 95–294, at 192 (May 12, 1977). significantly to, air pollution which may EPA’s approval of its plan, the Congress separately defined ‘‘technological system reasonably be anticipated to endanger provisions in the plan become federally of continuous emission reduction’’ as ‘‘(A) a public health or welfare.’’ 263 The EPA enforceable against the entity technological process for production or operation has listed more than 60 stationary responsible for noncompliance, in the by any source which is inherently low-polluting or source categories under this nonpolluting, or (B) technological system for same manner as the provisions of an 264 continuous reduction of the pollution generated by provision. Once the EPA lists a approved SIP under the Act. a source before such pollution is emitted into the source category, the EPA must, under Section 302(d) of the CAA defines the ambient air, including precombustion cleaning or CAA section 111(b)(1)(B), establish term ‘‘state’’ to include the treatment of fuels.’’ ‘‘Clean Air Act Amendments of ‘‘standards of performance’’ for 1977,’’ § 109, 91 Stat. at 700; see also 42 U.S.C. Commonwealth of Puerto Rico, the 7411(a)(7). emissions of air pollutants from new Virgin Islands, Guam, American Samoa 265 253 ‘‘Clean Air Act Amendments of 1977,’’ § 109, sources in the source categories. and the Commonwealth of the Northern 91 Stat. at 700. These standards are known as new Mariana Islands. While 40 CFR part 60 254 ‘‘New Stationary Sources Performance contains a separate definition of ‘‘state’’ Standards; Electric Utility Steam Generating Units,’’ 260 Congress also updated the regulatory schedule at section 60.2, this definition expands 44 FR 33580, 33581–82 (June 11, 1979). that was added in the 1977 CAA Amendments to 255 H.R. Rep. No. 95–294, at 195 (May 12, 1977). reflect the newly enacted 1990 CAA Amendments. on, rather than narrows, the definition 256 Sen. Muskie, S. Consideration of the H.R. See ‘‘Clean Air Act Amendments of 1990,’’ § 108, in section 302(d) of the CAA. The Conf. Rep. No. 95–564 (Aug. 4, 1977), 1977 CAA 104 Stat. 2467. introductory language to 40 CFR 60.2 Legis. Hist. at 353. 261 ‘‘Clean Air Act Amendments of 1990,’’ § 403, provides: ‘‘The terms in this part are 257 This concept was already reflected in the 104 Stat. at 2631. defined in the Act or in this section as EPA’s CAA section 111(d) implementing 262 ‘‘Clean Air Act Amendments of 1990,’’ § 301, regulations under 40 CFR 60.24(f). See 40 FR 53340, 104 Stat. at 2631. follows.’’ Section 60.2 defines ‘‘State’’ as 53347 (Nov. 17, 1975). 263 CAA section 111(b)(1)(A). 258 H.R. Rep. No. 101–490, at 144 (May 17, 1990). 264 See 40 CFR 60 subparts Cb—OOOO. 266 CAA section 111(d)(2)(A). 259 H.R. Rep. No. 101–490, at 144 (May 17, 1990). 265 CAA section 111(b)(1)(B), 111(a)(1). 267 CAA section 111(d)(2)(A).

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00042 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64703

‘‘all non-Federal authorities, including partial program elements. Those addition, the agency has regulated local agencies, interstate associations, procedures are applicable here. additional pollutants under CAA and State-wide programs that have been In these final emission guidelines, the section 111(d) in conjunction with CAA delegated authority to implement: (1) term ‘‘state’’ encompasses the 50 states section 129.276 The agency has not The provisions of this part and/or (2) and the District of Columbia, U.S. previously regulated CO2 or any other the permit program established under territories, and any Indian tribe that has GHGs under CAA section 111(d). part 70 of this chapter. The term State been approved by the EPA pursuant to The EPA’s previous CAA section shall have its conventional meaning 40 CFR 49.9 as to develop and 111(d) actions were necessarily geared where clear from the context.’’ The EPA implement a CAA section 111(d) plan. toward the pollutants and industries The EPA issued regulations believes that the last sentence refers to regulated. Similarly, in this rulemaking, implementing CAA section 111(d) in the conventional meaning of ‘‘state’’ in defining CAA section 111(d) 1975,269 and has revised them in the under the CAA. Thus, the EPA believes emission guidelines for the states and years since.270 (We refer to the determining the BSER, the EPA believes the term ‘‘state’’ as used in the emission regulations generally as the that taking into account the particular guidelines is most reasonably implementing regulations.) These characteristics of carbon pollution, the interpreted as including the meaning regulations provide that, in interconnected nature of the power ascribed to that term in section 302(d) promulgating requirements for sources sector and the manner in which EGUs of the CAA, which expressly includes under CAA section 111(d), the EPA first are currently operated is warranted. U.S. territories. develops regulations known as Specifically, the operators themselves Section 301(d)(A) of the CAA ‘‘emission guidelines,’’ which establish treat increments of generation as recognizes that the American Indian binding requirements that states must interchangeable between and among tribes are sovereign Nations and address when they develop their sources in a way that creates options for authorizes the EPA to ‘‘treat tribes as plans.271 The implementing regulations relying on varying utilization levels, States under this Act’’. The Tribal also establish timetables for state and lowering carbon generation, and Authority Rule (63 FR 7254, February EPA action: States must submit state reducing demand as components of the 12, 1998) identifies that EPA will treat plans within 9 months of the EPA’s overall method for reducing CO2 tribes in a manner similar to states for issuance of the guidelines,272 and the emissions. Doing so results in a broader, all of the CAA provisions with the EPA must take final action on the state forward-thinking approach to the design exception of, among other things, plans within 4 months of the due date of programs to yield critical CO2 273 specific plan submittal and for those plans, although the EPA has reductions that improve the overall 274 implementation deadlines under the authority to extend those deadlines. power system by lowering the carbon CAA. As a result, though they operate In this rulemaking, the EPA is following intensity of power generation, while as part of the interconnected system of the requirements of the implementing offering continued reliability and cost- electricity production and distribution, regulations, and is not re-opening them, effectiveness. These opportunities exist except that the EPA is extending the affected EGUs located in Indian country in the utility power sector in ways that timetables, as described below. would not be encompassed within a were not relevant or available for other Over the last forty years, under CAA industries for which the EPA has state’s CAA section 111(d) plan. Instead, section 111(d), the agency has regulated an Indian tribe with one or more established CAA section 111(d) four pollutants from five source 277 affected EGUs located in its area of emission guidelines. categories (i.e., sulfuric acid plants (acid In this action, the EPA is Indian country 268 will have the mist), phosphate fertilizer plants promulgating emission guidelines for opportunity, but not the obligation, to (fluorides), primary aluminum plants states to follow in developing their CAA apply for eligibility to develop and (fluorides), Kraft pulp plants (total section 111(d) plans to reduce emissions implement a CAA section 111(d) plan. reduced sulfur), and municipal solid of CO2 from the utility power sector. The Indian tribe would need to be waste landfills (landfill gases)).275 In approved by the EPA as eligible to J. Clean Power Plan Proposal and develop and implement a CAA section 269 ‘‘State Plans for the Control of Certain Supplemental Proposal 111(d) plan following the procedure set Pollutants from Existing Facilities,’’ 40 FR 53340 On June 18, 2014, the EPA proposed forth in 40 CFR part 49. Once a tribe is (Nov. 17, 1975). 270 The most recent amendment was in 77 FR emission guidelines for states to follow approved as eligible for that purpose, it 9304 (Feb. 16, 2012). in developing plans to address GHG would be treated in the same manner as 271 40 CFR 60.22. In the 1975 rulemaking, the emissions from existing fossil fuel-fired a state, and references in the emission EPA explained that it used the term ‘‘emission electric generating units (EGUs). guidelines to states would refer equally guidelines’’—instead of emissions limitations—to Specifically, the EPA proposed rate- make clear that guidelines would not be binding to the tribe. The EPA notes that, while requirements applicable to the sources, but instead based goals for CO2 emissions for each tribes have the opportunity to apply for are ‘‘criteria for judging the adequacy of State eligibility to administer CAA programs, plans.’’ 40 FR at 53343. 276 See, e.g., ‘‘Standards of Performance for New they are not required to do so. Further, 272 40 CFR 60.23(a)(1). Stationary Sources and Emission Guidelines for 273 40 CFR 60.27(b). Existing Sources: Sewage Sludge Incineration Units, the EPA has established procedures in 274 See 40 CFR 60.27(a). Final Rule,’’ 76 FR 15372 (Mar. 21, 2011). 40 CFR part 49 (see particularly 40 CFR 275 See ‘‘Phosphate Fertilizer Plants; Final 277 See ‘‘Phosphate Fertilizer Plants; Final 49.7(c)) that permit eligible tribes to Guideline Document Availability,’’ 42 FR 12022 Guideline Document Availability,’’ 42 FR 12022 request approval of reasonably severable (Mar. 1, 1977); ‘‘Standards of Performance for New (Mar. 1, 1977); ‘‘Standards of Performance for New Stationary Sources; Emission Guideline for Sulfuric Stationary Sources; Emission Guideline for Sulfuric Acid Mist,’’ 42 FR 55796 (Oct. 18, 1977); ‘‘Kraft Acid Mist,’’ 42 FR 55796 (Oct. 18, 1977); ‘‘Kraft 268 The EPA is aware of at least four affected Pulp Mills, Notice of Availability of Final Guideline Pulp Mills, Notice of Availability of Final Guideline sources located in Indian Country: Two on Navajo Document,’’ 44 FR 29828 (May 22, 1979); ‘‘Primary Document,’’ 44 FR 29828 (May 22, 1979); ‘‘Primary lands—the Navajo Generating Station and the Four Aluminum Plants; Availability of Final Guideline Aluminum Plants; Availability of Final Guideline Corners Generating Station; one on Ute lands—the Document,’’ 45 FR 26294 (Apr. 17, 1980); Document,’’ 45 FR 26294 (Apr. 17, 1980); Bonanza Generating Station; and one on Fort ‘‘Standards of Performance for New Stationary ‘‘Standards of Performance for New Stationary Mojave lands, the South Point Energy Center. The Sources and Guidelines for Control of Existing Sources and Guidelines for Control of Existing affected EGUs at the first three plants are coal-fired Sources: Municipal Solid Waste Landfills, Final Sources: Municipal Solid Waste Landfills, Final EGUs. The fourth affected EGU is an NGCC facility. Rule,’’ 61 FR 9905 (Mar. 12, 1996). Rule,’’ 61 FR 9905 (Mar. 12, 1996).

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00043 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64704 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

state with existing fossil fuel-fired including leaders in the utility power The EPA has given stakeholder EGUs, as well as guidelines for plans to sector, labor leaders, non-governmental comments careful consideration and, as achieve those goals. On November 4, organizations, other federal agencies, a result, this final rule includes features 2014, the EPA published a other experts, community groups and that are responsive to many stakeholder supplemental proposal that proposed members of the public. The EPA concerns. emission rate-based goals for CO participated in more than 300 meetings 2 1. Public Hearings emissions for U.S. territories and areas before the rule was proposed and more of Indian country with existing fossil than 300 after the proposal. More than 2,700 people attended the fuel-fired EGUs. In the supplemental Throughout the rulemaking process, public hearings sessions held in Atlanta, proposal, the EPA also solicited the agency has encouraged, organized, Denver, Pittsburgh, and Washington, comment on authorizing jurisdictions and participated in hundreds of DC. More than 1,300 people spoke at the (including any states, territories and meetings about CAA section 111(d) and public hearings. Additionally, about 100 areas of Indian country) without reducing carbon pollution from existing people attended the public hearing held existing fossil fuel-fired EGUs subject to power plants. The agency’s outreach in Phoenix, Arizona, on the November the proposed emission guidelines to prior to proposal, as well as during the 4, 2014 supplemental proposal. partner with jurisdictions (including public comment period, was designed to Speakers at the public hearings any states) that do have existing fossil solicit policy ideas,279 concerns, and included Members of Congress, other fuel-fired EGUs subject to the proposed technical information. The agency public officials, industry emission guidelines in developing received 4.3 million comments about all representatives, faith-based multi-jurisdictional plans. The EPA also aspects of the proposed rule and organizations, unions, environmental solicited comment on the treatment of thousands of people participated in the groups, community groups, students, RE, demand-side EE and other new low- agency’s public hearings, webinars, public health groups, energy groups, or zero-emitting electricity generation listening sessions,280 teleconferences academia and concerned citizens. across international boundaries in a and meetings held all across the Participants shared a range of state plan. country. perspectives. Many were concerned The EPA also issued two documents Our engagement has brought together with the impacts of climate change on after the June 18, 2014 proposal. On a variety of states and stakeholders to their health and on future generations, October 30, 2014, the EPA published a discuss a wide range of issues related to others were worried about the impact of NODA in which the agency provided the utility power sector and the regulations on the economy. Their additional information on several topics development of emission guidelines support for the agency’s efforts varied. raised by stakeholders and solicited under CAA section 111(d). The 2. State Officials comment on the information presented. meetings were attended by the EPA This action covered three topic areas: 1) Regional Administrators, other senior Since fall 2013, the agency has the emission reduction compliance managers and staff who have been provided multiple opportunities for the trajectories created by the interim goal instrumental in the development of the states to inform this rulemaking. for 2020 to 2029, 2) certain aspects of rule and will play key roles in Administrator McCarthy has engaged the building block methodology, and 3) developing and implementing it. with governors from states with a the way state-specific CO2 goals are This outreach process has produced a variety of interests in the rulemaking. calculated. wealth of information which has Other senior agency officials have In a separate action, the EPA informed this rule significantly. The engaged with every branch and major published a document regarding pre-proposal outreach efforts far agency of state government—including potential methods for determining the exceeded what is required of the agency state legislators, attorneys general, state mass that is equivalent to an emission in the normal course of a rulemaking energy, environment, and utility rate-based CO2 goal (79 FR 67406; process, and the EPA expects that the officials, and governors’ staff. November 13, 2014). With the action, dialogue with states and stakeholders On several occasions, state the EPA also made available, in the will continue after the rule is finalized. environmental commissioners met with docket for this rulemaking, a TSD that The EPA recognizes the importance of senior agency officials to provide provided two examples of how a state, working with all stakeholders, and in comments on the Clean Power Plan. The U.S. territory or tribe could translate a particular with the states, to ensure a EPA organized, encouraged and rate-based CO2 goal to total metric tons clear and common understanding of the attended meetings with states to discuss of CO2 (a mass-based equivalent). role the states will play in addressing multi-state planning efforts. States have carbon pollution from power plants. We come together with several collaborative K. Stakeholder Outreach and firmly believe that our outreach has groups to discuss ways to work together Consultations resulted in a more workable rule that to make the Clean Power Plan more Following the direction in the will achieve the statutory goals and has affordable. The EPA has participated in Presidential Memorandum to the enhanced the likelihood of timely and and supported the states in these Administrator (June 25, 2013),278 the successful achievement of the carbon discussions. Because of the EPA engaged in extensive and vigorous reduction goals, given the critical interconnectedness of the power sector, outreach to stakeholders and the general importance and urgency of the concrete and the fact that electricity generated at public at every stage of development of action. power plants crosses state lines; states, this rule. Our outreach has included utilities and ratepayers may benefit from direct engagement with the energy and 279 The EPA received more than 2,000 emails states working together to implement environment officials in states, tribes, offering input into the development of these the requirements of this rulemaking. guidelines through email and a Web-based form. and a full range of stakeholders These emails and other materials provided to the The meetings provided state leaders, EPA are posted on line as part of a non-regulatory including governors, environmental 278 Presidential Memorandum—Power Sector docket, EPA Docket ID No. EPA–HQ–OAR–2014– commissioners, energy officers, public Carbon Pollution Standards, June 25, 2013. http:// 0020, at www.regulations.gov. utility commissioners, and air directors, www.whitehouse.gov/the-press-office/2013/06/25/ 280 Summaries of the 11 public listening sessions presidential-memorandum-power-sector-carbon- in 2013 are available at www.regulations.gov at EPA opportunities to engage with the EPA pollution-standards. Docket ID No. EPA–HQ–OAR–2014–0020. officials. In addition, the states

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00044 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64705

submitted public comments from Association of Regulatory Utility geographically located within New several agencies within each state. The Commissioners (NARUC), and the Mexico; and the Bonanza Power Plant, wealth of comments and input from National Association of Clean Air in Ute Indian country, geographically states was important in developing the Agencies (NACAA) (the ‘‘3N’’ groups). located within Utah. The EPA offered final rulemaking. Meeting participants discussed issues consultation to the leaders of the tribes Agency officials listened to ideas, related to EE and RE. on whose lands these facilities are concerns and details from states, To help state officials prepare for the located as well as all of the federally including from states with a wide range planning process that will take place in recognized tribes to ensure that they had of experience in reducing carbon the states, the EPA presented a webinar the opportunity to have meaningful and pollution from power plants. The EPA on February 24, 2015. This webinar timely input into this rule. Section III reached out to all 50 states to engage provided an update on training plans (‘‘Stakeholder Outreach and with both environmental and energy and further connection with states in Conclusions’’) of the June 18, 2014 departments at all levels of government. the implementation process. Forty-nine proposal documents the EPA’s extensive As an example, a three-part webinar states, the District of Columbia, and 14 outreach efforts to tribal officials prior series in June/July 2014 for the states tribes were represented at this webinar. to that proposal, including an and tribes offered an interactive format The EPA is developing a state plan informational webinar, outreach for technical staff at the EPA and in the electronic collection system to receive, meeting, teleconferences with tribal states/tribes to exchange ideas and ask track, and store state submittals of plans officials and the National Tribal Air clarifying question. The webinars were and reports. The EPA plans to use an Association (NTAA), and letters offering then posted online so other stakeholders integrated project team to solicit consultation. Additional outreach to could view them. A few weeks after the stakeholder input on the system during tribal officials conducted by the EPA postings, the EPA organized follow-up development. The team membership, prior to the November 4, 2014 conference calls with stakeholder including state representatives, will supplemental proposal is discussed in groups. Also, the EPA hosted scores of bring together the business and Section II.D (‘‘Additional Outreach and technical meetings between states and technology skills required to construct a Consultation’’) of the supplemental the EPA in the weeks and months after successful product and promote proposal. The additional outreach for the rule was proposed. transparency in the EPA’s the supplemental proposal included Additionally, the EPA organized implementation of the rule. consultations with all three tribes that ‘‘hub’’ calls; these teleconferences To help identify training needs for the have affected EGUs on their lands, as brought all of the states in a given EPA final Clean Power Plan, the agency well as several other tribes that region together to discuss technical and reached out to a number of state and requested consultation, and also interstate aspects of the proposal. These local organizations such as the Central additional teleconferences with the exchanges helped provide the State Air Resources Agencies and other NTAA. stakeholders with the information they such regional air agencies. The EPA’s After issuing the supplemental needed to comment on the proposal outreach on training has included proposal, the EPA offered an additional effectively. The EPA also held a series sharing the plans with the states and consultation to the leaders of all of webinars with state environmental incorporating changes to the training federally recognized tribes. The EPA associations and their members on a topics based on the states’ needs. The held an informational meeting open to series of technical issues. EPA training plan includes a wide all tribes and also held consultations The agency has collected policy variety of topics such as basic training with the Navajo Nation, Fort McDowell papers and comment letters from states on the electric power sector as well as Yavapai Nation, Fort Mojave Tribe, Ak- with overarching energy goals and specific pollution control strategies to Chin Indian Community, and Hope technical details on the states’ utility reduce carbon emissions from power Tribe on November 18, 2014. The EPA power sector. EPA leadership and staff plants. In particular, the states requested held a consultation with the Ute Tribe also participated in webinars and training on how to use programs such as of the Uintah and Ouray Reservation on meetings with state and tribal officials combined heat and power, EE and RE to December 16, 2014, and a consultation hosted by collaborative groups and trade reduce carbon emissions. The EPA will with the Gila River Indian Community associations. After the comment period continue to work with states to tailor on January 15, 2015. The EPA held a closed, and based on our meetings over training activities to their needs. public hearing on the supplemental the last year, as well as written The agency has engaged, and will proposal on November 19, 2014, in comments on the proposal and NODA, continue to engage with states, Phoenix, Arizona. On April 28, 2015, the EPA analyzed information about territories, Washington, DC, and tribes the EPA held an additional consultation data errors that needed to be addressed after the rulemaking process and with the Navajo Nation. for the final rule. In February and March throughout implementation. Tribes were interested in the impact 2015, we reached out to particular states of this rule on other ongoing regulatory to clarify ambiguous or unclear 3. Tribal Officials actions at the affected EGUs, such as information that was submitted to the The EPA conducted significant permitting or requirements for the best EPA related to NEEDS and eGRID data. outreach to and consultation with tribes. available retrofit technology (BART). The EPA contacted particular states to Tribes are not required to, but may, Tribes also noted that it was important clarify the technical comments or develop or adopt Clean Air Act to allow RE projects on tribal lands to concerns to ensure that any changes we programs. The EPA is aware of four contribute toward meeting state goals. make are accurate and appropriate. facilities with affected EGUs located in Some tribes indicated an interest in To help prepare for implementation of Indian country: the South Point Energy being involved in the development of this rule, the agency initiated several Center, in Fort Mojave Indian country, implementation plans for areas of outreach activities to assist with state geographically located within Arizona; Indian country. Additional detail planning efforts. The agency the Navajo Generating Station, in Navajo regarding the EPA’s outreach to tribes participated in meetings organized by Indian country, geographically located and comments and recommendations the National Association of State Energy within Arizona; the Four Corners Power from tribes can be found in Section X.F Officials (NASEO), the National Plant, in Navajo Indian country, of this preamble.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00045 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64706 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

4. U.S. Territories to discuss the rule and issues related to stakeholders, including environmental The EPA has met with individual U.S. grid operations and reliability. EPA staff justice leaders and other leaders from territories and affected EGUs in U.S. met with the ISO/RTO Council on state and local government and the territories during the rulemaking several occasions to collect their ideas. private sector. Additionally, the agency process. On July 22, 2014, the EPA met The EPA regional offices also met with conducted a community call on with representatives from the Puerto the ISOs and RTOs in their regions. February 26, 2015, and on February 27, Rico Environmental Quality Board, the System operators have offered 2015, the EPA conducted a follow up Puerto Rico Electric Power Authority, suggestions in using regional webinar for participants in an October the Governor’s Office, and the Office of approaches to implement CAA section 30, 2014 training session. The EPA also Energy, Puerto Rico. On September 8, 111(d) while maintaining reliable, held a webinar for communities on the 2014, the EPA held a meeting with affordable electricity. Clean Air Act (CAA) and section 111(d) of the CAA on April 2, 2015. The representatives from the Guam 8. Representatives from Community and agency, in partnership with FERC and Environmental Protection Agency Non-governmental Organizations (GEPA) and the Guam Power Authority DOE, held two additional webinars for Agency officials engaged with and, on February 18, 2015, the EPA met communities on the electricity grid and community groups representing again with representatives from GEPA. on energy markets on June 11, 2015, and vulnerable communities, and faith- July 9, 2015. 5. Industry Representatives based groups, among others, during the During the EPA’s extensive outreach Agency officials have engaged with outreach effort. In response to a request conducted before and after proposal, the industry leaders and representatives from communities, the EPA held a day- EPA has heard a variety of issues raised from trade associations in many one-on- long training on the Clean Power Plan by environmental justice communities. one and national meetings. Many on October 30, 2014, in Washington DC Communities expressed the desire for meetings occurred at the EPA At this meeting, the EPA met with a the agency to conduct an environmental headquarters and in the EPA’s Regional number of environmental groups to justice (EJ) analysis and to require that Offices and some were sponsored by provide information on how the agency states in the development of their state stakeholder groups. Because the focus of plans on reducing carbon pollution from plans conduct one as well. Additionally, the rule is on the utility power sector, existing power plants using CAA they asked that the agency require that many of the meetings with industry section 111(d). states engage with communities in the have been with utilities and industry Many environmental organizations development of their state plans and representatives directly related to the discussed the need for reducing carbon that the agency conduct meaningful utility power sector. The agency has pollution. Meetings were technical, involvement with communities, also met with energy industries such as policy and legal in nature and many throughout the whole rulemaking coal and natural gas interests, as well as groups discussed specific state policies process, including the implementation companies that offer new technology to that are already in place to reduce phase. Furthermore, communities prevent or reduce carbon pollution, carbon pollution in the states. stressed the importance of low-income including companies that have expertise A number of organizations and communities of color receiving the in RE and EE. Other meetings have been representing religious groups have benefits of this rulemaking and being held with representatives of energy reached out to the EPA on several protected from being adversely intensive industries, such as the iron occasions to discuss their concerns and impacted by this rulemaking. and steel and aluminum industries, to ideas regarding this rule. Many The purpose of this rule is to help understand the issues related to members of faith communities attended substantially reduce emissions of CO2, a large industrial users of electricity. the four public hearings. key contributor to climate change, Public health groups discussed the which adversely and disproportionately 6. Electric Utility Representatives need for protection of children’s health affects vulnerable and disadvantaged Agency officials participated in many from harmful air pollution. Doctors and communities in the U.S. and around the meetings with utilities and their health care providers discussed the link world. In addition, the rule will result associations to discuss all aspects of the between reducing carbon pollution and in substantial reductions of proposed guidelines. We have met with air pollution and public health. conventional air pollutants, providing all types of companies that produce Consumer groups representing immediate public health benefits to the electricity, including private utilities or advocates for low income electricity communities where the facilities are investor owned utilities. Public utilities customers discussed the need for located and for many miles around. The and cooperative utilities were also part affordable electricity. They talked about EPA is committed to ensuring that all of in-depth conversations about CAA reducing electricity prices for Americans benefit from the public section 111(d) with EPA officials. consumers through EE and low-cost health and other benefits that this rule The conversations included meetings carbon reductions. will bring. Further discussion of the with the EPA headquarters and regional In winter/spring 2015, EPA continued impacts of this rule on vulnerable offices. State officials were included in to offer webinars and teleconferences for communities and actions that the EPA many of the meetings. Meetings with community groups on the rulemaking. is taking to address concerns cited by utility associations and groups of communities is available in Sections IX 9. Environmental Justice Organizations utilities were held with key EPA and XII.J of this preamble. officials. The meetings covered Agency officials engaged with 10. Labor technical, policy and legal topics of environmental justice groups interest and utilities expressed a wide representing communities of color, low- Senior agency officials met with a variety of support and concerns about income communities and others during number of labor union representatives CAA section 111(d). the outreach effort. Agency officials also about reducing carbon pollution using engaged with the EPA’s National CAA section 111(d). Those unions 7. Electricity Grid Operators Environmental Justice Advisory Council included: The United Mine Workers of The EPA had a number of (NEJAC) members in September 2013. America; the Sheet Metal, Air, Rail and conversations with the ISOs and RTOs The NEJAC is composed of Transportation Union (SMART); the

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00046 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64707

International Brotherhood of met with each of the FERC source category-specific CO2 emission Boilermakers, Iron Ship Builders, Commissioners and EPA staff had performance rates, state-specific goals, Blacksmiths, Forgers and Helpers (IBB); frequent contact with FERC staff requirements for state plan components, United Association of Journeymen and throughout the development the rule. and requirements for the process and Apprentices of the Plumbing and Pipe FERC held four technical conferences to timing for state plan submittal and Fitting Industry of the United States and discuss implications of compliance compliance. Canada; the International Brotherhood approaches to the rule for electric Under CAA section 111(d), the states of Electrical Workers (IBEW); and the reliability. EPA staff attended the four must establish standards of performance Utility Workers Union of America. In conferences and EPA leadership spoke that reflect the degree of emission addition, agency leaders met with the at all of them. The EPA, DOE, and FERC limitation achievable through the Presidents of several unions and the will continue to work together to ensure application of the ‘‘best system of President of the American Federation of electric grid reliability in the emission reduction’’ that, taking into Labor-Congress of Industrial development and implementation of account the cost of achieving such Organizations (AFL–CIO) at the AFL– state plans. reduction and any non-air quality health CIO headquarters. and environmental impact and energy EPA officials attended meetings L. Comments on the Proposal requirements, the Administrator sponsored by labor unions to give The Administrator signed the determines has been adequately presentations and engage in discussions proposed emission guidelines on June 2, demonstrated. about reducing carbon pollution using 2014, and, on the same day, the EPA The EPA has determined that the CAA section 111(d). These included made this version available to the public BSER is the combination of emission meetings sponsored by the IBB and the at http://www.epa.gov/cleanpowerplan/. rate improvements and limitations on IBEW. The 120-day public comment period on overall emissions at affected EGUs that 11. Other Federal Agencies and the proposal began on June 18, 2014, the can be accomplished through the Independent Agencies day of publication of the proposal in the following three sets of measures or Federal Register. On September 18, building blocks: Throughout the development of the 2014, in response to requests from rulemaking, the EPA consulted with 1. Improving heat rate at affected coal-fired stakeholders, the EPA extended the steam EGUs. other federal agencies with relevant comment period by 45 days, to 2. Substituting increased generation from expertise. For example, the EPA met December 1, 2014, giving stakeholders lower-emitting existing natural gas combined with managers from the U.S. over 165 days to review and comment cycle units for generation from higher- Department of Agriculture’s (USDA’s) upon the proposal. Stakeholders also emitting affected steam generating units. Rural Utility Service to discuss the rule had the opportunity to comment on the 3. Substituting increased generation from and potential effects on affected EGUs new zero-emitting RE generating capacity for NODA, as well as the Federal Register generation from affected fossil fuel-fired in rural areas and how USDA programs document and TSD regarding potential could interact with affected EGUs generating units. methods for determining the mass that Consistent with CAA section 111(d) during rule implementation. is equivalent to an emission rate-based The U.S. Department of Energy (DOE) and other rules promulgated under this CO2 goal, through December 1, 2014. section, the EPA is taking a traditional, was a frequent source of expertise on The EPA offered a separate 45-day the proposed and final rule. EPA performance-based approach to comment period for the November 4, establishing emission guidelines for management and staff had numerous 2014 supplemental proposal, and that meetings with management and staff at affected sources and applying the BSER comment period closed on December to two source subcategories of existing DOE on a range of topics, including the 19, 2014. effectiveness and costs of energy fossil fuel-fired EGUs—fossil fuel-fired The EPA received more than 4.2 electric utility steam generating units generation technologies, and EE. million comments on the proposed DOE provided technical assistance and stationary combustion turbines. The carbon pollution emission guidelines relating to RE and demand-side EE, EPA is finalizing source subcategory- from a range of stakeholders that including RE and demand-side EE cost specific emission performance rates that included, including state environmental and performance data and, for RE, reflect the EPA’s application of the and energy officials, local government information on the feasibility of BSER. For fossil fuel-fired steam officials, tribal officials, public utility deploying and reliably integrating generating units, we are finalizing a commissioners, system operators, increased RE generation. Further, EPA performance rate of 1,305 lb CO2/MWh. utilities, public interest advocates, and and DOE staff discussed emission For stationary combustion turbines, we members of the public. The agency measurement and verification (EM&V) are finalizing a performance rate of 771 received comments on many aspects of strategies. lb CO2/MWh. The EPA has also the proposal and many suggestions for The EPA also consulted with DOE on translated the source subcategory- changes that would address issues of electric reliability issues. EPA staff and specific CO emission performance rates concern. 2 managers met and spoke with DOE staff into equivalent statewide rate-based and and managers throughout the III. Rule Requirements and Legal Basis mass-based CO2 goals and is providing development of the proposed and final those as an option for states to use. rules on topic related to electric system A. Summary of Rule Requirements Under CAA section 111(d), each state reliability. The EPA is establishing emission must develop, adopt, and then submit EPA officials worked closely with guidelines for states to use in its plan to the EPA. For its CAA section DOE and Federal Energy Regulatory developing plans to address GHG 111(d) plan, a state will determine Commission (FERC) officials to ensure, emissions from existing fossil fuel-fired whether to apply these emission to the greatest extent possible, that electric generating units. The emission performance rates to each affected EGU, actions taken by states and affected guidelines are based on the EPA’s individually or together, or to take an EGUs to comply with the final rule determination of the ‘‘best system of alternative approach and meet either an mitigate potential electric system emission reduction . . . adequately equivalent statewide rate-based goal or reliability issues. Senior EPA officials demonstrated’’ (BSER) and include an equivalent statewide mass-based

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00047 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64708 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

goal, as provided by the EPA in this 2018, which is 3 years from the • Demonstration that the plan submittal is rulemaking. signature date of the rule. In order to projected to achieve the state’s CO2 emission goal 282 States with one or more affected EGUs receive an extension, states, in the • will be required to develop and State recordkeeping and reporting initial submittal, must address three requirements implement plans that set emission required components sufficiently to • Certification of hearing on state plan standards for affected EGUs. The CAA demonstrate that a state is able to • Supporting documentation section 111(d) emission guidelines that undertake steps and processes necessary Also, in all state plans, as part of the the EPA is promulgating in this action to timely submit a final plan by the supporting documentation, a state must apply to only the 48 contiguous states extended date of September 6, 2018. include a description of how they and any Indian tribe that has been The first required component is considered reliability in developing its approved by the EPA pursuant to 40 identification of final plan approach or state plan. CFR 49.9 as eligible to develop and approaches under consideration, State plan submittals using the implement a CAA section 111(d) including a description of progress emission standards approach must also plan.281 Because Vermont and the made to date. The second required include: District of Columbia do not have • affected EGUs, they will not be required component is an appropriate Identification of each affected EGU; identification of federally enforceable to submit a state plan. Because the EPA explanation for why the state requires additional time to submit a final plan emission standards for the affected EGUs; does not possess all of the information and monitoring, recordkeeping and reporting or analytical tools needed to quantify beyond September 6, 2016. The third requirements. the BSER for the two non-contiguous required component for states to address • Demonstrations that each emission states with otherwise affected EGUs in the initial submittal is a standard will result in reductions that are (Alaska and Hawaii) and the two U.S. demonstration of how they have been quantifiable, non-duplicative, permanent, territories with otherwise affected EGUs engaging with the public, including verifiable, and enforceable. (Guam and Puerto Rico), these emission vulnerable communities, and a State plan submittals using the state guidelines do not apply to those areas, description of how they intend to measures approach must also include: and those areas will not be required to meaningfully engage with community • Identification of each affected EGU; submit state plans on the schedule stakeholders during the additional time identification of federally enforceable required by this final action. (if an extension is granted) for emission standards for affected EGUs (if In developing its CAA section 111(d) development of the final plan. applicable); identification of backstop of plan, a state will have the option of federally enforceable emission standards; and Affected EGUs must achieve the final monitoring, recordkeeping and reporting choosing from two different approaches: emission performance rates or requirements. (1) An ‘‘emission standards’’ approach, equivalent state goals by 2030 and • Identification of each state measure and or (2) a ‘‘state measures’’ approach. With maintain that level thereafter. The EPA demonstration that each state measure will an emission standards approach, a state result in reductions that are quantifiable, will apply all requirements for is establishing an 8-year interim period non-duplicative, permanent, verifiable, and over which states must achieve the full achieving the subcategory-specific CO2 enforceable. emission performance rates or the state- required reductions to meet the CO2 In addition to these requirements, performance rates, and this begins in specific CO2 emission goal to affected each state plan must follow the EPA EGUs in the form of federally 2022. This 8-year interim period from implementing regulations at 40 CFR enforceable emission standards. With a 2022 through 2029, is separated into 60.23. state measures approach, a state plan three steps, 2022–2024, 2025–2027, and If a state with affected EGUs does not would be comprised, at least in part, of 2028–2029, each associated with its submit a plan or if the EPA does not measures implemented by the state that own interim CO2 emission performance approve a state’s plan, then under CAA are not included as federally enforceable rates that states must meet, as explained section 111(d)(2)(A), the EPA must components of the plan, along with a in Section VI of this preamble. establish a plan for that state. A state backstop of federally enforceable For the final emission guidelines, the that has no affected EGUs must emission standards for affected EGUs EPA is revising the list of components document this in a formal negative that would apply in the event the plan required in a final state plan submittal declaration submitted to the EPA by does not achieve its anticipated level of to reflect: (1) Components required for September 6, 2016. In the case of a tribe that has one or more affected EGUs in CO2 emission performance. all state plan submittals; (2) components its area of Indian country,283 the tribe The EPA is requiring states to make required for the emission standards has the opportunity, but not the their final plan submittals by September approach; and (3) components required obligation, to establish a CAA section 6, 2016, or to make an initial submittal for the state measures approach. The by this date in order to obtain an 111(d) plan for its area of Indian revised list of components also reflects extension for making their final plan country. If a tribe with one or more the approvability criteria, which are no submittals no later than September 6, affected EGUs located in its area of longer separate from the state plan 281 In the case of a tribe that has one or more submittal components. 282 A state that chooses to set emission standards affected EGUs in its area of Indian country, the tribe All state plans must include the that are identical to the emission performance rates has the opportunity, but not the obligation, to following components: for both the interim period and in 2030 and beyond establish a CO2 emission standard for each affected need not identify interim state goals nor include a EGU located in its area of Indian country and a • Description of the plan approach and separate demonstration that its plan will achieve CAA section 111(d) plan for its area of Indian the state goals. geographic scope 283 country. If the tribe chooses to establish its own • The EPA is aware of at least four affected plan, it must seek and obtain authority from the Identification of the state’s CO2 interim EGUs located in Indian country: Two on Navajo EPA to do so pursuant to 40 CFR 49.9. If it chooses period goal (for 2022–2029), interim steps lands, the Navajo Generating Station and the Four not to seek this authority, the EPA has the (interim step goal 1 for 2022–2024; interim Corners Power Plant; one on Ute lands, the Bonanza responsibility to determine whether it is necessary step goal 2 for 2025–2027; interim step goal Power Plant; and one on Fort Mojave lands, the or appropriate, in order to protect air quality, to South Point Energy Center. The affected EGUs at establish a CAA section 111(d) plan for an area of 3 for 2028–2029) and final CO2 emission the first three plants are coal-fired EGUs. The fourth Indian country where affected EGUs are located. goal of 2030 and beyond affected EGU is an NGCC facility.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00048 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64709

Indian country does not submit a plan implementing regulations for section standards. For example, an affected or does not receive EPA approval of a 111(d) that the EPA is authorized to coal-fired steam generating unit can submitted plan, the EPA has the determine the BSER; 285 accordingly, in achieve a rate-based standard through a responsibility to establish a CAA section this rulemaking, the EPA is determining set of actions that implement the 111(d) plan for that area if it determines the BSER. building block 1 measures and that that such a plan is necessary or The EPA is finalizing the BSER for implement the building block 2 and 3 appropriate. fossil fuel-fired EGUs based on building measures through a set of actions that During implementation of its blocks 1, 2, and 3. Building block 1 range from purchasing full or partial approved state plan, each state must includes operational improvements and interest in existing NGCC or new RE demonstrate to the EPA that its affected equipment upgrades that the coal-fired assets to purchasing ERCs that represent EGUs are meeting the interim and final steam-generating EGUs in the state may the environmental attributes of performance requirements included in undertake to improve their heat rate. It increased NGCC generation or new this final rule through monitoring and qualifies as part of the BSER because it renewable generation. In addition, the reporting requirements. State plan improves the carbon intensity of the affected EGU may reduce its generation requirements and flexibilities are affected EGUs in generating electricity and thereby reduce the extent that it described more fully in Section VIII of through actions the affected sources needs to implement the building blocks. this preamble. may undertake that are adequately The affected EGU may also purchase demonstrated and whose cost is B. Brief Summary of Legal Basis rate-based emission credits from other ‘‘reasonable.’’ Building blocks 2 and 3 affected EGUs. If the state chooses to This rule is consistent with the include increases in low- or zero- impose a mass-based emission standard, requirements of CAA section 111(d) and emitting generation which substitute for 284 the coal-fired steam generating unit may the implementing regulations. As an generation from the affected EGUs and implement building block 1 measures, initial matter, the EPA reasonably thereby reduce CO2 emissions from purchase mass-based emission interprets the provisions identifying those sources. All of these measures are allowances from other affected EGUs, or which air pollutants are covered under components of a ‘‘system of emission reduce its generation. In light of the CAA section 111(d) to authorize the reduction’’ for the affected EGUs available sources of lower- and zero- EPA to regulate CO from fossil fuel- 2 because they entail actions that the emitting replacement generation, this fired EGUs. In addition, the EPA affected EGUs may themselves approach would achieve an appropriate recognizes that CAA section 111(d) undertake that have the effect of level of emission reductions and applies to sources that, if they were new reducing their emissions. Further, these maintain the reliability of the electricity sources, would be covered under a CAA measures meet the criteria in CAA system. section 111(b) rule. Concurrently with section 111(a)(1) and the case law for this rule, the EPA is finalizing a CAA the ‘‘best’’ system of emission reduction With the promulgation of the section 111(b) rulemaking establishing that is ‘‘adequately demonstrated’’ emission guidelines, each state must develop and submit a plan to achieve standards of performance for CO2 because they achieve the appropriate emissions from new fossil fuel-fired level of reductions, their cost is the CO2 emission performance rates EGUs, from modified fossil fuel-fired ‘‘reasonable,’’ they do not have adverse established by the EPA or the equivalent EGUs, and from reconstructed fossil non-air quality health and statewide rate-based or mass-based goal fuel-fired EGUs, and any of those sets of environmental impacts or impose provided by the EPA in this rule. The section 111(b) standards of performance adverse energy requirements, and they EPA interprets CAA section 111(d) to provides the requisite predicate for this are each well-established among allow states to establish standards of rulemaking. affected EGUs. It should be emphasized performance and provide for their A key step in promulgating that these measures are consistent with implementation and enforcement requirements under CAA section current trends in the electricity sector. through either the ‘‘emission standards’’ 111(d)(1) is determining the ‘‘best Building blocks 2 and 3 may be or the ‘‘state measures’’ plan type. In the system of emission reduction which implemented through a set of measures, case of the ‘‘emission standards’’ plan . . . the Administrator determines has including reduced generation from the type, the emission standards establish been adequately demonstrated’’ (BSER) fossil fuel-fired EGUs. These measures standards of performance, and the other under CAA section 111(a)(1). It is clear do not, however, reduce the amount of components of the plan provide for their by the terms of section 111(a)(1) and the electricity that can be sold or that is implementation and enforcement. In the available to end users. In addition, case of the ‘‘state measures’’ plan type, 284 Under CAA section 111(d), there is no states should be expected to allow their –the state submits a plan that relies requirement that the EPA make a finding that the affected EGUs to trade rate-based upon measures that are only enforceable emissions from existing sources that are the subject as a matter of state law that will, in of regulation cause or contribute significantly to air emission credits or mass-based emission pollution which may reasonably be anticipated to allowances (trading) because trading is conjunction with any emission endanger public health or welfare. As predicates to well-established for this industry and standards on affected EGUs, result in promulgating regulations under CAA section 111(d) has the effect of focusing costs on the the achievement of the applicable for existing sources, the EPA must make performance rates or state goals by the endangerment and cause-or-contribute-significantly affected EGUs for which reducing findings for emissions from the source category, and emissions is most cost-effective. affected EGUs. Under the state measures the EPA must promulgate regulations for new Because trading facilitates plan type, states must also submit a sources in the source category. In the CAA section implementation of the building blocks federally enforceable backstop and a 111(b) rule for CO2 emissions for new affected EGUs mechanism that would trigger that the EPA is promulgating concurrently with this and may help to optimize cost- rule, the EPA discusses the endangerment and effectiveness, trading is a method of implementation of the backstop; cause-or-contribute-significantly findings and implementing the BSER as well. therefore, in a state measures plan, the explains why the EPA has already made them for As a result, an affected EGU has a set standards of performance take the form the affected EGU source categories so that the EPA of choices for achieving its emission of the backstop, the trigger mechanism is not required to make them for CO2 emissions from affected EGUs, and, in the alternative, why, if provides for the implementation of such the EPA were required to make those findings, it 285 The EPA is not re-opening that interpretation backstop, and the other required was making them in that rulemaking. in this rulemaking. components of the plan provide for

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00049 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64710 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

implementation and enforcement of the IV. Authority for This Rulemaking, performance cannot be established to standards of performance. Definition of Affected Sources, and address any HAP listed under CAA These two types of state plans and Treatment of Source Categories section 112(b) that may be emitted from that particular source category. See 70 their respective approaches, which A. EPA’s Authority Under CAA Section FR 15994, 16029–32 (March 29, 2005). could be implemented on a single-state 111(d) or multi-state basis, allow states to meet In June 2014, the EPA presented this the statutory requirements of section EPA’s authority for this rule is CAA previous interpretation as part of the 111(d) while accommodating the wide section 111(d). CAA section 111(d) proposal and requested comment on it. range of regulatory requirements and provides that the EPA will promulgate The EPA received numerous comments other programs that states have regulations under which each state will on its previous interpretation, including deployed or will deploy in the establish standards of performance for comments on the proper interpretation electricity sector that reduce CO2 existing sources for any air pollutant and effect of each of the two differing emissions from affected EGUs. It should that meets two criteria. First, CAA amendments, and whether the Section be noted that both state plan types allow section 111(d) applies to air pollutants 112 Exclusion should be read to mean the state flexibility in assigning the that are not regulated as a criteria that the EPA’s regulation of HAP from emission performance obligations to its pollutant under section 108 or as a power plants under CAA section 112 affected EGUs in the form of standards hazardous air pollutant (HAP) under bars the EPA from establishing CAA of performance as long as the required CAA section 112. 42 U.S.C. section 111(d) regulations covering CO2 emission performance level is met. Both 7411(d)(1)(A)(i).286 Second, section emissions from power plants. In plan types harness the efficiencies of 111(d) applies only to air pollutants for particular, many comments focused on emission reduction opportunities in the which the existing source would be two specific issues. First, some interconnected electricity system and regulated under section 111 if it were a commenters—including some industry are fully consistent with the principles new source. 42 U.S.C. 7411(d)(1)(A)(ii). and state commenters that had of cooperative federalism that underlie Here, carbon dioxide (CO2) meets both previously endorsed the EPA’s the Clean Air Act generally and CAA criteria: (1) It is not a criteria pollutant interpretation of the Section 112 287 section 111(d) particularly. That is, both regulated under section 108 nor a HAP Exclusion in other contexts —argued plan types achieve the emission regulated under CAA section 112, and that the EPA’s 2005 interpretation was in error because it allowed the performance requirements through the (2) CO2 emissions from new power vehicle of a state plan, and provide each plants (including newly constructed, regulation of certain pollutants from state significant flexibility to take local modified and reconstructed power source categories under CAA section circumstances and state policy goals plants) are regulated under the CAA 111(d) when those source categories into account in determining how to section 111(b) rule that is being were also regulated for different reduce emissions from its affected finalized along with this rule. pollutants under CAA section 112. sources, as long as the plan meets Second, some commenters argued that B. CAA Section 112 Exclusion to CAA the EPA’s previous interpretation of the minimum federal requirements. Section 111(d) Authority House amendment (as originally Both state plan types, and the represented in 2005 at 70 FR at 16029– standards of performance for the CAA section 111(d) contains an 30) was in error because it improperly affected EGUs that the states will exclusion that limits the regulation read that amendment as focusing on establish through the state plan process, under CAA section 111(d) of air pollutants that are regulated under CAA whether a source category was regulated are consistent with the applicable CAA under CAA section 112 rather than on section 111 provisions. A state has section 112. 42 U.S.C. 7411(d)(1)(A)(i). This ‘‘Section 112 Exclusion’’ in CAA whether the air pollutant was regulated discretion in determining the under CAA section 112, and that appropriate measures to rely upon for section 111(d) was the subject of a significant number of comments based improper reading lead to an its plan. The state may adopt measures interpretation that was inconsistent that assure the achievement of the on two differing amendments to this exclusion enacted in the 1990 CAA with the structure and purpose of the requisite CO2 emission performance rate CAA. or state goal by the affected EGUs, and Amendments. As discussed in more detail below, the House and the Senate In light of the comments, the EPA has is not limited to the measures that the reconsidered its previous interpretation EPA identifies as part of the BSER. each initially passed different amendments to the Section 112 of the Section 112 Exclusion and, in In this rulemaking, the EPA particular, considered whether the establishes reasonable deadlines for Exclusion and both amendments were ultimately passed by both houses and exclusion precludes the regulation state plan submission. Under CAA under CAA section 111(d) of CO from signed into law. In 2005, in connection 2 section 111(d)(1), state plans must power plants given that power plants with the Clean Air Mercury Rule ‘‘provide for implementation and are regulated for certain HAP under (CAMR), the EPA discussed the agency’s enforcement’’ of the standards of CAA section 112. On this issue, the EPA performance, and under CAA section interpretation of the Section 112 Exclusion in light of these two differing 111(d)(2), the state plans must be 287 For example, in the CAMR litigation (State of ‘‘satisfactory’’ for the EPA to approve amendments and concluded that the New Jersey v. EPA, No. 05–1097 (D.C. Cir.), the joint them. In this rulemaking, the EPA is two amendments were in conflict and brief filed by a group of intervenors and an amicus that the provision should be read as (including six states and the West Virginia finalizing the criteria that the state plans Department of Environmental Protection, and must meet under these requirements. follows to give both amendments Utility Air Regulatory Group and nine other The EPA discusses its legal meaning: where a source category has industry entities) stated that the EPA had interpretation in more detail in other been regulated under CAA section 112, interpreted section 111(d) in light of the two a CAA section 111(d) standard of different amendments and that the EPA’s parts of this preamble and provides interpretation was ‘‘a reasoned way to reconcile the additional information about certain conflicting language and the Court should defer to 286 issues in the Legal Memorandum Section 111(d) might be read to apply to HAP the EPA’s interpretation.’’ Joint Brief of State under certain circumstances. However, because Respondent-Intervenors, Industry Respondent- included in the docket for this carbon dioxide is not a HAP, this issue does not Intervernors, and State Amicus, filed May 18, 2007, rulemaking. need to be resolved in the context of this rule. at 25.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00050 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64711

has concluded that the two differing promulgate federal ‘‘standards of established under section 114 [later, amendments are not properly read as performance’’ addressing new stationary section 111]. Thus, there should be no conflicting. Instead, the House sources that cause or contribute gaps in control activities pertaining to amendment and the Senate Amendment significantly to ‘‘air pollution which stationary source emissions that pose should each be read to mean the same may reasonably be anticipated to any significant danger to public health in the context presented by this rule: endanger public health or welfare.’’ 42 or welfare.’’); Statement by S. Muskie, S. that the Section 112 Exclusion does not U.S.C. 7411(b)(1)(A). Once the EPA has Debate on S. 4358 (Sept. 21, 1970), 1970 bar the regulation under CAA section set new source standards addressing CAA Legis. Hist. at 227 (‘‘[T]he bill [in 111(d) of non-HAP from a source emissions of a particular pollutant section 114] provides the Secretary with category, regardless of whether that under CAA section 111(b), CAA section the authority to set emission standards source category is subject to standards 111(d) provides that the EPA will for selected pollutants which cannot be for HAP under CAA section 112. In promulgate regulations requiring states controlled through the ambient air reaching this conclusion, the EPA has to establish standards of performance quality standards and which are not revised its previous interpretation of the for existing stationary sources of the hazardous substances.’’). House amendment, as discussed below. same pollutant. 42 U.S.C. 7411(d)(1). Together, the criteria pollutant/ 2. The 1990 Amendments to the Section 1. Structure of the CAA and Pre-1990 NAAQS provisions in sections 108–110, 112 Exclusion Section 112 Exclusion the hazardous air pollutant provisions The Act was amended extensively in The Clean Air Act sets out a in section 112, and performance 1990. Among other things, Congress comprehensive scheme for air pollution standard provisions in section 111 sought to accelerate the EPA’s control, addressing three general constitute a comprehensive scheme to regulation of hazardous pollutants categories of pollutants emitted from regulate air pollutants with ‘‘no gaps in under section 112. To that end, stationary sources: (1) Criteria control activities pertaining to Congress established a lengthy list of pollutants (which are addressed in stationary source emissions that pose HAP; set criteria for listing ‘‘source sections 108–110); (2) hazardous any significant danger to public health categories’’ of such pollutants; and pollutants (which are addressed under or welfare.’’ S. Rep. No. 91–1196, at 20 required the EPA to establish standards section 112); and (3) ‘‘pollutants that are (1970).288 for each listed source category’s (or may be) harmful to public health or The specific role of CAA section hazardous pollutant emissions. 42 welfare but are not or cannot be 111(d) in this structure can be seen in U.S.C. 7412(b), (c) and (d). In the course controlled under sections 108–110 or CAA subsection 111(d)(1)(A)(i), which of overhauling the regulation of HAP 112.’’ 40 FR 53340 (Nov. 17, 1975). provides that regulation under CAA under section 112, Congress needed to Six ‘‘criteria’’ pollutants are regulated section 111(d) is intended to cover edit section 111(d)’s reference to section under sections 108–110. These are pollutants that are not regulated under 112(b)(1)(A), which was to be pollutants that the Administrator has either the criteria pollutant/NAAQS eliminated as part of the revisions to concluded ‘‘cause or contribute to air provisions or section 112. Prior to 1990, section 112. pollution which may reasonably be this limitation was laid out in plain To address the obsolete cross- anticipated to endanger public health or language, which stated that CAA section reference to section 7412(b)(1)(A), welfare;’’ ‘‘the presence of which in the 111(d) regulation applied to ‘‘any air Congress passed two differing ambient air results from numerous and pollutant . . . for which air quality amendments—one from the Senate and diverse mobile or stationary sources;’’ criteria have not been issued or which one from the House—that were never and for which the Administrator has is not included on a list published reconciled in conference. The Senate issued, or plans to issue, ‘‘air quality under section [108(a)] or [112(b)(1)(A)].’’ amendment replaced the cross reference criteria. 42 U.S.C. 7408(a)(1). Once the This plain language demonstrated that to old section 112(b)(1)(A) with a cross- EPA issues air quality criteria for such section 111(d) is designed to regulate reference to new section 112. Pub. L. pollutants, the Administrator must pollutants from existing sources that fall 101–549, § 302(a), 104 Stat. 2399, 2574 propose primary National Ambient Air in the gap not covered by the criteria (1990). The House amendment replaced Quality Standards (NAAQS) for them, pollutant provisions or the hazardous the cross-reference with the phrase set at levels ‘‘requisite to protect the air pollutant provisions. ‘‘emitted from a source category which public health’’ with an ‘‘adequate This gap-filling purpose can be seen is regulated under section [112].’’ Pub. margin of safety.’’ 42 U.S.C. 7409(a)-(b). in the early legislative history of the L. 101–549, § 108(g), 104 Stat. 2399, States must then adopt plans for CAA. As originally enacted in the 1970 2467 (1990).289 Both amendments were implementing NAAQS. 42 U.S.C. 7410. CAA, the precursor to CAA section 111 HAP are regulated under CAA section (which was originally section 114) was 289 Originally, when the House bill to amend the 112 and include the pollutants listed by described as covering pollutants that CAA was introduced in January 1989, it focused on amendments to control HAP. Of particular note, the Congress in section 112(b)(1) and other would not be controlled by the criteria amendments to section 112 included a provision pollutants that the EPA lists under pollutant provisions or the hazardous that excluded regulation under section 112 of sections 112(b)(2) and (b)(3). CAA air pollutant provisions. See S. ‘‘[a]ny air pollutant which is included on the list section 112 further provides that the Committee Rep. to accompany S. 4358 under section 108(a), or which is regulated for a source category under section 111(d).’’ H.R. 4, § 2 EPA will publish and revise a list of (Sept. 17, 1970), 1970 CAA Legis. Hist. (Jan. 3, 1989), 1990 CAA Legist. Hist. at 4046. In ‘‘major’’ and ‘‘area’’ source categories of at 420 (‘‘It should be noted that the other words, the Section 112 Exclusion in section HAP, and then establish emissions emission standards for pollutants which 111(d) that was ultimately contained in the House standards for HAP emitted by sources cannot be considered hazardous (as amendment was originally crafted as what might be defined in section 115 [which later called a ‘‘Section 111(d) Exclusion’’ in section 112. within each listed category. 42 U.S.C. This is significant because the ‘‘source category’’ 7412(c)(1) & (2). became section 112]) could be phrasing in the original January 1989 text with CAA section 111, 42 U.S.C. 7411, is respect to section 111(d) makes sense, whereas the the third part of the CAA’s structure for 288 In subsequent CAA amendments, Congress has ‘‘source category’’ phrasing in the 1990 House regulating stationary sources. Section maintained this three-part scheme, but amendment does not. When referring to the scope supplemented it with the Preservation of of what is regulated under section 111(d), it makes 111 has two main components. First, Significant Deterioration (PSD) program, the Acid sense to frame that scope with respect to source section 111(b) requires the EPA to Rain Program and the Regional Haze program. Continued

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00051 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64712 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

enacted into law, and thus both are part Amendments, as shown in the Statutes (Aug. 3, 1989). See 1990 CAA Legis. of the current CAA. To determine how at Large. Pub. L. 101–549, §§ 108(g) and Hist. at 3857 (noting that H.R. 3030 and this provision is properly applied in 302(a), 104 Stat. 2399, 2467, 2574 S.1490, as introduced, were the same). light of the two differing amendments, (1990). Where there is a conflict Although S. 1490 was identical to H.R. we first look at the Senate amendment, between the U.S. Code and the Statutes 3030 when they were introduced, the then at the House amendment, then at Large, the latter controls. See 1 U.S.C. Senate reported a vastly different bill discuss how the two amendments are 112 & 204(a); Stephan v. United States, (S.1630) at the end of 1989. See S. 1630, properly read together. 319 U.S. 423, 426 (1943) (‘‘the Code as reported (Dec. 20, 1989), 1990 CAA cannot prevail over the Statutes at Large Legis. Hist. at 7906. As reported and when the two are inconsistent’’); Five eventually passed, S. 1630 did not 3. The Senate Amendment is Clear and Flags Pipe Line Co. v. Dep’t of Transp., contain the text in the House Unambiguous 854 F.2d 1438, 1440 (D.C. Cir. 1988) amendment (‘‘or emitted from a source Unlike the ambiguous amendment to (‘‘[W]here the language of the Statutes at category which is regulated under CAA section 111(d) in the House Large conflicts with the language in the section 112’’) and instead contained the amendment (discussed below), the United States Code that has not been substitution of cross references Senate amendment is straightforward enacted into positive law, the language (changing ‘‘section 112(b)(1)(A)’’ to and unambiguous. It maintained the of the Statutes at Large controls.’’). ‘‘section 112(b)’’). See S. 1630, as pre-1990 meaning of the Section 112 Second, the ‘‘conforming’’ label is reported, 101st Cong. § 305, 1990 CAA Exclusion by simply substituting irrelevant. A ‘‘conforming’’ amendment Legis. Hist. at 8153; S. 1630, as passed, ‘‘section 112(b)’’ for the prior cross- may be either substantive or non- § 305 (Apr. 3, 1990), 1990 CAA Legis. reference to ‘‘section 112(b)(1)(A).’’ Pub. substantive. Burgess v. United States, Hist. at 4534. Though the EPA is not L. 101–549, § 302(a), 104 Stat. 2399, 553 U.S. 124, 135 (2008). And while the aware of any statements in the 2574 (1990). So amended, CAA section House Amendment contains more legislative history that expressly explain 111(d) mandates that the EPA require words, it also qualifies as a ‘‘conforming the Senate’s intent in making these states to submit plans establishing amendment’’ under the definition in the changes to the Senate bill, the sequence standards for ‘‘any air pollutant . . . Senate Legislative Drafting Manual, itself supports the conclusion that the which is not included on a list Section 126(b)(2) (defining ‘‘conforming Senate’s substitution reflects a decision published under section [108(a)] or amendments’’ as those ‘‘necessitated by to retain the pre-1990 approach of using section [112(b)].’’ Thus, the Section 112 the substantive amendments of a cross-reference to 112(b) to define the Exclusion resulting from the Senate provisions of the bill’’). Here, both the scope of the Section 112 Exclusion. amendment would preclude CAA House and Senate amendments were Whether the difference in approach section 111(d) regulation of HAP ‘‘necessitated by’’ Congress’ revisions to between the final Senate amendment in emission but would not preclude CAA section 112 in the 1990 CAA S.1630 and the House amendment in Amendment, which included the section 111(d) regulation of CO2 H.R. 3030 creates a substantive emissions from power plants deletion of old section 112(b)(1)(A). difference or are simply two different notwithstanding that power plants are Thus, the House’s amendment is no less means of achieving the same end also regulated for HAP under CAA ‘‘conforming’’ than the Senate’s, and the depends on what interpretation one section 112. heading under which it was enacted gives to the text in the House Some commenters have argued that (‘‘Miscellaneous Guidance’’) does not amendment, which we turn to next. suggest any more importance than the Senate amendment should be given 4. The House Amendment no effect, because only the House ‘‘Conforming Amendments.’’ In any amendment is shown in the U.S. Code, event, courts gives full effect to a. The House amendment is and because the Senate amendment conforming amendments, see ambiguous. Before looking at the appeared under the heading Washington Hosp. Ctr. v. Bowen, 795 specific text of the House amendment, ‘‘conforming amendments,’’ and for F.2d 139, 149 (D.C. Cir. 1986), and so it is helpful to review some principles various other reasons. The EPA neither the Senate Amendment nor the of statutory interpretation. First, disagrees. The Senate amendment, like House amendment can be ignored. statutory interpretation begins with the the House amendment, was enacted into Third, the legislative history of the text, but does not end there. As the D.C. law as part of the 1990 CAA Senate amendment supports the Circuit Court has explained, ‘‘[t]he amendments, and must be given effect. conclusion that the substitution of the literal language of a provision taken out First, that the U.S. Code only reflects updated cross-reference was not a of context cannot provide conclusive the House amendment does not change mindless, ministerial decision, but proof of congressional intent.’’ Bell the fact that both amendments were reflected a decision to choose an update Atlantic Telephone Cos. v. F.C.C., 131 signed into law as part of the 1990 of the cross reference instead of the text F.3d 1044, 1047 (D.C. Cir. 1977). See that was inserted into the Section 112 King v. Burwell, 2015 U.S. LEXIS 4248, categories, because section 111 regulation begins Exclusion by the House amendment. In *19(‘‘[O]ftentimes the ‘meaning—or with the identification of source categories under mid-1989, the House and Senate ambiguity—of certain words or phrases section 111(b)(1)(A). By contrast, regulation under introduced identical bills (H.R. 3030 may only become evident when placed section 112 begins with the identification of HAP in context.’ Brown & Williamson, 529 U. under section 112(b); the listing of source categories and S. 1490, respectively) to provide for under section 112(c) is secondary to the listing of ‘‘miscellaneous’’ changes to the CAA. In S., at 132, 120 S. Ct. 1291, 146 L. Ed. HAP. From this history, and in light of this both the Senate and House bills as they 2d 121. So when deciding whether the difference between the scope of what is regulated were introduced in mid-1989, the language is plain, we must read the in sections 111 and 112, it is reasonable to conclude that the ‘‘source category’’ phrasing is a legacy from Section 112 Exclusion was to be words ‘in their context and with a view the original 1989 bill—that is, when converting the amended by taking out ‘‘or 112(b)(1)(A)’’ to their place in the overall statutory 1989 text into the Section 112 Exclusion that we see and inserting ‘‘or emitted from a source scheme.’ Id., at 133, 120 S. Ct. 1291, 146 in the 1990 House amendment, the legislative category which is regulated under L. Ed. 2d 121 (internal quotation marks drafters continued to use phrasing based on ‘‘source category’’ notwithstanding that this phrasing section 112.’’ H.R. 3030, as introduced, omitted). Our duty, after all, is ‘to created a mismatch with the way that the scope of 101st Cong. § 108 (Jul. 27, 1989); S. construe statutes, not isolated section 112 regulation is determined. 1490, as introduced, 101st Cong. § 108 provisions.’ Graham County Soil and

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00052 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64713

Water Conservation Dist. v. United of this title . . .’’ This statutory text is One could presume that the negative States ex rel. Wilson, 559 U. S. 280, 290, ambiguous and subject to numerous from the second clause was intended to 130 S. Ct. 1396, 176 L. Ed. 2d 225 (2010) possible readings. carry over, implicitly inserting another (internal quotation marks omitted).’’). In First, the text of the House-amended ‘‘which is not’’ before ‘‘emitted from a addition, statutes should not be given a version of CAA section 111(d) could be source category which is regulated ‘‘hyperliteral’’ reading that is contrary to read literally as authorizing the under section [112].’’ But that is a established canons of statutory regulation of any pollutant that is not a presumption, and not the plain language construction and common sense. See criteria pollutant. This reading arises if of the statute. The text as amended by RadLAX Gateway Hotel v. one focuses on the use of ‘‘or’’ to join the House says that the EPA ‘‘shall’’ Amalgamated Bank, 132 S.Ct. 2065, the three clauses: prescribe regulations for ‘‘any air 2070–71 (2012). The Administrator shall prescribe pollutant . . . emitted from a source Further, a proper reading of statutory regulations . . . under which each State shall category which is regulated under text ‘‘must employ all the tools of submit to the Administrator a plan which section [112].’’ 42 U.S.C. 7411(d)(1). statutory interpretation, including text, establishes standards of performance for any Thus, CAA section 111(d)(1)(A)(i) could structure, purpose, and legislative existing source for any air pollutant [1] for be read as providing for the regulation history.’’ Loving v. I.R.S., 742 F.3d 1013, which air quality criteria have not been of emissions of pollutants if they are 1016 (D.C. Cir. 2014) (internal quotation issued or [2] which is not included on a list emitted from a source category that is omitted). See, also, Robinson v. Shell published under section 7408(a) of this title regulated under CAA section 112. Like or [3] emitted from a source category which the first reading discussed above, this Oil Co., 519 U.S. 337, 341 (1997) is regulated under section 7412 of this (statutory interpretation involves title.... reading would authorize the regulation of CO emissions from existing power consideration of ‘‘the language itself, the 42 U.S.C. 7411(d)(1) (emphasis and 2 plants under CAA section 111(d). But, specific context in which that language internal numbering added). Because the this second reading is not reasonable is used, and the broader context of the text contains the conjunction ‘‘or’’ because it would provide for the statute as a whole.’’). Moreover, one rather than ‘‘and’’ between the three regulation of a source’s HAP emissions principle of statutory construction that clauses, a literal reading could read the under CAA section 111(d) when those has particular application here is that three clauses as alternatives, rather than same emissions were also subject to provisions in a statute should be read to requirements to be imposed be consistent, rather than conflicting, if standards under CAA section 112. Thus, simultaneously. In other words, a literal this reading would be contrary to possible. This principle was discussed reading of the language of section 111(d) in the recent case of Scialabba v. Cuellar Congress’s intent that CAA section provides that the Administrator may 111(d) regulation fill the gap between De Osorio, 134 S. Ct. 2191, 2214 require states to establish standards for (concurring opinion by Chief Justice the other programs by covering an air pollutant so long as either air pollutants that the other programs do Roberts and Justice Scalia), 2219–2220 quality criteria have not been (dissent by Justices Sotomayor, Breyer not, but not duplicate the regulation of established for that pollutant, or one of pollutants that the other programs and Thomas)(2014). As Justice the remaining criteria is met. If this Sotomayor wrote (at 134 S. Ct. at 2220): cover. reading were applied to determine If one does presume that the ‘‘which ‘‘We do not lightly presume that Congress whether the EPA may promulgate CAA is not’’ phrase is intended to carry over has legislated in self-contradicting terms. See section 111(d) regulations for CO2 from A. Scalia & B. Garner, Reading Law: The to the third clause, then CAA section power plants, the result would be that 111(d) regulation under the House Interpretation of Legal Texts 180 (2012) CO from power plants could be (‘‘The provisions of a text should be 2 amendment would be limited to ‘‘any interpreted in a way that renders them regulated under CAA section 111(b) air pollutant . . . which is not . . . compatible, not contradictory. . . . [T]here because air quality criteria have not emitted from a source category which is can be no justification for needlessly been issued for CO2 and therefore regulated under section [112].’’ Even rendering provisions in conflict if they can be whether CO2 or power plants are with this presumption, however, the interpreted harmoniously’’). . . . Thus, time regulated under CAA section 112 would House amendment contains further and again we have stressed our duty to ‘‘fit, be irrelevant. This reading, however, is ambiguities with respect to the phrases if possible, all parts [of a statute] into [a] not a reasonable reading of the statute harmonious whole.’’ FTC v. Mandel Brothers, ‘‘a source category’’ and ‘‘regulated Inc., 359 U.S. 385, 389, 79 S. Ct. 818, 3 L. because, among other reasons, it gives under section 112,’’ and how those Ed. 2d 893 (1959); see also Morton v. little or no meaning to the limitation phrases are used within the structure of Mancari, 417 U.S. 535, 551, 94 S. Ct. 2474, covering HAP that are regulated under the provision limiting what air 41 L. Ed. 2d 290 (1974) (when two provisions CAA section 112 and thus is contrary to pollutants may be regulated under CAA ‘‘are capable of co-existence, it is the duty of both the CAA’s comprehensive scheme section 111(d). the courts . . . to regard each as effective’’). created by the three sets of provisions The phrase ‘‘regulated under section In reviewing an agency’s construction of a (under which CAA section 111 is not 112’’ is ambiguous. As the Supreme statute, courts ‘‘must,’’ we have emphasized, ‘‘interpret the statute ‘as a . . . coherent intended to duplicate the regulation of Court has explained in the context of regulatory scheme’ ’’ rather than an internally pollutants regulated under section 112) other statutes using a variation of the inconsistent muddle, at war with itself and and the principle of statutory word ‘‘regulate,’’ an agency must defective from the day it was written. Brown construction that text should not be consider what is being regulated. See & Williamson, 529 U.S., at 133, 120 S. Ct. construed such that a provision does not Rush Prudential HMO, Inc. v. Moran, 1291, 146 L. Ed. 2d 121. have effect. 536 U.S. 355, 366 (2002) (It is necessary As amended by the House, CAA A second reading of CAA section to ‘‘pars[e] . . . the ‘what’ ’’ of the term section 111(d)(1)(A)(i) limits CAA 111(d) as revised by the House ‘‘regulates.’’); UNUM Life Ins. Co. of Am. section 111(d) to any air pollutant ‘‘for amendment focuses on the lack of a v. Ward, 526 U.S. 358, 363 (1999) (the which air quality criteria have not been negative before the third clause. That is, term ‘‘ ‘regulates insurance’ . . . issued or which is not included on a list unlike the first and second clauses that requires interpretation, for [its] meaning published under section 7408(a) of this each contain negative phrases (either is not plain.’’). Here, one possible title or emitted from a source category ‘‘has not been issued’’ or ‘‘which is not reading is that the phase modifies the which is regulated under section 7412 included’’), the third clause does not. words ‘‘a source category’’ without

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00053 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64714 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

regard to what pollutants are regulated no reason to conclude that the House from that source category under section under section 112, which then presents amendment was intended to abandon 111(d).294 the issue of what meaning to give to the the existing structure and relationship b. The EPA’s Interpretation of the phrase ‘‘a source category.’’ between the three programs in this way. House Amendment. Having concluded Under this reading, and assuming the Indeed, Congress expressly provided that the interpretations discussed above phrase ‘‘a source category’’ is read to that regulation under CAA section 112 are not reasonable, the EPA now turns mean the particular source category, the was not to ‘‘diminish or replace the to what it has concluded is the best, and House amendment would preclude the requirements of’’ the EPA’s regulation of sole reasonable, interpretation of the regulation under CAA section 111(d) of non-hazardous pollutants under section House amendment as it applies to the a specific source category for any 7411. See 42 U.S.C. 7412(d)(7). Further, issue here. pollutant if that source category has been regulated for any HAP under CAA consistent with CAA section 112’s The EPA’s interpretation of the House section 112.290 The effect of this reading direction that EPA list ‘‘all categories amendment as applied to the issue would be to preclude the regulation of and subcategories of major sources and presented in this rule is that the Section 112 Exclusion excludes the regulation of CO2 from power plants under CAA area [aka, non-major] sources’’ of HAP section 111(d) because power plants and then establish CAA section 112 HAP under CAA section 112 if the have been regulated for HAP under CAA standards for those categories and source category at issue is regulated section 112. This is the interpretation subcategories, 42 U.S.C. 7412(c)(1) and under CAA section 112, but does not that the EPA applied to the House (c)(2), the EPA has listed and regulated exclude the regulation of other amendment in connection with the over 140 categories of sources under pollutants, regardless of whether that CAMR rule in 2005, when looking at the CAA section 112. Thus, this reading source category is subject to CAA question of whether HAP can be would eviscerate the EPA’s authority section 112 standards. This regulated under CAA section 111(d) for under section 111(d) and prevent it from interpretation reads the phrase a source category that is not regulated serving as the gap-filling provision ‘‘regulated under section 112’’ as for HAP under section 112, and some within the comprehensive scheme of the modifying the words ‘‘source category’’ (as does the interpretation discussed commenters have advocated for this CAA as Congress intended.293 In short, above) but also recognizes that the interpretation here. But, after it is not reasonable to interpret the phrase ‘‘regulated under section 112’’ considering all of the comments and Section 112 Exclusion in section 111(d) refers only to the regulation of HAP reconsidering this interpretation, the to mean that the existence of CAA EPA has concluded that this emissions. In other words, the EPA’s section 112 standards covering interpretation of the House amendment interpretation recognizes that source hazardous pollutants from a source is not a reasonable reading because it categories ‘‘regulated under section would disrupt the comprehensive category would entirely eliminate 112’’ are not regulated by CAA section scheme for regulating existing sources regulation of non-hazardous emissions 112 with respect to all pollutants, but created by the three sets of provisions only with respect to HAP. Thus, it is covering criteria pollutants, HAP and There is no basis for concluding that Congress reasonable to interpret the House intended to mandate that section 111(d) regulation amendment of the Section 112 the other pollutants that fall outside of occur first, nor is there any logical reason why the those two programs and frustrate the need to regulate under section 111(d) should be Exclusion as only excluding the role that section 111 is intended to dependent on the timing of such regulation in regulation of HAP emissions under CAA play.291 Specifically, under this relation to CAA 112 regulation of that source section 111(d) and only when that interpretation, the EPA could not category. source category is regulated under CAA regulate a source category’s emissions of 293 Some commenters have stated that EPA could section 112. We note that this choose to regulate both HAP and non-HAP under HAP under CAA section 112, and then section 111(d), and thus could regulate HAP interpretation of the House amendment promulgate regulations for other without creating a gap. But this presumes that alone is the same as the 2005 CAMR pollutants from that source category Congress intended EPA to have the choice of interpretation of the two amendments under CAA section 111(d).292 There is declining to regulate a section 112-listed source combined: Where a source category has category for HAP under section 112, which is been regulated under CAA section 112, inconsistent with the mandatory language in 290 ‘‘A source category’’ could also be interpreted section 112. See, e.g., section 112(d)(1)(‘‘The a CAA section 111(d) standard of to mean ‘‘any source category.’’ Under this Administrator shall promulgate regulations performance cannot be established to interpretation, CAA 111(d) regulation would be establishing emissions standards for each category limited to air pollutants that are not emitted by any address any HAP listed under CAA or subcategory of major sources and area sources of source category for which the EPA has issued section 112(b) that may be emitted from hazardous air pollutants listed for regulation standards for HAP under CAA section 112. This pursuant to subsection (c) of this section in that particular source category. See 70 interpretation is not reasonable because it would FR 15994, 16029–30 (March 29, 2005). effectively read CAA 111(d) out of the statute. accordance with the schedules provided in Given the extensive list of source categories subsections (c) and (e) of this section.’’). Moreover, regulated under CAA 112 and the breadth of given the prescriptive language that Congress added 294 Even if one were to determine that this pollutants emitted by those categories collectively, into section 112 concerning how to set standards for interpretation were the proper reading of the House literally all air pollutants would be barred from HAP, see section 112(d)(2) and (d)(3), it is amendment that would not be the end of the CAA 111(d) regulation under this interpretation. unreasonable to conclude that Congress intended analysis. Instead, that reading would create a 291 In assessing any interpretation of section that the EPA could simply choose to ignore the conflict between the Senate amendment and the 111(d), EPA must consider how the three main provisions in section 112 and instead regulate HAP House amendment that would need to be resolved. programs set forth in the CAA work together. See for a section 112 listed source category under In that event, the proper resolution of a conflict UARG, 134 S. Ct. at 2442 (a ‘‘reasonable statutory section 111(d). between the two amendments would be the analysis interpretation must account for . . . the broader Further, some supporters of this interpretation and conclusion discussed in the Proposed Rule’s context of the statute as a whole’’) (quotation have suggested that EPA could regulate CO2 under legal memorandum (discussing EPA’s analysis in omitted). section 112. But this suggestion fails to consider the CAMR rule at 70 FR 15994, 16029–32): The two 292 Supporters of this interpretation have noted that sources emitting HAP are major sources if they amendments must be read together so as to give that the EPA could regulate power plants under emit 10 tons of any HAP. See CAA section some effect to each amendment and they are both CAA section 111(d) and CAA section 112 if it 112(a)(1). Thus, if CO2 were regulated as a HAP, properly read together to provide that, where a regulated under section 111(d) first, before the and because emissions of CO2 tend to be many source category is regulated under section 112, the Section 112 Exclusion is triggered. But that times greater than emissions of other pollutants, a EPA may not establish regulations covering the argument actually further demonstrates another huge number of smaller sources would become HAP emissions from that source category under reason why this interpretation is unreasonable. regulated for the first time under the CAA. section 111(d).

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00054 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64715

There are a number of reasons why aware of no statement in the legislative predicate for applicability of CAA the EPA’s interpretation is reasonable history indicating that Congress section 111(d). and avoids the issues discussed above. simultaneously sought to restrict the CAA section 111(d)(1) requires the First, the EPA’s interpretation reads EPA’s authority under CAA section EPA to promulgate regulations under the House amendment to the Section 111(d) or to create gaps in the which states must submit state plans 112 Exclusion as determining the scope comprehensive structure of the statute. regulating ‘‘any existing source’’ of of what air pollutants are to be regulated If Congress had intended this certain pollutants ‘‘to which a standard under CAA section 111(d), as opposed amendment to make such a change, one of performance would apply if such to creating a wholesale exclusion for would expect to see some indication of existing source were a new source.’’ A source categories. The other text in that in the legislative history. ‘‘new source’’ is ‘‘any stationary source, subsections 111(d)(1)(A)(i) and (ii) Fourth, when applied in the context the construction or modification of modify the phrase ‘‘any air pollutant.’’ of this rule, the EPA’s interpretation of which is commenced after the Thus, reading the Section 112 Exclusion the House amendment is consistent publication of regulations (or, if earlier, to also address the question of what air with the Senate amendment. Thus, this proposed regulations) prescribing a pollutants may be regulated under CAA interpretation avoids creating a conflict standard of performance under [CAA section 111(d) is consistent with the within the statute. See discussion above section 111] which will be applicable to overall structure and focus of CAA of Scialabba v. Cuellar De Osorio, 134 such source.’’ It should be noted that section 111(d)(1)(A). S. Ct. 2191 at 2220 (citing and quoting, these provisions make clear that a ‘‘new Second, the EPA’s interpretation among other authorities, A. Scalia & B. source’’ includes one that undertakes furthers—rather than undermines—the Garner, Reading Law: The Interpretation either new construction or a purpose of CAA section 111(d) within of Legal Texts 180 (2012) (‘‘The modification. It should also be noted the long-standing structure of the CAA. provisions of a text should be that the EPA’s implementing regulations That is, this interpretation supports the interpreted in a way that renders them define ‘‘construction’’ to include comprehensive structure for regulating compatible, not contradictory. . . . ‘‘reconstruction,’’ which the various pollutants from existing sources [T]here can be no justification for implementing regulations go on to under the criteria pollutant/NAAQS needlessly rendering provisions in define as the replacement of program under sections 108–110, the conflict if they can be interpreted components of an existing facility to an HAP program under section 112, and harmoniously’’)). extent that (i) the fixed capital cost of other pollutants under section 111(d), In sum, when this interpretation of the new components exceeds 50 percent and avoids creating a gap in that the House amendment is applied in the of the fixed capital cost that would be structure. See King v. Burwell, 2015 U.S. context of this rule, the result is that the required to construct a comparable LEXIS 4248, *28 (2015)(‘‘A provision EPA may promulgate CAA section entirely new facility, and (ii) it is that may seem ambiguous in isolation is 111(d) regulations covering carbon technologically and economically often clarified by the remainder of the dioxide emissions from existing power feasible to meet the applicable statutory scheme . . . because only one plants notwithstanding that power standards. of the permissible meanings produces a plants are regulated for their HAP Under CAA section 111(d)(1), in order substantive effect that is compatible emissions under CAA section 112. for existing sources to become subject to with the rest of the law.’’) (quoting 5. The Two Amendments Are Easily that provision, the EPA must United Sav. Assn. of Tex. v. Timbers of Reconciled and Can Be Given Full Effect promulgate standards of performance under CAA section 111(b) to which, if Inwood Forest Associates, Ltd., 484 U. Given that both the House and Senate S. 365, 371, 108 S. Ct. 626, 98 L. Ed. 2d the existing sources were new sources, amendments should be read they would be subject. Those standards 740 (1988)’’) individually as having the same of performance may include standards Third, by avoiding the creation of meaning in the context presented in this for sources that undertake new gaps in the statutory structure, the rule, giving each amendment full effect construction, modifications, or EPA’s interpretation is consistent with is straight-forward: The Section 112 the legislative history demonstrating reconstructions. Exclusion in section 111(d) does not The EPA is finalizing a rulemaking that Congress’s intent in the 1990 CAA foreclose the regulation of non-HAP Amendments was to expand the EPA’s under CAA section 111(b) for CO2 from a source category regardless of emissions from affected EGUs regulatory authority across the board, whether that source category is also concurrently with this CAA section compelling the agency to regulate more regulated under CAA section 112. As 111(d) rulemaking, which will provide pollutants, under more programs, more applied here, the EPA has the authority 295 the requisite predicate for applicability quickly. Conversely, the EPA is to promulgate CAA section 111(d) of CAA section 111(d).296 regulations for CO2 from power plants 295 See S. Rep. No. 101–228 at 133 (‘‘There is now notwithstanding that power plants are D. Definition of Affected Sources a broad consensus that the program to regulate hazardous air pollutants . . . should be regulated for HAP under CAA section For the emission guidelines, an restructured to provide the EPA with authority to 112. affected EGU is any fossil fuel-fired regulate industrial and area sources of air pollution . . . in the near term’’), reprinted in 5 A Legislative C. Authority To Regulate EGUs electric utility steam generating unit (i.e., utility boiler or integrated History of the Clean Air Act Amendments of 1990 In a separate, concurrent action, the (‘‘Legis. Hist.’’) 8338, 8473 (Comm. Print 1993); S. gasification combined cycle (IGCC) unit) EPA is also finalizing a CAA section Rep. No. 101–228 at 14 (‘‘The bill gives significant or stationary combustion turbine that 111(b) rulemaking that regulates CO authority to the Administrator in order to overcome 2 was in operation or had commenced the deficiencies in [the NAAQS program]’’) & 123 emissions from new, modified, and (‘‘Experience with the mobile source provisions in reconstructed EGUs. The promulgation Title II of the Act has shown that the enforcement 296 In the past, the EPA has issued standards of authorities . . . need to be strengthened and of these standards provides the requisite performance under section 111(b) and emission broadened . . .’’), reprinted in 5 Legis. Hist. at 8354, guidelines under section 111(d) simultaneously. 8463; H.R. Rep. No. 101–952 at 336–36, 340, 345 regulations, the enactment of the Title V permit See ‘‘Standards of Performance for new Stationary & 347 (discussing enhancements to Act’s motor program, and enhancements to the EPA’s Sources and Guidelines for Control of Existing vehicle provisions, the EPA’s new authority to enforcement authority), reprinted in 5 Legis. Hist. Sources: Municipal Solid Waste Landfills—Final promulgate chemical accident prevention at 1786, 1790, 1795, & 1997. Rule,’’ 61 FR 9905 (March 12, 1996).

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00055 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64716 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

construction as of January 8, 2014,297 capable of combusting 50 percent or highly effective methods to maintain and that meets the following criteria, more non-fossil fuel) that have heat rates, and additional fleet-wide which differ depending on the type of historically limited the use of fossil reductions from simple cycle unit. To be an affected EGU, such a unit, fuels to 10 percent or less of the annual combustion turbines are likely less than if it is a fossil fuel-fired electric utility capacity factor or are subject to a 2 percent. In addition, while steam generating unit (i.e., a utility federally enforceable permit limiting approximately one-fifth of overall fossil boiler or IGCC unit), must serve a fossil fuel use to 10 percent or less of fuel-fired capacity (GW) consists of generator capable of selling greater than the annual capacity factor; (4) stationary simple cycle turbines, these units 25 MW to a utility power distribution combustion turbines that are not historically have operated at capacity system and have a base load rating capable of combusting natural gas (i.e., factors of less than 5 percent and only greater than 260 GJ/h (250 MMBtu/h) not connected to a natural gas pipeline); provide about 1 percent of the fossil heat input of fossil fuel (either alone or (5) combined heat and power units that fuel-fired generation (GWh). in combination with any other fuel). If are subject to a federally enforceable Combustion turbine capacity can such a unit is a stationary combustion permit limiting, or have historically therefore only contribute CO2 emissions turbine, the unit must meet the limited, annual net electric sales to a amounting to approximately 2 percent definition of a combined cycle or utility power distribution system to the of total coal-steam CO2 emissions. Any combined heat and power combustion product of the design efficiency and the single-digit percentage reduction in turbine, serve a generator capable of potential electric output or 219,000 combustion turbine heat rates would selling greater than 25 MW to a utility MWh (whichever is greater) or less; (6) therefore provide less than 1 percent power distribution system, and have a units that serve a generator along with reduction in total fossil-fired CO2 base load rating of greater than 260 other steam generating unit(s), IGCC(s), emissions. GJ/h (250 MMBtu/h). or stationary combustion turbine(s) Further, we are not aware of an When considering and understanding where the effective generation capacity approach to estimate any limited applicability, the following definitions (determined based on a prorated output opportunities that existing simple cycle may be helpful. Simple cycle of the base load rating of each steam turbines may have to reduce their heat combustion turbine means any generating unit, IGCC, or stationary rate. Similar to coal-steam EGUs, we do stationary combustion turbine which combustion turbine) is 25 MW or less; not have the unit-specific detailed does not recover heat from the (7) municipal waste combustor unit design information on existing combustion turbine engine exhaust subject to subpart Eb of Part 60; or (8) individual simple cycle combustion gases for purposes other than enhancing commercial or industrial solid waste turbines that is necessary for a detailed the performance of the stationary incineration units that are subject to assessment of the heat rate improvement combustion turbine itself. Combined subpart CCCC of Part 60. potential via best practices and cycle combustion turbine means any The rationale for applicability of this upgrades for each unit. While the EPA stationary combustion turbine which final rule is multi-fold. We had could conduct a ‘‘variability analysis’’ of recovers heat from the combustion proposed that affected EGUs were those simple cycle historical hourly heat rate turbine engine exhaust gases to generate existing fossil fuel-fired EGUs that met data (as was done for coal-steam EGUs), steam that is used to create additional the applicability criteria for coverage the various simple cycle models in use electric power output in a steam under the final GHG standards for new and the historically lower capacity turbine. Combined heat and power fossil fuel-fired EGUs being (CHP) combustion turbine means any promulgated under section 111(b). factors of the simple cycle fleet (less run stationary combustion turbine which However, we are finalizing that States time per start, and more part load recovers heat from the combustion need not include certain units that operation) would require a simple cycle turbine engine exhaust gases to heat would otherwise meet the CAA section analysis that includes more complexity water or another medium, generate 111(b) applicability in this CAA section and likely more uncertainty than in the steam for useful purposes other than 111(d) emission guidelines. These coal-steam analysis. Therefore, we do exclusively for additional electric include simple cycle turbines, certain not consider it feasible to estimate generation, or directly uses the heat in non-fossil units, and certain combined potential reductions due to heat rate the exhaust gases for a useful purpose. heat and power units. The final 111(b) improvements from simple cycle We note that certain affected EGUs are standards include applicability criteria turbines, and even if it were, we have exempt from inclusion in a state plan. for simple cycle combustion turbines, concluded those reductions would be Affected EGUs that may be excluded for reasons relating to implementation negligible compared to the reductions from a state’s plan are (1) those units and minimizing emissions from all from steam generating units. Hence, we that are subject to subpart TTTT as a future combustion turbines. However, do not consider building block 1 as result of commencing modification or for the following reasons none of the practically applicable to simple cycle reconstruction; (2) steam generating building blocks would result in units. units or IGCC units that are currently emission reductions from simple cycle Second, the vast majority of simple and always have been subject to a turbines so we are not requiring that cycle turbines serve a specific need— federally enforceable permit limiting States including them in their CAA providing power during periods of peak net-electric sales to one-third or less of section 111(d) plans. electric demand (i.e., peaking units). its potential electric output or 219,000 First, even more than combined cycle The existing block of simple cycle MWh or less on an annual basis; (3) units, simple cycle units have limited turbines are the only units that are able non-fossil units (i.e., units that are opportunities, compared to steam to start fast enough and ramp to full generating units, to reduce their heat load quickly enough to serve as peaking 297 Under Section 111(a) of the CAA, rate. Most combustion turbines likely units. If these units were to be used determination of affected sources is based on the already follow the manufacturer’s under building block 2 to displace date that the EPA proposes action on such sources. recommended regular preventive/ higher emitting coal-fired units, they January 8, 2014 is the date the proposed GHG standards of performance for new fossil fuel-fired restorative maintenance for both reliable would no longer be available to serve as EGUs were published in the Federal Register (79 and efficiency reasons. These regularly peaking units. Therefore, building block FR 1430). scheduled maintenance practices are 2 could not be applied to simple cycle

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00056 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64717

combustion turbines without combustion turbines—in that newly 111(a)(1)(A), nor does this final rule jeopardizing grid reliability. created subpart.298 revise either of the two source We believe that combining the Third, many commenters on the CAA categories—fossil fuel—fired electric emission guidelines for affected sources section 111(b) proposal stated that utility steam generating units and into a new subpart UUUU is appropriate stationary combustion turbines—that simple cycle turbines will be used to because the emission guidelines the the EPA has already listed under that provide backup power to intermittent EPA is establishing do not vary by type provision. Thus, the EPA is not required renewable sources of power such as of source. Combining the listing of to make a finding that the combined wind and solar. Consequently, adding sources into one location, subpart source category causes or contributes additional generation from intermittent UUUU, will facilitate implementation of significantly to air pollution which may renewable sources has the potential to CO2 mitigation measures, such as reasonably be anticipated to endanger actually increase emissions from simple shifting generation from higher to lower- public health or welfare. cycle turbines. Therefore, applying carbon intensity generation among V. The Best System of Emission building block 3 based on the capacity existing sources (e.g., shifting from Reduction and Associated Building of simple cycle turbines would not utility boilers to NGCC units), and Blocks result in emission reductions from emission trading among sources in the simple cycle combustion turbines. source category. In the June 2014 proposal, the EPA Finally, the EPA expects existing simple As discussed in the January 8, 2014 proposed to determine that the best cycle turbines to continue to operate as proposal for the CAA section 111(b) system of emission reduction they historically have operated, as standards for GHG emissions from EGUs adequately demonstrated (BSER) for peaking units. Including simple cycle (79 FR 1430), in 1971 the EPA listed reducing CO2 emissions from existing EGUs was a combination of measures— turbines in CAA section 111(d) fossil fuel-fired steam generating boilers (1) increasing the operational efficiency applicability would impact the as a new category subject to section 111 of existing coal-fired steam EGUs, (2) numerical value of state goals, but it rulemaking, and in 1979 the EPA listed fossil fuel-fired combustion turbines as substituting increased generation at would not impact the stringency of the existing NGCC units for generation at plans. Such inclusion would increase a new category subject to the CAA section 111 rulemaking. In the ensuing existing steam EGUs, (3) substituting burden but result in no environmental years, the EPA has promulgated generation from low- and zero-carbon benefit. standards of performance for the two generating capacity for generation at Additionally, under CAA section categories and codified those standards, existing fossil fuel-fired EGUs, and (4) 111(b) final applicability criteria, new at various times, in 40 CFR part 60 increasing demand-side EE to reduce dedicated non-fossil and industrial CHP subparts D, Da, GG, and KKKK. the amount of fossil fuel-fired units are not affected sources if they In the January 8, 2014 proposal, the generation—which we categorized as include permit restrictions on the EPA proposed separate standards of four ‘‘building blocks.’’ As an amount of fossil fuel they burn and the performance for new sources in the two alternative to the proposed building amount of electricity they sell. Such categories and proposed codifying the blocks 2, 3, and 4, the EPA also units historically have had no regulatory standards in the same Da and KKKK identified reduced generation in the amount of those building blocks as part mandate to include permit requirements subparts that currently contain the standards of performance for of the BSER. These measures are not the limiting the use of fossil fuel or electric only approaches EGUs can take to sales. We are exempting them from conventional pollutants from those reduce CO2, but are those that the EPA inclusion in CAA section 111(d) state sources. In addition, the EPA co- proposed combining the two categories felt best met the statutory criteria. We plans in the interest of consistency with solicited comment on all aspects of our CAA section 111(b) and based on their into a single category solely for purposes of the CO emissions from new BSER determination, including a broad historical fuel use and electric sales. 2 construction of affected EGUs, and array of other approaches. We have We discuss changes in applicability of codifying the proposed requirements in considered thoroughly the extensive units in relation to state plans in Section a new 40 CFR part 60 subpart TTTT. For comments submitted on a variety of VIII of this preamble. the final standards of performance for topics related to the BSER and the individual building blocks, along with E. Combined Categories and new construction of affected EGUs, the EPA is codifying the final requirements our own continued analysis, and we are Codification in the Code of Federal in a new 40 CFR part 60 subpart TTTT. finalizing the BSER based on the first Regulations In this rulemaking, the EPA is three building blocks, with certain refinements. In this rulemaking, the EPA is combining the two listed source categories into a single source category Consistent with the approach taken in combining the listing of sources from the proposed rule, in determining the the two existing source categories for for purposes of the emission guidelines for the CO emissions from existing BSER we have taken account of the the affected EGUs, as listed in 40 CFR 2 unique characteristics of CO affected EGUs. Because the two source 2 pollution, subpart Da and 40 CFR subpart KKKK, categories are pre-existing and the EPA particularly its global nature, huge into a single location, 40 CFR subpart would not be subjecting any additional quantities, and the limited means for UUUU, for purposes of addressing the sources to regulation, the combined controlling it; and the unique CO2 emissions from existing affected source category is not considered a new characteristics of the source category, EGUs. The EPA is also codifying all of source category that the EPA must list particularly the exceptional degree of the requirements for the affected EGUs under CAA section 111(b)(1)(A). As a interconnectedness among individual in a new subpart UUUU of 40 CFR part result, this final rule does not list a new affected EGUs and the longstanding 60 and including all GHG emission source category under section practice of coordinating planning and guidelines for the affected sources— operations across multiple sources, fossil fuel–fired electric utility steam 298 The EPA is not codifying any of the reflecting the fact that each EGU’s generating units, as well as stationary requirements of this rulemaking in subparts Da or function is interdependent with the KKKK. function of other EGUs. Each building

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00057 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64718 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

block is a proven approach for reducing 2022 to 2029 (instead of the proposed summarizes the determination of the emissions from the affected source interim period of 2020 to 2029). These BSER for this rule. In section V.A.3., we category that is appropriate in this changes to the BSER and the building discuss changes from the proposal. pollutant- and industry-specific context. blocks are discussed in more detail later Section V.A.4. provides more detail on The BSER also encompasses a variety of in this section of the preamble. our determination of the BSER, measures or actions that individual Also, to address concerns identified including our determinations regarding affected EGUs could take to implement in the proposal and the October 30, the individual elements of the BSER, as the building blocks, including (i) direct 2014 NODA and in response to applied to the two subcategories of investment in efficiency improvements associated comments, in the final rule fossil steam units and combustion and in lower- and zero-carbon we have represented the emission turbines. In section V.A.5., we explain generation, (ii) cross-investment in these limitations achievable through the BSER the specific actions that individual activities through mechanisms such as in the form of uniform CO2 emission affected EGUs in the two subcategories emissions trading approaches, where performance rates for each of two may take to implement the building the state-established standards of affected source subcategories: Steam blocks and thereby achieve the EPA- performance to which sources are generating units and stationary identified source subcategory-specific subject incorporate such approaches, combustion turbines. However, like the emission performance rates that, in turn, and (iii) reduction of higher-carbon proposed rule, the final rule also form the basis for the standards of generation. provides weighted-average state-specific performance that states must set. With attention to emission reduction goals that a state may choose as an Because these actions implement the costs, electricity rates, and the alternative method for complying with building blocks, they may be importance of ensuring continued its obligation to set standards of understood as part of the BSER. In this reliability of electricity supplies, the performance for its affected EGUs—an discussion, we recognize that states can individual building blocks and the alternative, that is, to adopting the choose to set sources’ standards of overall BSER have been defined not at nationwide subcategory-based CO2 performance in different forms and that the maximum possible degree of emission performance rates as the the form of the standard affects how stringency but at a reasonable degree of standard of performance for its affected various types of actions can be used to stringency designed to appropriately EGUs. The reformulation of the comply with the standard. In section balance consideration of the various emission limitations as uniform CO2 V.A.6., we discuss the substantial BSER factors. Additional, non-building emission performance rates is discussed compliance flexibility provided by block-specific aspects of the BSER in this section and in section VI of the additional measures, not included in the quantification methodology discussed preamble, and the relation of the BSER, that individual affected EGUs can below are similarly mindful of these performance rates to the state-specific use to achieve their standards of considerations. This approach to goals and states’ section 111(d) plan performance. Finally, section V.A.7. determination of the BSER provides options is discussed in sections VII and addresses the severability of the compliance headroom that ensures that VIII of the preamble. building blocks. the emission limitations reflecting the Section V.A. describes our BSER are achievable by the source determination of the final BSER, 1. Legal Requirements for BSER in the category, but nevertheless, as required including a discussion of the associated Emission Guidelines by the CAA, will result in meaningful emissions performance level, and a. Introduction. In the June 2014 reductions in CO2 emissions from this provides the rationale for our proposal for this rule, we described the sector. The wide range of actions determination. In section V.B. we principal legal requirements for encompassed in the building blocks, address certain legal issues in greater standards of performance under CAA and a further wide range of possible detail, including key issues raised in section 111(d)(1) and (a)(1). We based emissions-reducing actions not included comments. Sections V.C. through V.E. our description in part on our in the BSER but nevertheless available contain more detailed discussions of the discussion of the legal requirements for to help with compliance, ensure that three individual building blocks standards of performance under CAA those emission limitations are included in the final BSER. Further section 111(b) and (a)(1), which we achievable by individual affected EGUs information can be found in the GHG included in the January 2014 proposal as well. Mitigation Measures TSD for the CPP for standards of performance for CO2 The final BSER incorporates certain Final Rule, the CO2 Emission emissions from new fossil fuel-fired changes from the proposed rule, Performance Rate and Goal EGUs. In the latter proposal, we noted reflecting the EPA’s consideration of Computation TSD for the CPP Final that the D.C. Circuit has handed down comments responding to the approaches Rule, the Response to Comments numerous decisions that interpret CAA outlined in the proposal and our own document, and, about certain topics, the section 111(a)(1), including its further analysis. The principal changes Legal Memorandum for the Clean Power component elements, and we reviewed are the exclusion from the BSER of Plan Final Rule, all of which are that case law in detail.299 emission reductions achievable through available in the docket. We received comments on our demand-side EE and through nuclear proposed interpretation, and in light of A. The Best System of Emission generation; a revised approach to those comments, in this final rule, we Reduction determination of emission reductions are clarifying our interpretation in achievable through increased RE This section sets forth our certain respects. We discuss our generation; a consistent approach to determination of the BSER for reducing interpretation below.300 determination of emission reductions CO2 emissions from existing EGUs, achievable through all the building including a discussion of the associated 299 79 FR 1430, 1462 (January 8, 2014). blocks that better reflects the regional emissions performance level, and the 300 We also discuss our interpretation of the nature of the electricity system and rationale for that determination. In requirements for standards of performance and the BSER under section 111(b), for new sources, in the entails separate analyses for the Eastern, section V.A.1., we describe the legal section 111(b) rulemaking that the EPA is finalizing Western, and Texas Interconnections; framework for determination of the simultaneously with this rule and in the Legal and a revised interim goal period of BSER in general. Section V.A.2. Memorandum for this rule. Our interpretations of

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00058 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64719

b. CAA requirements and court a source subcategory-wide basis, to performance’’ when enacting CAA interpretation.301 Section 111(d)(1) determine the emission limitation that section 111 in the 1970 Clean Air Act directs the EPA to promulgate results from applying the BSER to the Amendments (CAAA), amended it in regulations establishing a section 110- sources in the subcategory, and then to the 1977 CAAA, and then amended it like procedure under which states establish emission guidelines for the again in the 1990 CAAA to largely submit state plans that establish states that incorporate those emission restore the definition as it read in the ‘‘standards of performance’’ for limitations. The EPA expresses these 1970 CAAA. It is in the legislative emissions of certain air pollutants from emission limitations in the form of history for the 1970 and 1977 CAAA sources which, if they were new emission performance rates, and they that Congress primarily addressed the sources, would be regulated under must be achievable by the source definition as it read at those times and section 111(b), and that implement and subcategory through the application of that legislative history provides enforce those standards of performance. the BSER. guidance in interpreting this The term ‘‘standard of performance’’ Following the EPA’s promulgation of provision.307 In addition, although the is defined to mean— emission guidelines, each state must D.C. Circuit has never reviewed a a standard for emissions of air pollutants determine the standards of performance section 111(d) rulemaking, the Court has which reflects the degree of emission for its sources, which the EPA’s reviewed section 111(b) rulemakings on limitation achievable through the application regulations call ‘‘designated numerous occasions during the past 40 of the best system of emission reduction facilities.’’ 303 A state has broad years, handing down decisions dated which (taking into account the cost of discretion in doing so. CAA section from 1973 to 2011,308 through which the achieving such reduction and any nonair 111(d)(1) requires the EPA’s regulations Court has developed a body of case law quality health and environmental impact and to ‘‘permit the State in applying a energy requirements) the Administrator that interprets the term ‘‘standard of determines has been adequately standard of performance to any performance.’’ demonstrated. particular source . . . to take into c. Key elements of interpretation. The consideration, among other factors, the emission guidelines promulgated by the Section 111(a)(1). remaining useful life of the . . . These provisions authorize the EPA to Administrator must include emission source. . .’’ 304 In addition, under CAA limitations that are ‘‘achievable’’ by the determine the BSER for the affected section 116, the state is authorized to set sources and, based on the BSER, to source category by application of a a standard of performance for any ‘‘system of emission reduction’’ that is establish emission guidelines that particular source that is more stringent identify the minimum amount of ‘‘adequately demonstrated’’ and that the than the emission limit contained in the EPA determines to be the ‘‘best,’’ emission limitation that a state, in its EPA’s emission guidelines.305 Thus, for state plan, must impose on its sources any particular source, a state may apply 307 through standards of performance. In the 1970 CAAA, Congress defined a standard of performance that is either ‘‘standard of performance,’’ under § 111(a)(1), as: Consistent with these CAA more stringent or less stringent than the a standard for emissions of air pollutants which requirements, the EPA’s regulations performance level in the emission reflects the degree of emission limitation achievable require that the EPA’s guidelines guidelines, as long as, in total, the through the application of the best system of reflect— emission reduction which (taking into account the state’s sources achieve at least the same cost of achieving such reduction) the Administrator the degree of emission reduction achievable degree of emission limitation as determines has been adequately demonstrated. through the application of the best system of included in the EPA’s emission In the 1977 CAAA, Congress revised the emission reduction which (taking into guidelines. The states must include the definition to distinguish among different types of account the cost of such reduction) the sources, and to require that for fossil fuel-fired Administrator has determined has been standards of performance in their state sources, the standard (i) be based on, in lieu of the adequately demonstrated.302 plans and submit the plans to the EPA ‘‘best system of emission reduction . . . adequately for review.306 Under CAA section demonstrated,’’ the ‘‘best technological system of The EPA’s approach in this 111(d)(2)(A), the EPA approves state continuous emission reduction . . . adequately rulemaking is to determine the BSER on demonstrated;’’ and (ii) require a percentage plans as long as they are ‘‘satisfactory.’’ reduction in emissions. In addition, in the 1977 As noted in the January 2014 proposal CAAA, Congress expanded the parenthetical these requirements in the two rules are generally and discussed in more detail above requirement that the Administrator consider the consistent except to the extent that they reflect cost of achieving the reduction to also require the distinctions between new and existing sources. For under section II.G, Congress first Administrator to consider ‘‘any nonair quality example, as discussed in the section 111(b) rule, the included the definition of ‘‘standard of health and environmental impact and energy legislative history indicates that Congress intended requirements.’’ that the BSER for new industrial facilities, which 303 40 CFR 60.24(b)(3). were expected to have lengthy useful lives, would In the 1990 CAAA, Congress again revised the 304 include the most advanced pollution controls The EPA’s regulations, promulgated prior to definition, this time repealing the requirements that available, but Congress had a broader conception of enactment of the ‘‘remaining useful life’’ provision the standard of performance be based on the best the BSER for existing facilities. of section 111(d)(1), provide: ‘‘Unless otherwise technological system and achieve a percentage specified in the applicable subpart on a case-by- 301 Our interpretation of the CAA provisions at reduction in emissions, and replacing those issue is guided by Chevron U.S.A. Inc. v. NRDC, case basis for particular designated facilities, or provisions with the terms used in the 1970 CAAA 467 U.S. 837, 842–43 (1984). In Chevron, the U.S. classes of facilities, States may provide for the version of § 111(a)(1) that the standard of Supreme Court set out a two-step process for agency application of less stringent emission standards or performance be based on the ‘‘best system of interpretation of statutory requirements: the agency longer compliance schedules than those otherwise emission reduction . . . adequately demonstrated.’’ must, at step 1, determine whether Congress’s required’’ by the corresponding emission guideline. This 1990 CAAA version is the current definition, intent as to the specific matter at issue is clear, and, 40 CFR 60.24(f). Some of the factors that a state may which is applicable at present. Even so, because if so, the agency must give effect to that intent. If consider for this case-by-case analysis include the parts of the definition as it read under the 1977 congressional intent is not clear, then, at step 2, the ‘‘cost of control resulting from plant age, location, CAAA were retained in the 1990 CAAA, the agency has discretion to fashion an interpretation or basic process design’’ and the ‘‘physical explanation in the 1977 CAAA legislative history, that is a reasonable construction of the statute. impossibility of installing necessary control and the interpretation, in the case law, of those 302 40 CFR 60.21(e). This definition was equipment,’’ among other factors ‘‘that make parts of the definition remain relevant to the promulgated as part of the EPA’s CAA 111(d) application of a less stringent standard or final definition as it reads today. implementing regulations and was not updated to compliance time significantly more reasonable.’’ Id. 308 Portland Cement Ass’n v. Ruckelshaus, 486 reflect the textual changes adopted by Congress in 305 In addition, CAA section 116 authorizes the F.2d 375 (D.C. Cir. 1973); Essex Chemical Corp. v. 1977. That said, Congress recognized that those state to set standards of performance for all of its Ruckelshaus, 486 F.2d 427, (D.C. Cir. 1973); changes ‘‘merely make[] explicit what was implicit sources that, together, are more stringent than the Portland Cement Ass’n v. EPA, 665 F.3d 177 (D.C. in the previous language.’’ H.R. Rep. No. 95–294, EPA’s emission guidelines. Cir. 2011). See also Delaware v. EPA, No. 13–1093 at 190 (May 12, 1977). 306 40 CFR 60.23. (D.C. Cir. May 1, 2015).

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00059 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64720 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

‘‘taking into account’’ the factors of subsection, in examining the range of economic or environmental way.’’ 315 It ‘‘cost . . . nonair quality health and reasonable options for states to consider does not mean that the system ‘‘must be environmental impact and energy in setting standards of performance in actual routine use somewhere.’’ 316 requirements.’’ The D.C. Circuit has under these guidelines, we identified a Rather, the Court has said, ‘‘[t]he stated that in determining the ‘‘best’’ number of considerations, including the Administrator may make a projection system, the EPA must also take into interconnected operations of the based on existing technology, though account ‘‘the amount of air affected sources and the characteristics that projection is subject to the 309 pollution’’ reduced and the role of of the CO2 pollutant. restraints of reasonableness and cannot ‘‘technological innovation.’’ 310 The be based on ‘crystal ball’ inquiry.’’ 317 Court has emphasized that the EPA has The remainder of this subsection Similarly, the EPA may ‘‘hold the discretion in weighing those various discusses the various elements in our industry to a standard of improved factors.311 312 general analytical approach. design and operational advances, so Our overall approach to determining (1) System of Emission Reduction long as there is substantial evidence that the BSER and emission guidelines, such improvements are feasible.’’ 318 which incorporates the various As we discuss below, the CAA does Ultimately, the analysis ‘‘is partially elements, is as follows: In developing an not define the phrase ‘‘system of dependent on ‘lead time,’’’ that is, ‘‘the emission guideline, we generally engage emission reduction.’’ The ordinary, time in which the technology will have in an analytical approach that is similar everyday meaning of ‘‘system’’ is a set to be available.’’ 319 Unlike for CAA to what we conduct under CAA section of things or parts forming a complex section 111(b) standards that are 111(b) for new sources. First, we whole; a set of principles or procedures applicable immediately after the identify ‘‘system[s] of emission according to which something is done; effective date of their promulgation, reduction’’ that have been ‘‘adequately an organized scheme or method; and a under CAA section 111(e), compliance demonstrated’’ for a particular source group of interacting, interrelated, or with CAA section 111(d) standards may category. Second, we determine the interdependent elements.314 With this be set sometime in the future. This is ‘‘best’’ of these systems after evaluating definition, the phrase ‘‘system of due, in part, to the period of time for the amount of reductions, costs, any emission reduction’’ takes a broad states to submit state plans and for the nonair health and environmental meaning: a set of measures that work EPA to act on them. impacts, energy requirements, and, in together to reduce emissions. The EPA (3) ‘‘Best’’ the alternative, the advancement of interprets this phrase to carry an In determining which adequately technology (that is, we apply a important limitation: Because the formulation of the BSER with the above demonstrated system of emission emission guidelines for the existing noted factors, and then, in the reduction is the ‘‘best,’’ the EPA sources must reflect ‘‘the degree of alternative, we apply a formulation of considers the following factors: emission limitation achievable through the BSER with those same factors plus the application of the best system of (a) Costs the advancement of technology). And emission reduction . . . adequately third, we select an achievable emission Under CAA section 111(a)(1), the EPA demonstrated,’’ the system must be limit—here, the emission performance is required to take into account ‘‘the cost rates—based on the BSER.313 In contrast limited to measures that can be of achieving’’ the required emission to subsection (b), however, subsection implemented—‘‘appl[ied]’’—by the reductions. As described in the January 320 (d)(1) assigns to the states, not the EPA, sources themselves, that is, as a 2014 proposal, in several cases the the obligation of setting standards of practical matter, by actions taken by the D.C. Circuit has elaborated on this cost performance for the affected sources. As owners or operators of the sources. As factor and formulated the cost standard discussed below in the following we discuss below, this definition is in various ways, stating that the EPA sufficiently broad to include the may not adopt a standard the cost of 321 309 See Sierra Club v. Costle, 657 F.2d 298, 326 building blocks. which would be ‘‘exorbitant,’’ ‘‘greater than the industry could bear (D.C. Cir. 1981). (2) ‘‘Adequately Demonstrated’’ 310 See Sierra Club v. Costle, 657 F.2d at 347. and survive,’’ 322 ‘‘excessive,’’ 323 or 311 324 See Lignite Energy Council v. EPA, 198 F.3d Under section 111(a)(1), in order for a ‘‘unreasonable.’’ These formulations 930, 933 (D.C. Cir. 1999). appear to be synonymous, and for 312 Although CAA section 111(a)(1) may be read ‘‘system of emission reduction’’ to serve as the basis for an ‘‘achievable’’ convenience, in this rulemaking, we to state that the factors enumerated in the will use reasonableness as the standard, parenthetical are part of the ‘‘adequately emission limitation, the Administrator demonstrated’’ determination, the D.C. Circuit’s must determine that the system is case law appears to treat them as part of the ‘‘best’’ 315 Essex Chem. Corp. v. Ruckelshaus, 486 F.2d determination. See Sierra Club v. Costle, 657 F.2d ‘‘adequately demonstrated.’’ This 427, 433 (D.C. Cir. 1973), cert. denied, 416 U.S. 969 at 330 (recognizing that CAA section 111 gives the means, according to the D.C. Circuit, (1974). EPA authority ‘‘when determining the best that the system is ‘‘one which has been 316 Portland Cement Ass’n v. Ruckelshaus, 486 technological system to weigh cost, energy, and shown to be reasonably reliable, F.2d 375, 391 (D.C. Cir. 1973) (citations omitted) environmental impacts’’). Nevertheless, it does not (discussing the Senate and House bills and reports appear that those two approaches would lead to reasonably efficient, and which can from which the language in CAA section 111 grew). different outcomes. See, e.g., Lignite Energy Council reasonably be expected to serve the 317 Ibid. v. EPA, 198 F.3d at 933 (rejecting challenge to the interests of pollution control without 318 Sierra Club v. Costle, 657 F.2d 298, 364 (1981). EPA’s cost assessment of the ‘‘best demonstrated 319 Portland Cement Ass’n v. Ruckelshaus, 486 system’’). In this rule, the EPA treats the factors as becoming exorbitantly costly in an F.2d 375, 391 (D.C. Cir. 1973) (citations omitted). part of the ‘‘best’’ determination, but, as noted, even 320 79 FR 1430, 1464 (January 8, 2014). if the factors were part of the ‘‘adequately 314 Oxford Dictionary of English (3rd ed.) (2010), 321 demonstrated’’ determination, our analysis and available at http://www.oxforddictionaries.com/us/ Lignite Energy Council v. EPA, 198 F.3d 930, outcome would be the same. definition/american_english/system; see also 933 (D.C. Cir. 1999). 313 See, e.g., Oil and Natural Gas Sector: New American Heritage Dictionary (5th ed.) (2013), 322 Portland Cement Ass’n v. EPA, 513 F.2d 506, Source Performance Standards and National available at http://www.yourdictionary.com/ 508 (D.C. Cir. 1975). Emission Standards for Hazardous Air pollutants system#americanheritage; and The American 323 Sierra Club v. Costle, 657 F.2d 298, 343 (D.C. Reviews, 77 FR 49490, 49494 (Aug. 16, 2012) College Dictionary (C.L. Barnhart, ed. 1970) (‘‘an Cir. 1981). (describing the three-step analysis in setting a assemblage or combination of things or parts 324 Sierra Club v. Costle, 657 F.2d 298, 343 (D.C. standard of performance). forming a complex or unitary whole’’). Cir. 1981).

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00060 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64721

so that a control technology may be (b) Non-Air Health and Environmental EPA must consider the amount of considered the ‘‘best system of emission Impacts emission reductions that the system reduction . . . adequately Under CAA section 111(a)(1), the EPA would yield. Even if the EPA were not demonstrated’’ if its costs are is required to take into account ‘‘any required to consider the amount of reasonable, but cannot be considered nonair quality health and environmental emission reductions, the EPA has the the best system if its costs are impact’’ in determining the BSER. As discretion to do so, on grounds that unreasonable.325 326 the D.C. Circuit has explained, this either the term ‘‘system of emission The D.C. Circuit has repeatedly requirement makes explicit that a reduction’’ or the term ‘‘best’’ may upheld the EPA’s consideration of cost system cannot be ‘‘best’’ if it does more reasonably be read to allow that in reviewing standards of performance. harm than good due to cross-media discretion. In several cases, the Court upheld environmental impacts.330 (e) Sector- or Nationwide Component of standards that entailed significant costs, Factors in Determining the BSER consistent with Congress’s view that (c) Energy Considerations ‘‘the costs of applying best practicable Under CAA section 111(a)(1), the EPA As discussed in the January 2014 control technology be considered by the is required to take into account ‘‘energy proposal for the section 111(b) owner of a large new source of pollution requirements.’’ As discussed below, the rulemaking and the proposal for this as a normal and proper expense of doing EPA may consider energy requirements rulemaking, another component of the business.’’ 327 See Essex Chemical Corp. on both a source-specific basis and a D.C. Circuit’s interpretations of CAA v. Ruckelshaus, 486 F.2d 427, 440 (D.C. sector-wide, region-wide, or nationwide section 111 is that the EPA may Cir. 1973); 328 Portland Cement basis. Considered on a source-specific consider the various factors it is Association v. Ruckelshaus, 486 F.2d basis, ‘‘energy requirements’’ entails, for required to consider on a national or 375, 387–88 (D.C. Cir. 1973); Sierra Club example, the impact, if any, of the regional level and over time, and not v. Costle, 657 F.2d 298, 313 (D.C. Cir. system of emission reduction on the only on a plant-specific level at the time 332 1981) (upholding standard imposing source’s own energy needs. of the rulemaking. The D.C. Circuit based this interpretation—which it controls on SO2 emissions from coal- (d) Amount of Emissions Reductions fired power plants when the ‘‘cost of the made in the 1981 Sierra Club v. Costle new controls . . . is substantial’’).329 In the proposed rulemakings for this case, which concerned the NSPS for As discussed below, the EPA may rule and the associated section 111(b) new power plants—on a review of the consider costs on both a source-specific rule, we noted that although the legislative history, stating, basis and a sector-wide, regional, or definition of ‘‘standard of performance’’ [T]he Reports from both Houses on the nationwide basis. does not by its terms identify the Senate and House bills illustrate very clearly amount of emissions from the category that Congress itself was using a long-term lens with a broad focus on future costs, 325 These cost formulations are consistent with of sources or the amount of emission the legislative history of section 111. The 1977 reductions achieved as factors the EPA environmental and energy effects of different House Committee Report noted: must consider in determining the ‘‘best technological systems when it discussed 333 In the [1970] Congress [sic: Congress’s] view, it system of emission reduction,’’ the D.C. section 111. was only right that the costs of applying best Circuit has stated that the EPA must do The Court has upheld EPA rules that the practicable control technology be considered by the owner of a large new source of pollution as a so. See Sierra Club v. Costle, 657 F.2d EPA ‘‘justified . . . in terms of the normal and proper expense of doing business. 298, 326 (D.C. Cir. 1981) (‘‘we can think policies of the Act,’’ including balancing 1977 House Committee Report at 184. Similarly, of no sensible interpretation of the long-term national and regional impacts: the 1970 Senate Committee Report stated: statutory words ‘‘best . . . system’’ The standard reflects a balance in The implicit consideration of economic factors in which would not incorporate the determining whether technology is ‘‘available’’ environmental, economic, and energy should not affect the usefulness of this section. The amount of air pollution as a relevant consideration by being sufficiently stringent overriding purpose of this section would be to factor to be weighed when determining to bring about substantial reductions in SO2 prevent new air pollution problems, and toward the optimal standard for controlling . . . emissions (3 million tons in 1995) yet does that end, maximum feasible control of new sources emissions’’).331 The fact that the so at reasonable costs without significant at the time of their construction is seen by the purpose of a ‘‘system of emission energy penalties .... By achieving a committee as the most effective and, in the long balanced coal demand within the utility run, the least expensive approach. reduction’’ is to reduce emissions, and sector and by promoting the development of S. Comm. Rep. No. 91–1196 at 16. that the term itself explicitly less expensive SO2 control technology, the 326 We received comments that we do not have incorporates the concept of reducing final standard will expand environmentally authority to revise the cost standard as established emissions, supports the Court’s view acceptable energy supplies to existing power in the case law, e.g., ‘‘exorbitant,’’ ‘‘excessive,’’ etc., that in determining whether a ‘‘system plants and industrial sources. to a ‘‘reasonableness’’ standard that the commenters By substantially reducing SO emissions, considered less protective of the environment. We of emission reduction’’ is the ‘‘best,’’ the 2 agree that we do not have authority to revise the the standard will enhance the potential for cost standard as established in the case law, and we 330 long term economic growth at both the Portland Cement v. EPA, 486 F. 2d at 384; 334 are not attempting to do so here. Rather, our Sierra Club v. Costle, 657 F. 2d at 331; see also national and regional levels. description of the cost standard as ‘‘reasonableness’’ Essex Chemical Corp. v. Ruckelshaus, 486 F. 2d at In this rule, the EPA is considering is intended to be a convenient term for referring to 439 (remanding standard to consider solid waste costs and energy implications on the the cost standard as established in the case law. disposal implications of the BSER determination). 327 1977 House Committee Report at 184. 331 Sierra Club v. Costle, 657 F.2d 298 (D.C. Cir. 328 The costs for these standards were described 1981) was governed by the 1977 CAAA version of 332 79 FR 1430, 1465 (January 8, 2014) (citing in the rulemakings. See 36 FR 24876 (December 23, the definition of ‘‘standard of performance,’’ which Sierra Club v. Costle, 657 F.2d at 351). 1971), 37 FR 5767, 5769 (March 21, 1972). revised the phrase ‘‘best system of emission 333 Sierra Club v. Costle, 657 F.2d at 331 (citations 329 Indeed, in upholding the EPA’s consideration reduction’’ to read, ‘‘best technological system of omitted) (citing legislative history). of costs under other provisions requiring continuous emission reduction.’’ As noted above, 334 Sierra Club v. Costle, 657 F.2d at 327–28 consideration of cost, courts have also noted the the 1990 CAAA deleted ‘‘technological’’ and (quoting 44 FR at 33583/3–33584/1). In the January substantial discretion delegated to the EPA to weigh ‘‘continuous’’ and thereby returned the phrase to 2014 proposal, we explained that although the D.C. cost considerations with other factors. Chemical how it read under the 1970 CAAA. The court’s Circuit decided Sierra Club v. Costle before the Mfr’s Ass’n v. EPA, 870 F. 2d 177, 251 (5th Cir. interpretation of the 1977 CAAA phrase in Sierra Chevron case was decided in 1984, the D.C. 1989); Am. Iron & Steel Inst. v. EPA, 526 F. 2d 1027, Club v. Costle to require consideration of the Circuit’s decision could be justified under either 1054 (3d Cir. 1975); Ass’n of Pacific Fisheries v. amount of air emissions remains valid for the 1990 Chevron step 1 or 2. 79 FR 1430, 1466 (January 8, EPA, 615 F. 2d 794, 808 (9th Cir. 1980). CAAA phrase ‘‘best system of emission reduction.’’ 2014).

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00061 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64722 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

basis of (i) their source-specific impacts The D.C. Circuit established these addition, the Court’s interpretation finds and (ii) a sector-wide, regional, or standards for achievability in cases firm support in the legislative national basis, both separately and in concerning CAA section 111(b) new history.341 The legislative history combination with each other. source standards of performance. There identifies three different ways that is no case law under CAA section Congress designed CAA section 111 to (4) Achievability of the Emission 111(d). Assuming that those standards authorize standards of performance that Limitation in the Emission Guidelines for achievability apply under section promote technological improvement: (i) Before discussing the requirement 111(d), in this rulemaking, we are taking The development of technology that under section 111(d) that the emission a similar approach for the emission may be treated as the ‘‘best system of limitation in the emission guidelines limitation that the EPA identifies in the emission reduction . . . adequately emission guidelines. For existing demonstrated;’’ under section must be ‘‘achievable,’’ it is useful to 342 discuss the comparable requirement sources, section 111(d)(1) requires the 111(a)(1); (ii) the expanded use of the best demonstrated technology; 343 and under section 111(b) for new sources. EPA to establish requirements for state (iii) the development of emerging For new sources, CAA section plans that, in turn, must include technology.344 Even if the EPA were not 111(b)(1)(B) and (a)(1) provides that the ‘‘standards of performance.’’ Through 339 required to consider technological EPA must establish ‘‘standards of long-standing regulations and innovation as part of its determination performance,’’ which are standards for consistent practice, the EPA has of the BSER, it would be reasonable for emissions that reflect the degree of interpreted this provision to require the the EPA to consider it, either because emission limitation that is ‘‘achievable’’ EPA to promulgate emission guidelines that determine the BSER for a source technological innovation may be through the application of the BSER. category and that identify the amount of considered an element of the term According to the D.C. Circuit, a standard emission limitation achievable by ‘‘best,’’ or because the term ‘‘best system of performance is ‘‘achievable’’ if a application of the BSER. of emission reduction’’ is ambiguous as technology can reasonably be projected The EPA has promulgated these to whether technological innovation to be available to an individual source may be considered, and it is reasonable at the time it is constructed that will emission guidelines on the basis that the 335 existing sources can achieve the for the EPA to interpret it to authorize allow it to meet the standard. consideration of technological Moreover, according to the Court, ‘‘[a]n limitation, even though the state retains discretion to apply standards of innovation in light of Congress’s achievable standard is one which is emphasis on technological innovation. within the realm of the adequately performance to individual sources that are more or less stringent. In any event, as discussed below, the demonstrated system’s efficiency and EPA may justify the control measures As indicated in the proposed which, while not at a level that is purely identified in this rule as the BSER even rulemakings for this rule and the theoretical or experimental, need not without considering the factor of associated section 111(b) rule, the necessarily be routinely achieved within incentivizing technological innovation 336 requirement that the emission limitation the industry prior to its adoption.’’ or development. To be achievable, a standard ‘‘must be in the emission guidelines be capable of being met under most ‘‘achievable’’ based on the ‘‘best system (6) EPA Discretion adverse conditions which can of emission reduction . . . adequately The D.C. Circuit has made clear that reasonably be expected to recur and demonstrated’’ indicates that the the EPA has broad discretion in which are not or cannot be taken into technology or other measures that the determining the appropriate standard of account in determining the ‘costs’ of EPA identifies as the BSER must be performance under the definition in compliance.’’ 337 To show a standard is technically feasible. See 79 FR 1430, CAA section 111(a)(1), quoted above. achievable, the EPA must ‘‘(1) identify 1463 (January 8, 2014). At least in some Specifically, in Sierra Club v. Costle, variable conditions that might cases, in determining whether the 657 F.2d 298 (D.C. Cir. 1981), the Court contribute to the amount of expected emission limitation is achievable, it is explained that ‘‘section 111(a) explicitly emissions, and (2) establish that the test useful to analyze the technical instructs the EPA to balance multiple data relied on by the agency are feasibility of the system of emission concerns when promulgating a representative of potential industry- reduction, and we do so in this wide performance, given the range of rulemaking. broadly defined and include within their ambit variables that affect the achievability of (5) Expanded Use and Development of subfactors such as technological innovation.’’). the standard.’’ 338 341 See S. Rep. No. 91–1196 at 16 (1970) Technology (‘‘Standards of performance should provide an incentive for industries to work toward constant 335 Sierra Club v. Costle, 657 F.2d 298, 364, n. 276 The D.C. Circuit has long held that improvement in techniques for preventing and (D.C. Cir. 1981). Congress intended for CAA section 111 controlling emissions from stationary sources’’); S. 336 Essex Chem. Corp. v. Ruckelshaus, 486 F.2d to create incentives for new technology Rep. No. 95–127 at 17 (1977) (cited in Sierra Club 427, 433–34 (D.C. Cir. 1973), cert. denied, 416 U.S. and therefore that the EPA is required v. Costle, 657 F.2d at 346 n. 174) (‘‘The section 111 Standards of Performance . . . sought to assure the 969 (1974). to consider technological innovation as 337 Nat’l Lime Ass’n v. EPA, 627 F.2d 416, 433, use of available technology and to stimulate the n.46 (D.C. Cir. 1980). one of the factors in determining the development of new technology’’). 338 Sierra Club v. Costle, 657 F.2d 298, 377 (D.C. ‘‘best system of emission reduction.’’ 342 See Portland Cement Ass’n v. Ruckelshaus, Cir. 1981) (citing Nat’l Lime Ass’n v. EPA, 627 F.2d See Sierra Club v. Costle, 657 F.2d at 486 F.2d 375, 391 (D.C. Cir. 1973) (the best system 416 (D.C. Cir. 1980). In considering the of emission reduction must ‘‘look[ ] toward what 346–47. The Court has grounded its may fairly be projected for the regulated future, representativeness of the source tested, the EPA 340 may consider such variables as the ‘‘‘feedstock, reading in the statutory text. In rather than the state of the art at present’’). operation, size and age’ of the source.’’ Nat’l Lime 343 See 1970 Senate Committee Report No. 91– Ass’n v. EPA, 627 F.2d 416, 433 (D.C. Cir. 1980). 339 40 CFR 60.21(e). 1196 at 15 (‘‘The maximum use of available means Moreover, it may be sufficient to ‘‘generalize from 340 Sierra Club v. Costle, 657 F. 2d at 346 (‘‘Our of preventing and controlling air pollution is a sample of one when one is the only available interpretation of section 111(a) is that the mandated essential to the elimination of new pollution sample, or when that one is shown to be balancing of cost, energy, and nonair quality health problems’’). representative of the regulated industry along and environmental factors embraces consideration 344 See Sierra Club v. Costle, 657 F.2d at 351 relevant parameters.’’ Nat’l Lime Ass’n v. EPA, 627 of technological innovation as part of that balance. (upholding a standard of performance designed to F.2d 416, 434, n.52 (D.C. Cir. 1980). The statutory factors which EPA must weigh are promote the use of an emerging technology).

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00062 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64723

NSPS,’’ 345 and emphasized that ‘‘[t]he As with any of its own regulations, therefore be understood as part of the text gives the EPA broad discretion to the EPA has authority to interpret or BSER. weigh different factors in setting the revise these regulations. An example illustrating the standard.’’ 346 In Lignite Energy Council Of course, regardless of whether the relationship between the measures v. EPA, 198 F.3d 930 (D.C. Cir. 1999), EPA subcategorizes within a source determined to constitute the BSER for the Court reiterated: category for purposes of determining the the source category and the actions that may be undertaken by individual Because section 111 does not set forth the BSER and the emissions performance weight that should be assigned to each of level for the emission guideline, as part sources that are therefore also part of the these factors, we have granted the agency a of its CAA section 111(d) plan, a state BSER is the substitution of zero-emitting great degree of discretion in balancing retains great flexibility in assigning generation for CO2-emitting generation. them.... EPA’s choice [of the ‘best standards of performance to its affected This measure involves two distinct system’] will be sustained unless the EGUs. Thus, the state may, if it wishes, actions: Increasing the amount of zero- environmental or economic costs of using the impose different emission reduction emitting generation and reducing the technology are exorbitant.... EPA [has] obligations on different sources, as long amount of CO2-emitting generation. considerable discretion under section 111.347 as the overall level of emission From the perspective of the source category, the two actions are halves of d. Approach to the source category limitation is at least as stringent as the emission guidelines. a single balanced endeavor, but from the and subcategorizing. Section 111 perspective of any individual affected requires the EPA first to list source 2. The BSER for This Rule—Overview EGU, the two actions are separable, and categories that may reasonably be a particular affected EGU may decide to expected to endanger public health or a. Summary. This section describes implement either or both of the actions. welfare and then to regulate new the EPA’s overall approach to Further, an individual source may sources within each such source establishing the BSER. This rule, choose to invest directly in actions at its category. Section 111(b)(2) grants the promulgated under CAA section 111(d), own facility or an affiliated facility or to EPA discretion whether to ‘‘distinguish establishes emission guidelines for cross-invest in actions at other facilities among classes, types, and sizes within states to use in establishing standards of on the interconnected electricity system. categories of new sources for the performance for affected EGUs, and the To reiterate the overall context for the purpose of establishing [new source] BSER is the central determination that BSER: In this rule, the EPA determined standards,’’ which we refer to as the EPA must make in formulating the the BSER, and applied it to the category ‘‘subcategorizing.’’ Section 111(d)(1), in guidelines. In order to establish the of affected EGUs to determine the conjunction with section 111(a)(1), BSER we have considered the performance levels—that is, the CO2 simply requires the EPA to determine subcategory of the steam affected EGUs emission performance rates—for steam the BSER, does not prescribe the as a whole, and the subcategory of the generators and for combustion turbines. method for doing so, and is silent as to combustion turbine affected EGUs as a States must impose standards of whether the EPA may subcategorize. whole, and have identified the BSER for performance on their sources that The EPA interprets this provision to each subcategory as the measures that implement the CO2 emission authorize the EPA to exercise discretion the sources, viewed together and performance rates, or, as an alternative as to whether and, if so, how to operating under the standards of method of compliance, in total, achieve subcategorize. In addition, the performance established for them by the the equivalent emissions performance regulations under CAA section 111(d) states, can implement to reduce their level that the CO2 emission performance provide that the Administrator will emissions to an appropriate amount, rates would achieve if applied directly specify different emission guidelines or and that meet the other requirements for to each source as the standard or compliance times or both ‘‘for different the BSER including, for example, cost emissions limitation it must meet.350 sizes, types, and classes of designated reasonableness.349 After identifying the Each state has flexibility in how it facilities when costs of the control, BSER in this manner, the EPA assigns the emission limitations to its physical limitations, geographical determines the performance levels—in affected EGUs—and in fact, the state can location, or similar factors make this case, the CO2 emission performance be more stringent than the guidelines subcategorization appropriate.’’ 348 rates—for the steam generators and for require—but one of the state’s choices is the combustion turbines. to convert the CO2 emission 345 Sierra Club v. Costle, 657 F.2d at 319. In establishing the BSER the EPA also performance rates into standards of 346 Sierra Club v. Costle, 657 F.2d at 321; see also considered the set of actions that an performance—which may incorporate New York v. Reilly, 969 F. 2d at 1150 (because EGU, operating under a standard of emissions trading—for each of its Congress did not assign the specific weight the Administrator should assign to the statutory performance established by its state, affected EGUs. If a state does so, then elements, ‘‘the Administrator is free to exercise may take to achieve the applicable the affected EGUs may achieve their [her] discretion’’ in promulgating an NSPS). performance rate, if the state adopts that emission limits by taking the actions 347 Lignite Energy Council v. EPA, 198 F.3d 930, rate as the standard of performance and that qualify as the BSER. Since the 933 (D.C. Cir. 1999) (paragraphing revised for BSER and, in this case its constituent convenience). See New York v. Reilly, 969 F.2d applies it to the EGUs in its jurisdiction, 1147, 1150 (D.C. Cir. 1992) (‘‘Because Congress did or to achieve the equivalent mass-based elements, reflect the criteria of not assign the specific weight the Administrator limit, and that meet the other reasonable cost and other BSER criteria, should accord each of these factors, the requirements for the BSER. These the BSER assures that there is at least Administrator is free to exercise his discretion in one pathway—the CO emission this area.’’); see also NRDC v. EPA, 25 F.3d 1063, actions implement the BSER and may 2 1071 (D.C. Cir. 1994) (EPA did not err in its final performance rates—for the state and its balancing because ‘‘neither RCRA nor EPA’s 349 In this rulemaking, our determination that the affected EGUs to take that achieves the regulations purports to assign any particular weight costs are reasonable means that the costs meet the requisite level of emission reductions, to the factors listed in subsection (a)(3). That being cost standard in the case law no matter how that while, again, assuring that the affected the case, the Administrator was free to emphasize standard is articulated, that is, whether the cost or deemphasize particular factors, constrained only standard is articulated through the terms that the EGUs can achieve those emission limits by the requirements of reasoned agency case law uses, e.g., ‘‘exorbitant,’’ ‘‘excessive,’’ etc., decisionmaking.’’). or through the term we use for convenience, 350 The approaches that states may take in their 348 40 CFR 60.22(b)(5). ‘‘reasonableness’’. plans are discussed in section VIII.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00063 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64724 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

at reasonable cost and consistent with (as discussed in section V.A.2.f. below), Not surprisingly, whenever the EPA the other factors for the BSER. where the affected EGUs are operating begins the regulatory process under This section describes the EPA’s under standards of performance that section 111, it initially undertakes these process and basis for determining the incorporate emissions trading.353 same inquiries and then proceeds to BSER for the purpose of determining the The set of measures identified as the fashion the rule to fit the industry. For 351 CO2 emission performance rates. The BSER for the source category example, in 1979, the EPA finalized EPA is identifying the BSER as a well- encompasses a menu of actions that are new standards of performance to limit established set of measures that have part of the BSER and that individual emissions of SO2 from new, modified, been used by EGUs for many years to affected EGUs may implement in and reconstructed EGUs.355 In assessing achieve various business and policy different amounts and combinations in the final SO2 standard, the EPA carried purposes, and have been used in recent order to achieve their emission limits at out extensive analyses of a range of years for the specific purpose of reasonable cost. This menu includes alternative SO2 standards ‘‘to identify reducing EGUs’ CO2 emissions, and that actions that: (i) Affected steam EGUs environmental, economic, and energy are appropriate for carbon pollution can implement to improve their heat impacts associated with each of the (given its global nature and large rates; (ii) affected steam EGUs can alternatives considered at the national quantities, and the limited means to implement to increase generation from and regional levels.’’ 356 In identifying control it) and afforded by the highly lower-emitting existing NGCC units in the best system underlying the final integrated nature of the utility power specified amounts; (iii) all affected standard, the EPA evaluated ‘‘coal sector. We evaluated these measures EGUs can implement to increase cleaning and the relative economics of with a view to the states’ obligation to generation from new low- or zero- FGD [flue gas desulfurization] and coal establish standards of performance and carbon generation sources in specified cleaning’’ together as the ‘‘best included in our BSER determination amounts; (iv) all affected EGUs can demonstrated system for SO emission consideration of the range of options implement to reduce their generation in 2 reduction.’’ 357 The EPA also took into available for states to employ in specified amounts; and (v) all affected establishing those standards of EGUs operating under a standard of account the unique features of power performance. These measures include: performance that incorporates emissions transmission along the interconnected (i) Improving heat rate at existing coal- trading can implement by means of grid and the unique commercial fired steam EGUs on average by a purchasing rate-based emission credits relationships that rely on those 358 specified percentage (building block 1); or mass-based emission allowances from features. (ii) substituting increased generation other affected EGUs, since the effect of Similarly, in 1996, the EPA finalized from existing NGCC units for reduced the purchase would be the same as section 111(b) standards and 111(d) generation at existing steam EGUs in achieving the other listed actions emission guidelines to ensure that specified amounts (building block 2); through direct means.354 certain municipal solid waste (MSW) and (iii) substituting increased Importantly, affected EGUs also have landfills controlled landfill gases to the generation from new zero-emitting RE available numerous other measures that level achievable through application of generating capacity for reduced are not included in the BSER but that the BSER.359 EPA’s identification of this generation at existing fossil fuel-fired could materially help the EGUs achieve BSER was critically influenced by the EGUs in specified amounts (building their emission limits and thereby ‘‘unique emission pattern of block 3). It should be noted that provide compliance flexibility. building block 2 incorporates reduced Examples include, among numerous 355 The need for new standards was due in part generation from steam EGUs and other approaches, investment in to findings that in 1976, steam electric generating building block 3 incorporates reduced demand-side EE, co-firing with natural units were responsible for ‘‘65 percent of the SO2 generation from all fossil fuel-fired gas (for coal-fired steam EGUs), and . . . emissions on a national basis.’’ 44 FR 33580, 352 33587 (June 11, 1979). The EPA explained that EGUs. Further, as discussed below, investment in new generating units [u]nder the current performance standards for given the global nature of carbon using low- or zero-carbon generating power plants, national SO2 emissions are projected pollution and the highly integrated technologies other than those that are to increase approximately 17 percent between 1975 utility power sector, each of the part of building block 3. and 1995. Impacts will be more dramatic on a b. The EPA’s review of measures for regional basis.’’ Id. Thus, ‘‘[o]n January 27, 1977, building blocks incorporates various EPA announced that it had initiated a study to mechanisms for facilitating cross- determining the BSER. The EPA review the technological, economic, and other investment by individual affected EGUs described in the proposal for this rule factors needed to determine to what extent the SO2 in emission rate improvements or the analytical process by which the EPA standard for fossil-fuel-fired steam generators determined the BSER for this source should be revised.’’ Id. at 33587–33588. emission reduction activities at other 356 category. The EPA is finalizing large 44 FR 33580, 33582 (June 11, 1979). locations on the interconnected 357 44 FR 33580, 33593. The EPA considered an electricity system. The range of parts of that analysis, but the EPA is investigation by the U.S. Department of the Interior mechanisms includes bilateral also refining that analysis as informed regarding the amount of sulfur that could be investment of various kinds; the by the information and data discussed removed from various coals by physical coal issuance and acquisition of ERCs by commenters and our further cleaning. Id. at 33593. evaluation. What follows is the EPA’s 358 See 44 FR 33580, 33597–33600 (taking into representing the emissions-reducing account ‘‘the amount of power that could be effects of specific activities, where final determination. purchased from neighboring interconnected utility available under state plans; and more As described in the proposal, to companies’’ and noting that ‘‘[a]lmost all electric general emissions trading using rate- determine the BSER, the EPA began by utility generating units in the United States are electrically interconnected through power considering the characteristics of CO2 based credits or mass-based allowances transmission lines and switching stations’’ and that pollution and the utility power sector. ‘‘load can usually be shifted to other electric 351 Other sections in this preamble describe how generating units’’). 353 EPA calculated the CO2 emission performance rates Conditions for the use of these mechanisms 359 61 FR 9905, 9905 (March 12, 1996). In the based on the BSER. under various state plans are discussed in section rule, the EPA referred to the BSER for both new and 352 The building block measures are not designed VIII. existing MSW landfills as ‘‘the best demonstrated to reduce electricity generation overall; they are 354 Again, conditions for the use of these system of continuous emission reduction,’’ as well focused on maintaining the same level of electricity mechanisms under various state plans are discussed as the ‘‘BDT’’—short for ‘‘best demonstrated generation, but through less polluting processes. in section VIII. technology.’’ See, e.g., id. at 9905–07, 9913–14.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00064 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64725

landfills.’’ 360 Unlike ‘‘typical stationary interdependence in both planning and integrated nature of the electricity source[s],’’ which only generate real-time system operation among the system. emissions while in operation, MSW owners and operators of the facilities The EPA examined state and landfills can ‘‘continue to generate and comprised within each of the three large company programs intended at least in emit a significant quantity of emissions’’ electrical interconnections covering the part to reduce CO2 from fossil fuel-fired long after the facility has closed or contiguous 48 states. Given these power plants. These programs include otherwise stopped accepting waste.361 unique characteristics, it is not GHG performance standards established In recognition of this salient and unique surprising that the North American by states including California, New characteristic of landfills, the EPA set power system has been characterized as York, Oregon, and Washington; utility the BSER based on an emission- a ‘‘complex machine.’’ 364 The core planning approaches carried out by reducing system of gas collection and function of providing reliable electricity companies in Colorado and Minnesota; control that remained in place as long service is carried out not by individual and renewable portfolio standards (RPS) as emissions remained above a certain electricity generating units but by the established in more than 25 states.368 threshold—even after the regulated complex machine as a whole. Important They also include market-based landfill had permanently closed.362 The subsidiary functions such as initiatives, such as RGGI and the GHG EPA acknowledged that for some management of costs and management emissions trading program established landfills, it could take 50 to 100 years of environmental impacts are also by the California Global Warming for emissions to drop below the carried out to a great extent on a multi- Solutions Act, and conservation and cutoff.363 unit basis rather than an individual-unit demand reduction programs. For this rule, we discuss at length in basis. Generation from one generating We also examined federal legislative the proposed rule and in section II unit can be and routinely is substituted and regulatory programs, as well as state above the unique characteristics of CO2 for generation from another generating programs currently in operation, that pollution. The salient facts include the unit in order to keep the complex address pollutants other than CO2 global nature of CO2, which makes the machine operating while observing the emitted by the power sector. These specific location of emission reductions machine’s technical, environmental, programs include, among others, the unimportant; the enormous quantities of and other constraints and managing its CAA Title IV program to reduce SO2 CO2 emitted by the utility power sector, costs. and NOX, the MATS program to reduce coupled with the fact that CO2 is The EPA also reviewed broad trends mercury and air toxic emissions, and relatively unreactive, which make CO2 within the utility power sector.365 It is the CSAPR program to reduce SO2 and 369 much more difficult to mitigate by evident that, in the recent past, coal- NOX. This analysis demonstrated measures or technologies that are fired electricity generation has been that, among other measures, the typically utilized within an existing reduced, and projected future trends are application of control technology, fuel- power plant; the need to make large for continued reduction. By the same switching, and improvements in the reductions of CO2 in order to protect token, lower-emitting NGCC generation operational efficiency of EGUs all human health and the environment; and and renewable generation have resulted in reductions in a range of the fact that the utility power sector is increased, and projected future trends pollutants. These programs also the single largest source category by a are for continued increases.366 A survey demonstrate that replacement of higher- considerable margin. of integrated resource plans (IRPs), emitting generation with lower-emitting We also discuss at length in the included in the docket, shows that fossil generation—including generation shifts proposal and in section II above the fuel-fired EGUs are taking actions to between coal-fired EGUs and natural unique characteristics of the utility reduce emissions of both non-GHG air gas-fired EGUs and generation shifts power sector. Topics of that discussion pollutants and GHGs.367 Some fossil between fossil fuel-fired EGUs and RE include the physical properties of generation—also reduces emissions. electricity and the integrated nature of fuel-fired EGUs are investing in lower- or zero-emitting generation. In fact, our Some of these programs also include the electricity system. Here, we reiterate emissions trading among the power and emphasize that the utility power review indicates that the great majority of fossil fuel-fired generators surveyed plants. sector is unique in the extent to which In this rule, when evaluating the types are including new RE resources in their it must balance supply and demand on and amounts of measures that the planning. In addition, some fossil fuel- a real-time basis, with limited electricity source category can take to reduce CO2 storage capacity to act as a buffer. In fired EGUs are using those measures to replace their higher-emitting generation. emissions, we have appropriately taken turn, the need for real-time into account the global nature of the synchronization across each Some fossil fuel-fired generators appear to be reducing their higher-emitting pollutant and the high degree to which interconnection has led to a uniquely each individual affected EGU is high degree of coordination and generation without fully replacing it themselves. These measures in aggregate integrated into a ‘‘complex machine’’ that makes it possible for generation 360 result in the replacement of higher- 61 FR 9905, 9908; see 56 FR 24468, 24478 from one generating unit to be replaced (May 30, 1991) (explaining at proposal that because emitting generation with lower- or zero- landfill-gas emission rates ‘‘gradually increase’’ emitting generation, reflecting the with generation from another generating from zero after the landfill opens, and ‘‘gradually unit for the purpose of reducing decrease’’ from peak emissions after closure, the generation from CO2-emitting generating 364 EPA’s identification of the BSER for landfills S. Massoud Amin, ‘‘Securing the Electricity units. We have also taken into account inherently requires a determination of ‘‘when Grid,’’ The Bridge, Spring 2010, at 13, 14; Phillip controls systems must be installed and when they F. Schewe, The Grid: A Journey Through the Heart the trends away from higher-carbon may be removed’’). of Our Electrified World 1 (2007). generation toward lower- and zero- 361 See U.S. EPA, Municipal Solid Waste 365 These trends are discussed in more detail in carbon generation. These factors Landfills, Volume 1: Summary of the Requirements sections V.D. and V.E. below. strongly support consideration of for the New Source Performance Standards and 366 Demand-side energy efficiency measures have Emission Guidelines for Municipal Solid Waste also increased, and the projected future trends are emission reduction approaches that Landfills, Docket No. EPA–453R/96–004 at 1–3 for continued increase. (February 1999). 367 See memorandum entitled ‘‘Review of Electric 368 See 79 FR 34848–34850. 362 61 FR 9905, 9907–08. Utility Integrated Resource Plans’’ (May 7, 2015) 369 Many of these programs are discussed in 363 61 FR 9905, 9908. available in the docket. section II.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00065 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64726 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

focus on the machine as a whole—that trading is discussed further in section emitting fossil unit may reduce its is, the overall source category—by V.A.2.f. below. generation, which, in the presence of shifting generation from dirtier to This entire review has made clear that requirements for the source category as cleaner sources in addition to emission there are numerous measures that, alone a whole to reduce CO2 emissions, would reduction approaches that focus on or in various combinations, merit result in increased demand for, and improving the emission rates of analysis for inclusion in the BSER. The therefore increased amounts of, cleaner individual sources. review has also made clear that the generation. Third, a higher-emitting The factors just discussed that unique characteristics of CO2 pollution fossil unit may do both of these things, support consideration of emission and the unique, interconnected and directly replacing part of its generation reduction measures at the source- interdependent manner in which with investments in lower- or zero- category level likewise strongly support affected EGUs and other generating emitting generation. In addition, for consideration of mechanisms such as sources operate within the electricity measures in all of the categories, emissions trading approaches, sector make certain types of measures multiple mechanisms exist by which an and mechanisms available and especially since, as discussed in section individual affected EGU may make appropriate for consideration as the VIII, the states will have every these investments, ranging from BSER for this rule that would not be opportunity to design their section bilateral investments, to purchase of 111(d) plans to allow the affected EGUs appropriate for other pollutants and other industrial sectors. For purposes of credits representing the emissions- in their respective jurisdictions to reducing benefits of specific activities, employ emissions trading approaches to this discussion, the measures can be categorized in terms of the essential to purchase of general rate-based achieve the standards of performance characteristics of the four building emissions credits or mass-based established in those plans. In short, as blocks described in the proposal: emission allowances. As discussed discussed in more detail in section measures that (i) reduce the CO below, mechanisms involving tradable V.A.2.f. below, it is entirely feasible for 2 emission rate at the unit; (ii) substitute credits or allowances are well within states to establish standards of generation from existing lower-emitting the realm of consideration for the performance that incorporate emissions fossil fuel-fired units for generation standards of performance states can trading, and it is reasonable to expect from higher-emitting fossil fuel-fired choose to apply to their EGUs and that states will do so. These approaches units; (iii) substitute generation from hence, are entirely appropriate for EPA lower overall costs, add flexibility, and new low- or zero-emitting generating to consider in evaluating these measures make it easier for individual sources to capacity, especially RE, for generation in the course of making its BSER address pollution control objectives. To from fossil fuel-fired units; and (iv) determination. the extent that the purchase of an increase demand-side EE to avoid emissions credit or allowance represents c. State establishment of standards of generation from fossil fuel-fired units. In performance and source compliance. the purchase of surplus emission the proposal, we described our reductions by an emitting source, Before identifying in detail the measures evaluations of various measures in each that the BSER comprises, it is useful to emissions trading represents, in effect, of these categories. In this rule, with the the investment in pollution control by describe the process by which the states benefit of comments, we have refined establish the standards of performance the purchasing source, notwithstanding our evaluation of which specific that the control activity may be with which the affected EGUs must measures should comprise the first three comply, and the implications for the occurring at another source. As noted building blocks, and, for reasons above, the utility power sector has a sources that will be operating subject to discussed below, we have determined those standards of performance. As part long history of using the ‘‘complex that the fourth building block, demand- machine’’ to address objectives and of the EPA’s emission guidelines in this side EE, should not be included in the rule, and based on the BSER, the EPA constraints of various kinds. When BSER in these guidelines. is identifying CO emission performance afforded the opportunity to address The measures are discussed more 2 environmental objectives on a multi- fully below, but it should be noted here rates that reflect the BSER and, pursuant unit basis, the industry has done so. that because of the integrated nature of to subsection 111(d)(1), requiring states Congress and the EPA have selected the utility power sector—in which to establish standards of performance emissions trading approaches when individual EGUs’ operations for affected EGUs in order to implement addressing regional pollution from the intrinsically depend on the operations those rates. States, of course, could utility power sector contributing to of other generators—coupled with the simply impose those rates on each problems such as acid precipitation and sector’s high degree of planning and affected EGU in their respective interstate transport of ozone and reliability safeguards, the measures in jurisdictions, but we are also offering particulate matter. Similarly, states have the second and third categories (which states alternative approaches to carrying selected market-based approaches for involve generation shifts to lower- and out their obligations. For purposes of their own programs to address regional zero-emitting sources) may occur defining these alternatives and and global pollutants. The industry has through several different actions from facilitating states’ efforts to formulate readily adapted to that form of the perspective of an individual source, compliance plans encompassing regulation, taking advantage of the all of which are equivalent from the maximum flexibilities, we are flexibility and incorporating those perspective of the source category as a aggregating the performance rates into programs into the planning and whole. First, a higher-emitting fossil goals for each state. The state, in turn, operation of the ‘‘machine.’’ Further unit may invest in cleaner generation has the option of setting specific reinforcing our conclusion that reliance without reducing its own generation, standards of performance for its EGUs on trading is appropriate is the which, in the presence of requirements such that the emission limitations from extensive interest in using such for the source category as a whole to the EGUs operating under those mechanisms that states and utilities reduce CO2 emissions, would result in standards of performance together meet demonstrated through their formal less demand for, and therefore the performance rates or the state goal. comments and in discussions during the reductions in generation by, other To do this, the state must adopt a plan outreach process. The role of emissions higher-emitting units. Second, a higher- that establishes the EGUs’ standards of

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00066 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64727

performance and that implements and (1) Measures that reduce individual improvements at another EGU. We note enforces those standards. affected EGUs’ CO2 emission rates. this aspect below in describing the Each state has significant flexibility in As described in the proposal, the actions an individual affected EGU can several respects. For example, as measures that the affected EGUs could take to implement the BSER and discuss mentioned, a state may impose implement to improve their CO2 it in more detail in section V.A.2.f. standards of performance on its steam emission rates include a set of measures These heat rate improvements are a EGU sources and on its combustion that the EPA determined would result in low-cost option that fit the criteria for turbine sources that simply reflect the improvements in heat rate at coal-fired the BSER, except that they lead to only respective CO2 emission performance steam EGUs in the amount of 6 percent small emission reductions for the source rates for those subcategories set in the on average, and the EPA proposed that category.370 Given the magnitude of the emission guidelines. Alternatively, a this set of measures qualifies as a environmental problem and projections state may impose standards with component of the BSER. In this final by climate scientists that much larger differing degrees of stringency on rule, the EPA concludes that those emission reductions are needed from various sources, and, in fact, may be measures do qualify as a component of fossil fuel-fired EGUs to address climate more stringent overall than its state goal the BSER. However, as described in change, the EPA looked at additional requires. In addition—and most section V.C. below, based on responsive measures to reduce emission rates. This importantly for purposes of describing comments and further evaluation, the reflects our conclusion that, given the the BSER—a state may set standards of EPA has refined its approach to availability of other measures capable of performance as mass limits (e.g., tons of quantifying the emission reductions much greater emission reductions, the achievable through heat rate CO2 per year) rather than as emission emission reductions limited to this set improvements and no longer includes a rates (e.g., lbs of CO2 per MWh). of heat rate improvement measures Moreover, a state may make the limits separate increment of emission would not meet one of the tradable (subject to conditions described reductions attributable to equipment considerations critical to the BSER in section VIII below), whether the upgrades. Also, rather than evaluating determination—the quantity of limits are rate-based or mass-based. The the emission reductions available from emissions reductions resulting from the form of the emission limits, whether these measures on a nationwide basis as application of these measures is too emission rate limits or mass limits, has in the proposal, the EPA has quantified small for these measures to be the BSER implications for what specific actions the emission reductions achievable by themselves for this source category. that are part of the BSER the individual through building block 1 on a regional Specifically, as described in the affected EGUs may take to achieve those basis, consistent with the EPA’s proposal, the EPA also considered co- limits as well as what specific non- proposals to better reflect the regional firing (including 100 percent BSER measures are available to the nature of the interconnected electrical conversion) with natural gas, a measure system and the treatment of the other individual affected EGUs for that presented itself in part because of building blocks in this final rule. As a compliance flexibility. For example, if the recent increase in availability and result of these refinements, the EPA is an individual source chooses to adopt reduction in price of natural gas, and identifying the heat rate improvements building block 3 by both investing in the industry’s consequent increase in achievable by coal-fired steam EGUs as lower- or zero-emitting generation and reliance on natural gas.371 The EPA also 4.3 percent for the Eastern reducing its own generation, both those considered implementation of carbon Interconnection, 2.1 percent for the actions will be accounted for in its capture and storage (CCS).372 The EPA Western Interconnection, and 2.3 emission rate and both will therefore found that some of these co-firing and percent for the Texas Interconnection. help the source meet its rate-based limit. CCS measures are technically feasible The refinements are based, in significant and within price ranges that the EPA If the same individual source takes the part, on the numerous comments we same actions but is subject to a mass- has found to be cost effective in the received on our proposed approaches, context of other GHG rules, that a based limit, the action of reducing its especially those from states and generation will directly count in helping segment of the source category may utilities. implement these measures, and that the the source meet its own mass-based These heat rate improvement resulting emission reductions could be limit but the action of investing in measures include best practices such as potentially significant. cleaner generation will not. However, improved staff training, boiler chemical However, these co-firing and CCS the investment in lower-or zero-emitting cleaning, cleaning air preheater coils, measures are more expensive than other generation by that source and other and use of various kinds of software, as available measures for existing sources. sources collectively will help the overall well as equipment upgrades such as This is because the integrated nature of source category achieve the emission turbine overhauls. These are measures the electricity system affords limits consistent with the BSER and in that the owner/operator of an affected significantly lower cost options, ones doing so will make it easier for that coal-fired steam EGU may take that that fossil fuel-fired power plants source and other sources collectively to would have the effect of reducing the meet their mass-based limits. amount of CO2 the source emits per In instances where a state establishes 370 As further discussed below, if heat rate MWh. As a result, these measures improvements at coal-fired steam EGUs were standards of performance that would help the source achieve an implemented in isolation, without other measures incorporate emissions trading, the emission limit expressed as either an to reduce CO2 emissions, the heat rate tradable credits or allowances can serve emission rate limit or as a mass limit. improvements could lead to increases in as a medium through which affected competitiveness and utilization of the coal-fired We note again that in the context both EGUs—a so-called ‘‘rebound effect’’—causing EGUs can invest in any emission of the integrated electricity system and increases in CO2 emissions that could partially or reduction measure. of available and anticipated state even entirely offset the CO2 emission reductions d. Identification of the BSER approaches to setting standards of achieved through the reductions in the amount of measures. We now discuss the performance, emissions trading CO2 emissions per MWh of generation. 371 The EPA further addressed co-firing in the evaluation of potential measures for approaches could be used as October 30, 2014 NODA. 79 FR 64549–51. inclusion in the BSER for the source mechanisms through which one affected 372 CCS is also sometimes referred to as carbon category as a whole. EGU could invest in heat rate capture and sequestration.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00067 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64728 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

throughout the U.S. and in foreign of EGUs, as part of the BSER, those substantial extent, determine, if not nations are already using to reduce their controls remain measures that some dictate, any given EGU’s operations on CO2 emissions. affected EGUs may be expected to a nearly moment-to-moment basis. In The less expensive options include implement and that as a result, will analyzing BSER from the perspective of shifting generation to existing NGCC provide reductions that those affected the overall source category, because the units—an option that has become EGUs may rely on to achieve their affected EGUs are connected to each particularly attractive in light of the emission limits or may sell, through other operationally, a combination of increased availability and lower prices emissions trading, to other affected dispatching and investment in lower- of natural gas—as well as shifting EGUs to achieve emission limits (to the and zero-emitting generation allows the generation to new RE generating units. extent permitted under the relevant replacement of higher-emitting A comparison of the costs of converting section 111(d) plans). Another example generation with lower-emitting and an existing coal-fired boiler to burn 100 of a non-BSER measure that an affected zero-emitting generation (measures in percent natural gas compared to the cost EGU in certain circumstances could building blocks 2 and 3), and thereby of shifting generation to an existing choose to implement is the conversion reduces emissions while continuing to NGCC unit illustrates this point. of waste heat from electricity generation serve load. Because an NGCC unit burns natural gas into useful thermal energy. The EPA As noted above, substitution of significantly more efficiently than an further discusses the potential use of higher-emitting generation for lower- or affected steam EGU does, the cost of these non-BSER measures for zero-emitting generation may include shifting generation from the steam EGU compliance flexibility below. reduced generation, depending on the to an existing NGCC unit is significantly The EPA’s quantification of the CO2 specific action taken by the individual cheaper in most cases than more emission reductions achievable through EGU. Likewise, when incorporated into aggressive emission rate reduction heat rate improvements as a component standards of performance, emissions measures at the steam EGU. As a result, of the BSER (building block 1) is trading mechanisms may be readily as a practical matter, were the EPA to discussed in section V.C. of this used for implementing these building include co-firing and CCS in the BSER preamble and in the GHG Mitigation blocks. We discuss these aspects below and promulgate performance standards Measures TSD for the CPP Final Rule. in describing the actions that individual accordingly, few EGUs would likely (2) Measures available because of the sources may take to implement the comply with their emission standards integrated electricity system. building blocks. through co-firing and CCS; rather, the To determine the BSER that meets the (a) Substituting generation from EGUs would rely on the lower cost expectations and requirements of the lower-emitting affected EGUs for options of substituting lower- or zero- CAA, including the achievement of generation from higher-emitting affected emitting generation or, as a related meaningful reductions of CO2, the EPA EGUs. matter, reducing generation.373 turned next to the set of measures that In the proposal, the EPA observed that The EPA also considered heat rate presented themselves as a result of the substantial CO2 emission reductions improvement opportunities at oil- and fact that the operations of individual could be achieved at reasonable cost by gas-fired steam EGUs and NGCC units affected EGUs are interdependent on increasing generation from existing and found that the available emission and integrated with one another and NGCC units and commensurately reductions would likely be more with the overall electricity system. reducing generation from steam EGUs. expensive or too small to merit Those are the measures in the categories Because NGCC units produce much less consideration as a material component represented in the proposal by building CO2 per MWh of generation than steam of the BSER. blocks 2, 3, and 4. This section EGUs—typically less than half as much Thus, in reviewing the entire range of discusses the components of the BSER CO2 as coal-fired steam EGUs, which control options, it became clear that that relate to building blocks 2 and 3, account for most generation from steam controlling CO2 from affected EGUs at which the EPA is finalizing as EGUs—this generation shift reduces CO2 levels that are commensurate with the components of the BSER. This section emissions. We also noted that because sector’s contribution to GHG emissions also discusses the measures comprising NGCC units can generate as much as 46 and thus necessary to mitigate the the proposed building block 4, which percent more electricity from a given dangers presented by climate change, the EPA is not including in the BSER in quantity of natural gas than a steam unit could depend in part, but not primarily, this final rule. can, generation shifting from coal-fired on measures that improve efficiency at It bears reiterating that the extent to steam EGUs to existing NGCC units is a the power plants. Rather, most of the which the operations of individual more cost-effective strategy for reducing affected EGUs are integrated with one CO2 controls need to come in the form CO2 emissions from the source category of those other measures that are another and with the overall electricity than converting coal-fired steam EGUs available to the utility power sector system is a highly salient and unique to combust natural gas or co-firing coal thanks specifically to the integrated attribute of this source category. and natural gas in steam EGUs. We nature of the electricity system, and that Because of this integration, the proposed to find that shifting generation involve, in one form or another, individual sources in the source consistent with a 70 percent target replacement of higher emitting category operate through a network that utilization rate (based on nameplate generation with lower- or zero-emitting physically connects them to each other capacity) for NGCC units was feasible generation. and to their customers, an and should be a component of the Although the presence of lower-cost interconnectedness that is essential to BSER. options that achieve the emission their operation under the status quo and As described in section V.D. below, reduction goals means that the EPA is by all indications is projected to be analysis reflecting consideration of the not identifying either natural gas co- augmented further on a continual basis many comments we received on the firing or CCS at coal-fired steam EGUs, in the future to address fundamental EPA’s proposal with respect to this or heat rate improvements at other types objectives of reliability assurance and issue supports the inclusion of cost reduction. This physical generation shifting from higher-emitting 373 Many EGUs would also rely on demand-side interconnectedness exists to serve a set to lower-emitting EGUs as a component energy efficiency measures. of interlocking regimes that, to a of the BSER. Shifting of generation

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00068 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64729

among EGUs is an everyday occurrence allowing the increased RE generation to higher cost and therefore less within the integrated operations of the replace generation from fossil fuel-fired appropriate for inclusion in the BSER. utility power sector that is used to EGUs can reduce CO2 emissions from Accordingly, as described in section ensure that electricity is provided to the affected source category. V.A.3., the EPA is not finalizing meet customer demands in the most Accordingly, we proposed to include increased generation from under- economic manner consistent with replacement of defined quantities of construction nuclear capacity as a system constraints. Generation shifting fossil generation by RE generation in the component of the BSER. to lower-emitting units has been BSER. The EPA is likewise not finalizing the recognized as an approach for reducing The EPA is finalizing the proposal to include a component emissions in other EPA rules such as determination that substitution of RE representing preserved existing nuclear CSAPR. generation from new RE generating generation in the BSER. On further The EPA’s analysis continues to show capacity is a component of the BSER consideration, we believe it is that the magnitude of emission but, with the benefit of comments inappropriate to base the BSER on reductions included in the proposed responding to the EPA’s proposals on elements that will not reduce CO2 rule from generation shifting is regionalization and techno-economic emissions from affected EGUs below achievable. In response to our request analytic approaches, the EPA has current levels. Existing nuclear for comment on the proposed target adjusted the approach for determining generation helps make existing CO2 utilization rates, some commenters the quantities of RE generation. As part emissions lower than they would stated that summer capacity ratings are of the adjustment in approach, we have otherwise be, but will not further lower a more appropriate basis upon which to also refocused the quantification solely CO2 emissions below current levels. compute a target utilization than on generation from new RE generating Accordingly, as described in section nameplate capacity ratings used at capacity rather than total (new and V.A.3., the EPA is not finalizing proposal. We agree, and accordingly, existing) RE generating capacity as in preservation of generation from existing using the same data on historical the proposal. Our quantification of the nuclear capacity as a component of the generation as at proposal, we have RE generation component of the BSER is BSER. reanalyzed feasible NGCC utilization discussed in section V.E. of the (iii) Generation from new NGCC units. levels expressed in terms of summer preamble and in the GHG Mitigation New NGCC units—that is, units that capacity ratings and have found that a Measures TSD for the CPP Final Rule. had not commenced construction as of 75 target utilization rate based on (ii) Increased and preserved January 8, 2014, the date of publication summer capacity ratings is feasible. generation from nuclear generating of the proposed CO2 standards of The EPA is finalizing a determination capacity. performance for new EGUs under that generation shift from higher- In the June 2014 proposal, the EPA section 111(b)—are not subject to the emitting affected EGUs to lower- also identified the replacement of standards of performance that will be emitting affected EGUs is a component generation from fossil fuel-fired EGUs established for existing sources under of the BSER (building block 2). Our with generation from nuclear units as a section 111(d) plans based on the BSER quantification of the associated potential approach for reducing CO2 determined in this final rule. In the June emission reductions is discussed in emissions from the affected source 2014 proposed emission guidelines for section V.D. of this preamble and in the category. We proposed to include two existing EGUs, the EPA solicited GHG Mitigation Measures TSD for the elements of nuclear generation in the comment on whether to include this CPP Final Rule. BSER: An element representing measure in the BSER. Commenters (b) Substituting increased generation projected generation from nuclear units raised numerous concerns, and after from new low- or zero-carbon generating under construction; and an element consideration of the comments, we are capacity for generation from affected representing preserved generation from not including replacement of generation EGUs. existing nuclear generating capacity at from affected EGUs through the Reducing generation from fossil fuel- risk of retirement, and we took comment construction of new NGCC capacity in fired EGUs and replacing it with on all aspects of these proposals. the BSER. In this section, we discuss the generation from lower- or zero-emitting Like generation from new RE reasons for our approach. EGUs is another method for reducing generating capacity, generation from The EPA did not include reduced CO2 emissions from the utility power new nuclear generating capacity can generation from affected EGUs achieved sector. In the proposal, the EPA clearly replace fossil fuel-fired through construction and operation of identified RE generating capacity and generation and thereby reduce CO2 new NGCC capacity in the proposed nuclear generating capacity as potential emissions. However, there are also BSER because we expected that the CO2 sources of lower- or zero-CO2 generation important differences between these emission reductions achieved through that could replace higher-CO2 types of low- or zero-CO2 generation. such actions would, on average, be more generation from affected EGUs. Investments in new nuclear capacity are costly than CO2 emission reductions (i) Increased generation from new RE very large capital-intensive investments achieved through the proposed BSER generating capacity. that require substantial lead times. By measures. However, our determination The EPA’s survey of trends and comparison, investments in new RE not to include new construction and actions already being taken in the utility generating capacity are individually operation of new NGCC capacity in the power sector indicated that RE smaller and require shorter lead times. BSER in this final rule rests primarily generating capacity and generation have Also, important recent trends evidenced on the achievable magnitude of grown rapidly in recent years, in part in RE development, such as rapidly emission reductions rather than costs. because of the environmental benefits of growing investment and rapidly Unlike emission reductions achieved shifting away from fossil fuel-fired decreasing costs, are not as clearly through the use of any of the building generation and in part because of evidenced in nuclear generation. We blocks, emission reductions achieved improved economics of RE generation view these factors as distinguishing the through the use of new NGCC capacity relative to fossil fuel-fired generation. It under-construction nuclear units from require the construction of additional is clear that increasing the amount of RE generating capacity, indicating that CO2-emitting generating capacity, a new RE generating capacity and the new nuclear capacity is likely of consequence that is inconsistent with

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00069 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64730 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

the long-term need to continue reducing consumers need less electricity in order BSER for the source category and for CO2 emissions beyond the reductions to provide the same level of electricity- individual sources. We believe this that will be achieved through this rule. dependent services—e.g., heating, approach is permissible under the CAA. New generating assets are planned and cooling, lighting, and use of motors and Another aspect of our methodology for built for long lifetimes—frequently 40 electronic devices. Through the computing the CO2 emission years or more—that are likely longer integrated electricity system, including performance rates, further described in than the expected remaining lifetimes of the connection of customers to affected section V.A.3.f. and section VI, is that the steam EGUs whose CO2 emissions EGUs through the electricity grid, the CO2 emission performance rate would initially be displaced be the reduced demand for electricity, in turn, applicable to a given source subcategory generation from the new NGCC units. leads to reduced generation and reduced in all three interconnections reflects the The new capacity is likely to continue CO2 emissions. Our examination of emission rate achievable by that source to emit CO2 throughout these longer actions and trends underway in the subcategory through application of the lifetimes, absent decisions to retire the utility power sector confirmed that building blocks in the interconnection units before the end of their planned investments in demand-side EE where that achievable emission rate is lifetimes or to install CCS technology in programs are increasing. We proposed the highest (i.e., least stringent).374 This the future at substantial additional cost. to include avoidance of defined aspect of our methodology not only Because of the likelihood of CO2 quantities of fossil fuel-fired generation ensures that the nationwide CO2 emissions for decades, the overall net through increased demand-side EE as a emission performance rates are emission reductions achievable through component of the BSER (proposed achievable by affected EGUs in all three the construction and operation of new building block 4). However, we also interconnections but also provides NGCC are less than for the measures took comment on which building blocks additional headroom within the BSER including in the BSER, such as should comprise the BSER and on our for affected EGUs in the two increased generation at existing NGCC determination as to whether each interconnections that did not set the capacity, which would be expected to building block met the various statutory CO2 emission performance rates reach the end of its useful life sooner factors. ultimately used. Additional headroom than new NGCC capacity, or Commenters expressed a wide range within the BSER is available through the construction and operation of zero- of views on the proposed reliance on use of emissions trading approaches, emitting RE generating capacity. We demand-side EE in the BSER. Some because the final rule does not limit the view the production of long-term CO2 commenters strongly supported the use of these mechanisms to sources emissions that otherwise would not be proposal, with suggestions for within the same interconnections. In created as inconsistent with the BSER improvements, while some commenters fact, in response to proposals that requirement that we consider the strongly opposed the proposal and took emerged from the comment record and magnitude of emissions reductions that the position that it exceeded the EPA’s direct engagement with states and can be achieved. For this reason, we are legal authority. We do not address the stakeholders reflecting their strong not including replacement of generation merits of these comments here because, interest in pursuing multi-state from affected EGUs through the for the reasons discussed in section approaches, the guidelines include construction and operation of new V.B.3.c.(8) below, we are not finalizing mechanisms for implementing NGCC capacity in the final BSER. the proposal to include avoided standards of performance that Commenters also raised a concern generation achieved through demand- incorporate interstate trading, as with the interrelation of section 111(b) side EE as a component of the BSER. discussed in section VIII. (In addition, and section 111(d). New NGCC capacity However, we note that most as further discussed below, the rule also is distinguished from the other non- commenters also supported the use of permits section 111(d) plans to allow BSER measures discussed above by the demand-side EE for compliance whether the use of non-BSER measures for fact that its CO2 emissions would be or not it is used in determining the compliance in certain circumstances, subject to the CO2 standards for new BSER, and we are allowing demand-side increasing both compliance flexibility EGUs being established under section EE to be used for that purpose. (We also and the assurance that the emission 111(b). Section 111 creates an express emphasize that the emission limitations limitations reflecting application of the distinction between the sources subject reflective of the BSER are achievable BSER are achievable.) to section 111(b) and the sources subject even if aggregate generation is not Further, the sets of measures in each to section 111(d), and commenters reduced through demand-side EE.) of these individual building blocks, in expressed concern that to allow section (3) Further analysis to quantify the the stringency assigned in this rule, 111(b) sources to play a direct role in BSER. meet the criteria for the BSER. That is, setting the BSER under section 111(d) While the discussion above they each achieve the appropriate level would be inconsistent with summarizes how and why the of reductions, are of reasonable cost, do congressional intent to treat the two sets components of the BSER were not impose energy penalties on the of sources separately. Section VIII of determined in terms of qualitative 374 this preamble includes a discussion of characteristics, it still leaves a wide Specifically, the annual CO2 emission ways to address new NGCC capacity in range of potential stringencies for the performance rates applicable to steam EGUs in all BSER. As explained in sections V.C., three interconnections are the annual emission rates the context of different types of section achievable by that subcategory in the Eastern 111(d) plans. V.D., and V.E. below, discussing Interconnection through application of the building (c) Increasing demand-side EE to building blocks 1, 2, and 3 respectively, blocks. Similarly, the annual CO2 emission avoid generation and emissions from the EPA has determined a reasonable performance rates applicable to stationary level of stringency for each of the combustion turbines in all three interconnections fossil fuel-fired EGUs. are the annual emission rates achievable by that The final category of approaches for building blocks rather than the subcategory in the Texas Interconnection for years reducing generation and CO2 emissions maximum possible level of stringency. from 2022 to 2026, and in the Eastern from affected EGUs that the EPA We have taken this approach in part to Interconnection for years from 2027 to 2030, considered in the proposal involves ensure that there is ‘‘headroom’’ within through application of the building blocks. Additional information is provided in the CO2 increasing demand-side EE. When the BSER measures that provides greater Emission Performance Rate and State Goal demand-side EE is increased, energy assurance of the achievability of the Computation TSD in the docket.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00070 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64731

affected EGUs and do not result in non- (2) Actions to implement measures in representing the emissions-reducing air quality pollutants, and have building blocks 2 and 3. benefit of the investment.375 acceptable cost and energy implications Viewing the BSER from the When combined with reduced on a source-by-source basis and for the perspective of an individual EGU, there generation, either at the affected EGU or energy sector as a whole. In addition, as are several ways that affected EGUs can elsewhere in the interconnected system, explained below, each is adequately access the measures in building blocks the types of actions listed above would demonstrated. Importantly, past 2 and 3, thanks to the integrated nature be fully equivalent to building blocks 2 industry practice and current trends of the electricity system, coupled with and 3 when viewed from the strongly support each of the building the system’s high degree of planning perspective of the overall source blocks, as do federal and state pollution and reliability mechanisms. The category. Thus, a source could achieve control programs that require or result affected EGUs can: (a) Invest in lower- a standard of performance identical to in similar measures. or zero-emitting generation, which will the applicable CO emission For example, all of the measures in 2 lead to reductions in higher-emitting performance rate in the EPA emission building blocks 2 and 3 have been generation at other units in the guidelines, through implementation of implemented for decades, initially for integrated system; (b) reduce their the actions described above for building reasons unrelated to pollution control, generation, which in the presence of blocks 2 and 3, along with the actions then in recent years in order to control emission reduction requirements non-GHG air pollutants, and more described further above for building applicable to the source category as a block 1. recently, for purposes of CO2-emission whole will have the effect of increasing control by states and companies. The EPA anticipates that in instances demand for, and thereby incentivize Moreover, Congress itself recognized in where section 111(d) plans provide for investment in, the measures in the enacting the acid rain provisions of the use of instruments such as ERCs as building blocks elsewhere in the CAA Title IV that RE measures reduce a mechanism to facilitate use of these integrated system; or (c) both invest in CO from affected EGUs. In addition, the measures, organized markets will 2 the measures in the building blocks and EPA has relied on the measures in develop so that owner/operators of reduce their own generation, effectively building blocks 2 and 3 in other rules. affected EGUs that have invested in replacing their generation with cleaner It should also be noted that building measures eligible for the issuance of generation. The availability of these blocks 2 and 3 also meet the criteria for ERCs will be able to sell those credits options is further enhanced where the the BSER in combination with one individual EGU is operating under a and other affected EGUs will be able to another and with building block 1, as standard of performance that purchase them. Such markets have described below. incorporates emissions trading. developed for other instruments used e. Actions that individual affected for emissions trading purposes. For EGUs could take to apply or implement (a) Investment in measures in building example, liquid markets for SO2 the building blocks. We now turn to a blocks 2 and 3. allowances developed rapidly following summary of measures or actions that An affected EGU may take the the implementation of Title IV of the individual EGUs could take to apply or following actions to invest in the 1990 Clean Air Act Amendments implement the building blocks and that measures in building blocks 2 and 3. For establishing the Acid Rain Program. are therefore, in that sense, part of the building block 2, the owner/operator of Members of Congress and industry had BSER. a steam EGU may increase generation at expressed concern during the legislative (1) Improvement in CO2 emission rate an existing NGCC unit it already owns, debate that the lack of a liquid SO2 at the unit. or one that it purchases or invests in. In allowance market would create An affected EGU may take steps to addition, the owner/operator may, challenges for affected sources that improve its CO2 emission rate as through a bilateral transaction with an needed to acquire allowances to meet discussed above for the source category existing NGCC unit, pay the unit to their compliance obligations. Congress as a whole. As discussed in section V.C., increase generation, and acquire the added statutory provisions to ensure the record makes clear that coal-fired CO2-reducing effects of that increased that, should a market not develop, steam EGUs can make, and have made, generation in the form of a credit, as sources could purchase needed heat rate improvements to a greater or discussed below. allowances directly from the EPA. In lesser degree, resulting in reductions in Similarly, for building block 3, an fact, these provisions went unused CO emissions. The resulting 2 owner/operator of an affected EGU may because a liquid market for allowances improvement in an EGU’s CO emission 2 build, or purchase an ownership interest did develop very quickly. Sources rate would help the EGU achieve an in, new RE generating capacity and engaged in allowance transactions emission limit imposed in the form of acquire the CO -reducing effects of that directly with other sources as they an emission rate. If the EGU’s emission 2 increased generation. Alternatively, an sought to lower compliance costs. limit is imposed in the form of a mass owner/operator may, through bilateral Market intermediaries offered services standard, the heat rate improvement transactions, purchase the CO -reducing to sources to match allowance buyers would also lower the EGU’s mass 2 effects of that increased generation from and sellers and helped sources emissions provided that the EGU held renewable generation providers, again, understand their compliance options. the amount of its generation constant or in the form of a credit. Trade associations worked with increased its generation by a smaller members to develop standardized In case of an investment in either percentage than the efficiency contracts and other tools to facilitate building block 2 or building block 3 by improvement. Under a mass-based allowance transactions, thereby a unit subject to a rate-based form of standard that incorporates emission reducing transaction costs. Similar CO performance standard, it would be trading, an EGU that improves its heat 2 developments have occurred in state- rate would need fewer emission reasonable for state plans to authorize affected EGUs to use an approved and allowances for each MWh of generation 375 Criteria for issuance of valid ERCs and for whatever level of generation it chose to validated instrument such as an tracking credits after issuance are discussed in produce. ‘‘emission rate credit’’ (ERC) section VIII below.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00071 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64732 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

level renewable portfolio standard interstate compliance regimes that generation and therefore CO2 emissions programs.376 mirror the interconnected operation of from the group of affected EGUs within If states choose to allow through their the electricity system. As a result, the a region, in a state with mass-based section 111(d) plans mechanisms or EPA believes that it is reasonable to limits implementation of these measures standards of performance involving anticipate that a virtually nationwide facilitates the ability of the individual instruments such as ERCs, the EPA emissions trading market for EGUs within the region to achieve their believes that there would be an ample compliance will emerge, and that ERCs limits by choosing to reduce their own supply of such credits, for several will be effectively available to any generation and emissions. reasons. First, as discussed in sections affected EGU wherever located, as long (b) Reduced generation. V.D. and V.E., the EPA has established as its state plan authorizes emissions In addition, the owner/operator of an the stringencies for building blocks 2 trading among affected EGUs.377 affected EGU may help itself meet its and 3 at levels that are reasonable and It should also be noted that although emission limit by reducing its not at the maximum achievable levels, in a state that sets emission limits in a generation. If the owner/operator providing headroom for investment in rate-based form the measures in reduces generation and therefore the the measures in these building blocks building blocks 2 and 3 can be taken amount of its CO2 emissions, then, if the beyond the amounts reflected in the CO2 into account directly in computations to affected EGU is subject to an emission emission performance rates reflecting determine whether an individual rate limit, the owner/operator will need application of the BSER. In addition, if affected EGU has achieved its emission to implement fewer of the building emission limits are set at the CO2 limit, in a state that sets emission limits block measures, e.g., buy fewer ERCs, to emission performance rates, affected in a mass-based form these measures are achieve its emission rate; and if the EGUs in two of the three not taken into account directly in affected EGU is subject to a mass interconnections on average do not need computations to determine whether an emission limit, the owner/operator will to implement the building blocks to individual affected EGU has achieved need fewer mass allowances. As their full available extent in order to its emission limit. However, by reducing discussed below, at the levels that the achieve their emission limits (because EPA has selected for the BSER, reduced the performance rates for each source 377 There is a theoretical possibility—which we generation at higher-emitting EGUs does category are the emission rates view as extremely unlikely—that the affected EGUs not decrease the amount of electricity achievable by that source subcategory in a given state or group of states that has chosen available to the system and end users to pursue a technology-specific rate-based approach because lower-emitting (or zero- through application of the building could have insufficient access to ERCs because of blocks in the interconnection where that the choices of certain other states to pursue mass- emitting) generation will be available achievable emission rate is the highest), based or blended-rate approaches. We view this as from other sources. providing further opportunities in those very unlikely in part because of the conservative An owner/operator may take actions assumptions used in calculating the emission to ensure that it reduces its generation. interconnections to generate surplus reductions available through the building blocks emission reductions that could be used and the broad availability of non-BSER emission For example, it may accept a permit as the basis for issuance of ERCs. reduction opportunities, such as energy efficiency, restriction on the amount of hours that Further, to the extent that section 111(d) that will generate ERCs. If such a situation arises, it generates. In addition or alternatively, plans take advantage of the latitude the and the state or states implementing the technology- it may represent the cost of additional specific rates does not have, within the state or final guidelines provide for states to set states, sufficient ERC-generation potential to match emission credits or allowances that standards of performance incorporating their compliance requirements, the EPA will work would be required due to incremental emissions trading on an interstate basis with the state or states to ensure that there is a generation as an additional variable cost among affected EGUs in different mechanism that the state or states can include in that increases the total variable cost their state plans to allow the affected EGUs in the considered when dispatch decisions are interconnections, all sources can take state or states to generate additional ERCs where the advantage of the headroom available in state or states can demonstrate that the ERCs do not made for the unit. other interconnections. As a result, represent double-counting under other state Because of the integrated nature of the significant amounts of existing NGCC programs. One potential mechanism would be to electricity system, combined with the assume for purposes of demonstrating compliance system’s high degree of planning and capacity and potential for RE remain with their standards of performance that the available to serve as the basis for generation replacing any reductions in generation at reliability safeguards, as well as the long issuance of ERCs for all affected EGUs those affected EGUs that was not paired with planning horizon afforded by this rule, in both source subcategories to rely on verified ERCs came from existing NGCC units in individual affected EGUs can other states from which ERCs were not accessible. implement the building blocks by to achieve their emission limits. In other words, any reductions in fossil steam Because we recognize the ready generation from 2012 levels in a state or states that reducing generation to achieve their 378 availability to states of standards of was implementing technology-specific rates that emission performance standards. performance that incorporate emissions could not be matched by increases in NGCC Individual affected steam EGUs can trading—and because such standards generation or by ERCs from zero-emitting sources, reduce their generation in the amounts and for which it could be demonstrated that no of building blocks 2 and 3, while can easily encompass interstate further ERCs can be procured, could generate trading—this rule includes by express building block 2 ERCs as if that level of displaced individual affected NGCC units can design a variety of options that states generation were NGCC generation. A demonstration reduce their generation in the amount of and utilities can select to pursue that no further ERCs are procurable would have to building block 3. With emission limits include demonstrations that the capacity factor of for the source category as a whole in all NGCC generation in the state or states was 376 The emergence of markets under the Acid expected to be greater than 75 percent and that place, the resulting reduction in supply Rain Program and other environmental programs further deployment of RE would go beyond the of higher-emitting generation will where trading has been permitted, as well as state amounts found available in the BSER. States could incentivize additional utilization of and industry support for the development of distribute these additional ERCs to ensure existing NGCC capacity, the resulting markets under states’ section 111(d) plans, is compliance by affected EGUs. Before such ERCs discussed in a recent report by the Advanced could be created by a state or states, a framework reduction in overall fossil fuel-fired Energy Economy Institute. AEE Institute, Markets would have to be submitted to the EPA for approval Drive Innovation—Why History Shows that the including documentation of the levels of fossil 378 For purposes of this discussion, we assume Clean Power Plan Will Stimulate a Robust Industry steam and NGCC generation in the state or states, that coal-fired steam generators also implement Response (July 2015), available at https:// a demonstration that no further ERCs are accessible, building block 1 measures so that they will www.aee.net/aeei/initiatives/epa-111d.html#epa- and the total amount of building block 2 ERCs to implement the full set of measures needed to reports-and-white-papers. be created. achieve their emission limit.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00072 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64733

generation will incentivize investment incorporate emissions trading.379 These The states’ and EGUs’ interest in in additional RE generating capacity, wide-ranging factors include (i) the emissions trading is rooted in the well- and the integrated system’s response to global nature of the air pollutant in recognized benefits that trading these incentives will ensure that there question—i.e., CO2; (ii) the transactional provides. The experience of multiple will be sufficient electricity generated to nature of the industry; (iii) the trading programs over many years has continue to meet the demand for interconnected functioning of the shown that some units can achieve electricity services. industry and the coordination of emission reductions at lower cost than (c) Emissions trading. generation resources at the level of the others, and a system that allows for As described above, viewed from the regional grid; (iv) the extensive those lower-cost reductions to be perspective of the source category as a experience that states—and EGUs— maximized is more cost-effective overall whole, it is reasonable for our analysis already have with emissions trading; to the industry and to society. Trading of the BSER to include an element of and (v) material in the record provides an affected EGU other options source-category-wide multi-unit demonstrating strong interest on the besides direct implementation of compliance which could be part of many states and affected EGUs emission reduction measures in its own implemented via a state-set standard of in using emissions trading to help meet facility or an affiliated facility when performance incorporating emissions their obligations.380 lower-cost emission reduction trading, under which EGUs could opportunities exist elsewhere. engage in trading of rate-based emission 379 As an alternative to authorizing trading that Specifically, the affected EGU can cross- credits or mass-based emission would still provide a degree of multi-unit invest, that is, invest in actions at allowances. By the same token, viewed flexibility, a state could choose in its state plan to give an owner of multiple affected EGUs flexibility facilities owned by others, in exchange from the perspective of an individual regarding how the owner distributes any credits or for rate-based emission credits or mass- EGU, consideration of the ready allowances it acquires among its affected EGUs. based emission allowances. Through availability to states of the opportunity 380 Numerous states submitted comments urging cross-investment, trading allows each to establish standards of performance the EPA to allow states to develop trading programs, as suggested in the proposal, including affected EGU to access the control that incorporate emissions trading is interstate trading programs. They include, for measures that other affected EGUs integral to our analysis. Accordingly, example, Alabama (EPA should develop and issue decide to implement, which in this case our assessment of the actions available guidelines that allow options for multi-state plans include all the building blocks as well to individual EGUs for achieving and interstate credit trading programs, comment 23584), California (EPA should provide flexibility as other measures. standards of performance reflecting the for allowance trading programs to be integrated into Accordingly, our analysis of the BSER includes the purchase of rate- state plans, comment 23433), Hawaii (supports use measures under consideration in our based emission credits or mass-based of emission credit trading with other entities to BSER determination reflected the well- emission allowances, because one of the achieve compliance, comment 23121), Massachusetts (EPA should explore possibility of things an affected EGU can do to hosting a third-party emissions trading bank that Economy (including Arizona, California, Colorado, achieve its emission limit is to buy a can allow states interested in allowance trading to Idaho, Montana, Nevada, Oregon, South Dakota, credit or an allowance from another plug and play in to a wider, more cost-effective Utah, Washington) (‘‘Some degree of RE and EE affected EGU that has over-complied. market, comment 31910), Michigan (supports credit trading among states may support emissions trading programs, comment 23987), compliance, even in the absence of a The use of purchased credits or Minnesota (develop model trading rule that states comprehensive regional plan. Therefore, EPA allowances would have to be could incorporate by reference as part of plan and should support approaches which allow states authorized, of course, in the purchasing automatically be included in multi-state mass flexibility to allocate credit for these zero-carbon EGUs’ states’ section 111(d) plans and trading program, comment 23987), North Carolina resources, along with approaches which allow would have to meet conditions set out (EPA should examine a system of banking and states to reach agreements on the allocation of trading for energy efficiency, comment 23542), carbon liabilities. This includes ensuring that for such approaches in section VIII Oregon (EPA should expand the explicit options for existing tracking mechanisms for renewable energy below. The role of emissions trading in multi-state plans beyond cap-and-trade, comment in the West, such as the Western Renewable Energy the BSER analysis is discussed further 20678), Washington (supporting trading, comment Generation Information System (WREGIS), are in section V.A.2.f. below. 22764), Wisconsin (requesting EPA to develop a compatible with the final proposal.’’ Comment national trading program, Post-111(d) Proposal 21787 at 5); Midcontinent States Environmental and f. The role of emissions trading. In Questions to EPA WI Questions for 7/16 Hub call). Energy Regulators (including Arkansas, Illinois, making its BSER determination here, the In addition, several groups of states supported Michigan, Minnesota Missouri, Wisconsin) (EPA EPA examined a number of technologies trading programs: Georgetown Climate Center (a should also provide states with optional . . . and emission reduction measures that group of state environmental agency leaders, energy systems (or system) for tracking emissions, agency leaders, and public utility commissioners allowances, reduction credits, and/or generation result in lower levels of CO2 emissions from California, Colorado, Connecticut, Delaware, attributes that states may choose to use in their and evaluated each one on the basis of Illinois, Maine, Maryland, Massachusetts, 111(d) plans,’’ comment 22535 at 3). the several criteria on which the EPA Minnesota, New Hampshire, New York, Oregon, In addition, trading programs were supported by, relies in determining the BSER. In Rhode Island, Vermont, and Washington) (‘‘We among others, a group of Attorneys General from 11 contrast to section 111(b), however, believe states should have maximum flexibility to states and the District of Columbia. Comment 25433 determine what kinds of collaborations might work (Attorneys General from New York, California, section 111(d)(1) obliges the states, not for them. These could include submission of joint Connecticut, Maine, Maryland, Massachusetts, New the EPA, to set standards of performance plans, standardized approaches to trading Mexico, Oregon, Rhode Island, Vermont, for the affected EGUs in order to renewable or energy efficiency credits.... We Washington, District of Columbia, and New York implement the BSER. Accordingly, with also encourage EPA to help facilitate such interstate City Corporation Counsel). agreements or multi-state collaborations by working Numerous industry commenters also supported respect to each measure or control with states to either identify or provide a platform trading, including Alliant Energy Corporate strategy under consideration, the EPA or framework that states may elect to use for the Services, Inc. (comment 22934), Calpine (comment also evaluated whether or not the states tracking and trading of avoided generation or 23167), DTE Energy (comment 24061), Exelon could establish standards of emissions credits due to interstate efficiency or (comment 23428 and 23155), Michigan Municipal renewable energy.’’ comment 23597, at 39–40); Electric Association (MMEA) (comment 23297), performance for affected EGUs that RGGI (including Connecticut, Delaware, Maine, National Climate Coalition (comment 22910), would allow those sources to adopt the Maryland, Massachusetts, New Hampshire, New Pacific Gas and Electric Company (comment measure in question. In this case, the York, Rhode Island, Vermont) (‘‘[E]very serious 23198), Western Power Trading Forum (WPTF) EPA identified a host of factors that proposal to reduce carbon emissions from EGUs, (comment 22860). Environmental advocates also from proposed US legislation to programs in place supported trading, including Clean Air Task Force persuaded us that states could— and, in in California and Europe, has identified allowance (comment 22612), Environmental Defense Fund fact, may be expected to—establish trading as the best approach.’’ Comment 22395 at (comment 23140), Institute for Policy Integrity, New standards of performance that 7–8); Western States Center for New Energy York University School of Law (comment 23418).

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00073 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64734 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

founded conclusion that it is reasonable the environmental goal of reducing CO2 tailored closely to its compliance needs. for states to incorporate emissions pollution. In its character as a pollutant The existence of such tradable trading in the standards of performance whose impacts extend beyond local commodities also incentivizes over- they establish for affected EGUs and that areas, CO2 pollution resembles to some compliance by affected EGUs, which 381 many, if not all, would do so. extent the regional SO2 pollution that can then sell their over-compliance in Whether viewed from the perspective Congress chose to address with the the form of ERCs or allowances to other of an individual EGU or the source emissions trading program enacted in affected EGUs. Moreover, as noted category as a whole, emissions trading Title IV of the 1990 CAA Amendments. elsewhere, the opportunity to trade is is thus an integral part of our BSER The argument in support of trading consistent with the EPA’s regional analysis. Again, we concluded that this approaches is even stronger for CO2 approach for the building blocks. is reasonable given the global nature of pollution, whose adverse effects are By the same token, the opportunity to the pollutant, the transactional and global rather than merely regional like trade incentivizes affected EGUs to over- interconnected nature of this industry, the SO2 emissions contributing to acid comply with building block 1. Thus, the and the long history and numerous precipitation. opportunity to trade supports the EPA’s examples demonstrating that, in this Further, as discussed elsewhere in the assumptions about what an average sector, trading is integral to how preamble, the utility power sector—and affected EGU can achieve with regards regulators have established, and sources the affected EGUs and other generation to heat rate improvement even if each have complied with, environmental and assets that it encompasses—has a long and every affected EGU cannot achieve similar obligations (such as RE history of working on a coordinated that level of improvement. In addition, standards) when it was appropriate to basis to meet operating and trading incentivizes affected EGUs to do so given the program objective. The environmental objectives, necessitated consider low-cost, non-BSER methods reasonableness is further demonstrated and facilitated by the unique to reduce emissions as well, and, as by the numerous comments (some of interconnectedness and discussed below, there are numerous which are noted above) from industry, interdependence of the sector. That non-BSER methods, ranging from states, and other stakeholders in this history includes joint dispatch for implementation of demand-side EE rulemaking that supported allowing economic and reliability purposes, both programs to natural gas co-firing. states to adopt trading programs to within large utility systems and in Trading has become an important comply with section 111(d) and multi-utility power pools that have mechanism for achieving environmental encouraged EPA to facilitate trading evolved into RTOs; joint power plant goals in the electricity sector in part across state lines through the use of ownership arrangements; and long-term because trading allows environmental trading-ready state plans. The EPA’s and short-term bilateral power purchase regulators to set an environmental goal reliance on trading in its BSER arrangements. More recently, the while preserving the ability of the determination does not mean, however, sector’s history also includes emissions operators of the affected EGUs to decide that states are required to establish trading programs designed by Congress, the best way to meet it taking account trading programs (just as states are not the EPA, and the states to address of the full range of considerations that required to implement the building regional environmental problems and, govern their overall operations. For blocks that comprise BSER). Nor does it most recently, climate change. Examples example, commenters were concerned mean that trading is the only of such programs are noted below. that because of building block 2, the transactional approach that we could Essentially, trading does nothing more emission guidelines would require state have considered in setting the BSER or than commoditize compliance, with the environmental regulators to make that states could use to effectuate the following two important results dispatch decisions for the electricity building blocks were they to decide that emerging from that: It reduces the markets, a role that state environmental they did not want to take on the overall costs of controls and spreads regulators do not currently play. responsibility of running a trading those costs among the entire category of Although building block 2 entails program. Rather, it is simply a regulated entities while providing a substituting existing NGCC generation recognition of the nature of this industry greater range of options for sources that for steam generation, implementing the and the long history of trading as an may not want to make on-site emission limits that are based in part on important regulatory tool in establishing investments for controlling their building block 2 through a trading regulatory regimes for this industry and emissions and may prefer to make the program provides the individual its reasonable availability to states in same investment, via the purchase of affected EGUs with a great deal of establishing standards of performance. the tradable compliance instrument, at control over their own generation while As an initial matter, trading is another generating source. Building the industry as a whole achieves the permissible for these emission blocks 2 and 3 entail affected EGUs environmental goals. For example, guidelines because CO2 is a global investing in increased generation from individual steam generators have the pollutant; the location of its emission existing NGCC units and RE. The option of maintaining their generation does not affect the location of the affected EGUs could do so in any as long as they acquire additional ERCs. environmental harm it causes. For CO2, number of ways, including acquiring Moreover, trading provides a way for it is the total amount of emissions from ownership interests in existing NGCC or states to set standards of performance the source category that matters, not the RE facilities or entering into bilateral that realize the required emissions specific emissions from any one EGU. transactions with the owners of existing reduction without requiring any form of The fact that trading allows sources to NGCC facilities or RE sources. As ‘‘environmental dispatch’’ because, as shift emissions from one location to discussed elsewhere, it is reasonable to many existing trading programs have another does not impede achievement of expect that these actions can develop shown, monetization of the into discrete, tradable commodities (e.g., environmental constraint is consistent 381 As discussed in the Legal Memorandum, the an ERC) and that liquid markets will with a least-cost dispatch system. EPA has promulgated other rulemakings, including develop, which would reduce Trading also supports the EPA’s the transport rulemakings—the NOX SIP Call and CAIR, which required states to submit SIPs, and transaction costs and allow an affected approach to the ‘‘remaining useful life’’ CSAPR, which allows SIPs—on the premise of EGU to comply with its emission limits provision in section 111(d)(1) because interstate emission trading. by purchasing discrete units in amounts with trading, an affected EGU with a

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00074 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64735

limited remaining useful life can avoid preamble that Congress, in enacting the not included in the BSER. There are the need to implement long-term Title IV acid rain trading program, and numerous other measures that are emission reduction measures and can the EPA, in promulgating the regulatory available to at least some affected EGUs instead purchase ERCs or other tradable trading programs listed, recognized both to help assure that they can achieve instruments, such as mass-based the suitability of trading for the EGU their emission limits, even though the allowances, thereby allowing the state to industry and the benefits of trading in EPA is not identifying these measures as meet the requirements of this rule. reducing costs, spreading costs to part of the BSER. These measures The EPA’s job in issuing these affected EGUs throughout the sector, include demand-side EE implementable emission guidelines is to determine the and facilitating the ability of affected by affected EGUs; new or uprated BSER that has been adequately EGUs to comply with their emission nuclear generation; renewable measures demonstrated and to set emission limits. In addition, as we discuss in other than those that are part of building limitations that are achievable through section V.E. of this preamble, many block 3, including distributed the application of the BSER and states have adopted RE standards that generation solar power and off-shore implementable through standards of promote RE through the trading of wind; combined heat and power and performance established by the states. renewable energy certificates (RECs). waste heat power; and transmission and The three building blocks are the EPA’s Based on this history, it is reasonable distribution improvements. In addition, determination of what technology is for the EPA to determine that states can a state may implement measures that adequately demonstrated. We also establish standards of performance that yield emission reductions for use in consider trading an integral part of the incorporate trading and, as a result, for reducing the obligations on affected BSER analysis because, in addition to the purpose of making a BSER EGUs, such as demand-side EE being available to states for determination here to evaluate measures not implementable by affected incorporation in the standards of prospective emission control measures EGUs, including appliance standards, performance they set for affected EGUs, in light of the availability of trading. building codes, and drinking water or trading has been adequately Trading is a regulatory mechanism that wastewater system efficiency measures. demonstrated for this industry in works well for this industry. The The availability of these measures circumstances where systemic rather environmental attributes in the further assures that the appropriate level than unit-level reductions are central. preceding programs (representing of emission reductions can be achieved Congress, the EPA, and state regulators emissions of air pollutants) are identical and that affected EGUs will be able to have established successful to or similar in nature to the achieve their emission limits. environmental programs for this environmental attribute here (CO2 industry that allow trading of emissions). The markets for RECs show h. Ability of EGUs to implement the environmental (or similar) attributes, that robust markets for RE, in particular, BSER. The EPA’s analysis, based in part and trading has been widely used by the already exist. on observed decades-long behavior of industry to comply with these programs. Given the benefits of trading and the EGUs, shows that all types and sizes of Examples include the CAA Title IV background of multi-unit coordination affected EGUs in all locations are able to undertake the actions described as Acid Rain Program, the NOX SIP Call grounded in the nature of the utility the BSER, including investor-owned (currently referred to as the NOX Budget power sector, it is natural for sources Trading Program), the Clean Air and states to look for opportunities to utilities, merchant generators, rural Interstate Rule (CAIR), the Cross-State apply similar coordination to a regional cooperatives, municipally-owned utilities, and federal utilities. Some may Air Pollution Rule (CSAPR),382 the problem such as reduction of CO2 Regional Haze trading programs, the emissions from the sector. As noted need to focus more on certain measures; Clean Air Mercury Rule,383 RGGI, the earlier, the EPA heard this interest for example, an owner of a small trading program established by expressed during the outreach process generation portfolio consisting of a California AB32, and the South Coast for this rulemaking and saw it reflected single coal-fired steam EGU may need to Air Quality Management District in comments on the proposal. Emissions rely more on cross-investment RECLAIM program. We describe these trading was prominent in these approaches, possibly including the programs in section II.E. of this expressions of interest; while the purchase of emission credits or preamble. In addition, we note in the proposal allowed trading and allowances, because of a lack of Legal Memorandum accompanying this encouraged the development of multi- sufficient scale to diversify its own state plans which would allow the portfolio to include NGCC capacity and 382 For example, in CSAPR, which covered the benefits of trading to extend over larger RE generating capacity in addition to states in the eastern half of the U.S., the EPA regions, we heard that interest was even coal-fired capacity. As a legal matter, it assumed the existence of trading across those states greater in ‘‘trading-ready’’ plans that is not necessary that each affected EGU in the rule’s cost estimates contained in the RIA. be able to implement the BSER, but in ‘‘Regulatory Impact Analysis for the Federal would use trading mechanisms and Implementation Plans to Reduce Interstate market-based coordination, rather than any event, in this rule, all affected EGUs Transport of Fine Particulate Matter and Ozone in state-to-state coordination, as the can do so. Since states can reasonably 27 States; Correction of SIP Approvals for 22 primary means of facilitating multi-unit be expected to establish standards of States’’ 32 (June 2011), http://www.epa.gov/ approaches to compliance. The general performance incorporating emissions airtransport/CSAPR/pdfs/FinalRIA.pdf. In addition, the rule is being implemented either through industry and state preference for multi- trading, affected EGUs may rely on federal implementation plans (FIPs) that authorize unit compliance approaches makes great emissions trading approaches interstate emission trading or SIPs that authorize sense in the context of the industry and authorized under their states’ section interstate emissions trading. this pollutant, as does the specific 111(d) plans to, in effect, invest in 383 Although the CAMR trading program never took effect because the rule was vacated on other preference for trading-ready section building block measures that are grounds, it consisted of a nationwide trading 111(d) plans, and we have made efforts physically implemented at other program that the EPA adopted under CAA section in the final rule to accommodate locations. As discussed above, the EPA’s 111(d). Some states declined to allow their sources trading-ready plans as described in quantification of the CO2 emission to participate in the trading program on the grounds that nationwide trading was not appropriate for the section VIII. performance rates in a manner that air pollutant at issue, mercury, a HAP that caused g. Measures that reduce CO2 provides headroom within the BSER adverse local impacts. emissions or CO2 emission rates but are also contributes to the ability of all

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00075 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64736 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

affected EGUs to implement the BSER reasonable cost using the approaches we applied. The clarified and more refined and achieve emissions limitations have identified as the BSER as well as interpretations replace the proposed consistent with those performance rates. other available measures. interpretations. i. Subcategorization. As noted above, Of course, a state retains great Two of these points merit mention in this rule, we are treating all fossil flexibility in assigning standards of here. First, the EPA is clarifying in this fuel-fired EGUs as a single category, performance to its affected EGUs and rule that the interpretation of ‘‘system of and, in the emission guidelines that we can impose different emission reduction emission reduction’’ does not include are promulgating with this rule, we are obligations on its sources, as long as the emission reduction measures that the treating steam EGUs and combustion overall level of emission limitation is at states have authority to mandate turbines as separate subcategories. We least as stringent as the emission without the affected EGUs being able to are determining the BSER for steam guidelines, as discussed below. implement the measures themselves EGUs and the BSER for combustion (e.g., appliance standards or building turbines, and applying the BSER to each 3. Changes From Proposal codes). In the final rule, we have subcategory to determine a performance For the BSER determined in this final clarified that the components of the rate for that subcategory. We are not rule, based on consideration of BSER must be implementable by the further subcategorizing among different comments responding to a broad array affected EGUs, not just by the states, and types of steam EGUs or combustion of topics considered in the proposal, the we show that all the components of the turbines. As we discuss below, this EPA has adopted certain modifications BSER have been demonstrated to be approach is fully consistent with the to the proposed BSER. In this subsection achievable on that basis without provisions of section 111(d), which we describe the most important reliance on actions that can be simply require the EPA to determine the modifications, including some that accomplished only through government BSER, do not prescribe the method for relate to individual building blocks and mandates. Further discussion of these doing so, and are silent as to some that are more general. Additional points can be found throughout this subcategorization. This approach is also modifications that relate to individual section on the BSER and the following fully consistent with other provisions in building blocks are discussed in the sections on the individual building section 111, which require the EPA first respective sections for those building blocks. to list source categories that may blocks below (sections V.C. through Second, the EPA has adopted a reasonably be expected to endanger V.E.). combined interpretation of sections public health or welfare and then to We note that taken together, the 111(a)(1) and 111(d) that, compared to regulate new sources within each such modifications yield emission reductions the proposal, better reflects the source category, and which grant the requirements that commence more historical interpretations of section EPA discretion whether to subcategorize gradually than the proposed goals but 111(a)(1), which have generally the sources for purposes of determining are projected to produce greater overall supported emissions standards that are the BSER. annual emission reductions by 2030.384 nationally uniform for sources As discussed below, each affected We also note that the modifications lead incorporating a given technology, and EGU can achieve the performance rate to requirements that are more uniform gives less weight to the state-focused by implementing the BSER, specifically, across states than the proposed state character of section 111(d), which calls by taking a range of actions—some of goals (consistent with the direction of for emissions standards to be which depend on features of the section certain alternatives on which we sought implemented through the development 111(d) plan chosen by the state, such as comment in the proposal), with the final of individual state plans. The proposed the choice of rate-based or mass-based requirements generally becoming more state goals were heavily (although not standards of performance and the choice stringent (compared to the proposal) in entirely) dependent on the emission of whether and how to permit emissions reduction opportunities available to the states with the highest 2012 CO2 trading—including investment in the emission rates and less stringent in EGUs in each individual state, and building blocks, replaced or reduced because the relative magnitudes of these states with lower 2012 CO2 emission generation, and purchase of emission rates. opportunities varied by state, states with credits or allowances. Further, in the a. Interpretations of CAA section 111. similar EGU fleet compositions could case of a rate-based state plan, several In the June 2014 proposal, the EPA have faced state goals of different other compliance options not included proposed interpretations of section stringencies, potentially making it in the BSER for this rule are also 111(a)(1) and (d), and applied these difficult for multiple states to set the available to all affected EGUs, including interpretations to existing fossil fuel- same standards of performance for investment in demand-side EE fired EGUs.385 Informed by comments, affected EGUs using the same measures. Such compliance options the EPA has clarified some of these technologies (assuming the states were may also indirectly help affected EGUs interpretations, and has developed a interested in setting standards of achieve compliance under a mass-based more refined understanding of how performance for their various affected plan. some of these interpretations should be EGUs in such a manner). Some Our approach of subcategorizing commenters viewed this potential result between steam EGUs and combustion as inconsistent with section 111(a)(1), 384 For the proposed rule, the EPA projected total turbines is reasonable because building CO2 emission reductions from 2005 levels of 29% inequitable, or both. In response, we blocks 1 and 2 apply only to steam in 2025 and 30% in 2030. For the final rule, the took further comment on these potential EGUs. Moreover, our approach of not EPA projects total CO2 emissions reductions from disparities in the October 30, 2014 further subcategorizing as between 2005 levels of 28% in 2025 and 32% in 2030. See NODA. In this final rule, we are Regulatory Impact Analysis for the CPP Proposed different types of steam EGUs or Rule, Table 3–6, and Regulatory Impact Analysis for obviating those concerns by assessing combustion turbines reflects the the CPP Final Rule, Table 3–6, available in the the emission reduction opportunities at reasonable policy that affected EGUs docket. an appropriate regional scale, consistent with higher emission rates should 385 The June 2014 proposal in part referenced with alternatives on which we sought proposed interpretations of section 111(a)(1) that reduce their emissions by a greater the EPA explained in the January 2014 proposal to comment, and using this regional percentage than affected EGUs with address CO2 emissions from new fossil fuel-fired information to reformulate the proposed lower emission rates and can do so at a EGUs under section 111(b). emissions standards as nationally

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00076 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64737

uniform emissions standards for the of RE generation on an incremental generation in the goals is premature emission guidelines.386 National basis is both more consistent with the because the units’ actual completion uniformity is consistent with prior treatment of other building blocks and dates could be delayed. Commenters section 111 rulemaking and advances a more consistent with the general also stated that inclusion of the under- number of other goals central to this principle that the BSER should construction nuclear generation in the rulemaking. The methodological comprise incremental measures that BSER would be inequitable because refinements related to regional will reduce emissions below existing states where the same heavy investment assessment of emission reduction levels, not measures that are already in in zero-CO2 generation was not being opportunities and the use of uniform place, even if those in-place measures made would have relatively less emissions standards by technology help current emission levels be lower stringent goals. subcategory are further discussed below. than would be the case without the With respect to generation from b. Approach to quantification of measures. The final rule therefore existing nuclear units, some emission reductions from increased RE defines the RE component of the BSER commenters stated that our method of generation. In the June 2014 proposal, in terms of incremental rather than total accounting for potential unit shutdowns the EPA described two possible RE generation.387 Further details was flawed, observing that even if the approaches for quantifying the amount regarding the final rule’s quantification prediction of a 5.8 percent nationwide of emission reductions achievable from of RE generation are provided in section loss of nuclear generation were accurate, affected EGUs through the use of RE V.E. below. the actual shutdowns would occur in a generation. The proposed approach c. Exclusion from the BSER of handful of states, resulting in much used information on state RPS emission reductions from use of under- larger losses of generation in those aggregated at a regional level along with construction or preserved nuclear particular states. historical RE generation data to project capacity. In the June 2014 proposal, the Upon consideration of comments and the amount of RE generation used in EPA included in building block 3 the accompanying data, the EPA has quantifying the emission reductions provisions reflecting the ability for determined that the BSER should not achievable through the BSER. The nuclear generation to replace fossil include either of the components related alternative approach used information generation and thereby reduce CO2 to nuclear generation from the proposal. on the technical and market potential emissions at affected EGUs. We With respect to nuclear units under for development of renewable resources proposed to include in building block 3 construction, although we believe that in each state to project the RE-related the potential generation from five other refinements to this final rule emission reductions. In the October 30, under-construction nuclear generating would address commenters’ concerns 2014 NODA, we sought comment on an units whose construction had that goals for the particular states where additional approach of aggregating the commenced prior to the issuance of the the units are located would be overly state-level information to a regional proposal. In addition, to address the stringent either in absolute terms or level, as suggested by some commenters. potential that some currently operating relative to other states, we also In this final rule we are adopting a nuclear facilities may shut down prior acknowledge that, in comparison to RE combination of these approaches that to 2030, the proposal incorporated into generating technology, investments in uses historical RE generating capacity the BSER for each state with nuclear new nuclear units tend to be deployment data aggregated to a capacity a projected 5.8 percent individually much larger and to require regional level, supported and confirmed reduction in nuclear generation, based longer lead times. Also, important by projections of market potential on an estimate of potential nationwide recent trends evidenced in RE developed through a techno-economic loss of nuclear generation from existing development, such as rapidly growing approach. units. We sought comment on all investment and rapidly decreasing In the June 2014 proposal, RE aspects of these proposed approaches. costs, are not as clearly evidenced in generation was also quantified as While we recognize the important role nuclear generation. We view these generation from total—that is, existing nuclear power plants have to play in factors as distinguishing the under- and new—RE generating capacity, a providing carbon-free generation in an construction nuclear units from RE formulation that was consistent with the all-of-the-above energy system, for this generating capacity, indicating that the formulation of most RPS, which are final rule, the BSER does not include new nuclear capacity is likely of higher typically framed in terms of total rather either of the components related to cost and therefore less appropriate for than incremental generation. In nuclear generation. inclusion in the BSER. Excluding the response to the EPA’s request for The EPA received numerous under-construction nuclear units from comment on this approach, commenters comments on the proposed BSER the BSER, but allowing emission observed that the approach was components related to nuclear power. reductions attributable to generation inconsistent with the approach taken for With respect to generation from under- from the units to be used for compliance other building blocks, and that construction nuclear units, some as discussed below and in section VIII, generation from RE generating capacity commenters expressed strong will recognize the CO2 emission that already existed as of 2012 should opposition to the inclusion of this reduction benefits achievable through not be treated as reducing emissions of generation in the BSER and the setting the significant ongoing commitment affected EGUs from 2012 levels. As just of state goals, stating that inclusion required to complete these major noted, we are not using the RPS-based would result in very stringent state goals investments. methodology in the final rule, and we for the states where the units are being With respect to existing nuclear units, agree with comments that quantification built and that the inclusion of the although again we believe that other refinements in the final rule would 386 Of course, a source in one state may face 387 Generation from existing RE capacity will address the concern about disparate different requirements than similar sources in other continue to make compliance with mass-based impacts on particular states, we states, depending on whether the state adopts the standards easier to achieve by making the overall acknowledge that we lack information state measures approach or, if it adopts the amount of fossil fuel-fired generation that is emission standards approach, whether it imposes a required to meet the demand for energy services on shutdown risk that would enable us mass limit or an emission rate and, if the latter, at lower than it would otherwise be, thereby keeping to improve the estimated 5.8 percent what level. CO2 emissions lower than they would otherwise be. factor for nuclear capacity at risk of

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00077 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64738 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

retirement. Further, based in part on implementation of CAA section 111 has reductions achievable through all the comments received on another aspect of allowed regulated entities to produce as building blocks. Under this approach, the proposal—specifically, the proposed much of a particular good as they desire each of the building blocks is quantified inclusion of existing RE generation in provided that they do so through an and applied at the regional level, the goal-setting computations—we appropriately clean (or low-emitting) resulting in the computation for each believe that it is inappropriate to base process. While building blocks 1, 2, and region of a performance rate for steam the BSER in part on the premise that the 3 fall squarely within this paradigm, the EGUs and a performance rate for NGCC preservation of existing low- or zero- proposed building block 4 does not. In units. For each of the technology carbon generation, as opposed to the view of this, since the BSER must serve subcategories, we identify the most production of incremental, low- or zero- as the foundation of the emission conservative—that is, the least stringent carbon generation, could reduce CO2 guidelines, the EPA has not included —of the three regional performance emissions from current levels. demand-side EE as part of the final rates. We then apply these least Accordingly, we have determined not to BSER determination. stringent subcategory-specific reflect either of the nuclear elements in It should be noted that commenters performance rates to the baseline data the final BSER. also took the position that the EPA for the EGU fleet in each state to Generation from under-construction should allow demand-side EE as a establish state goals of consistent or other new nuclear units and capacity means of compliance with the stringency across the country. (Note that uprates at existing nuclear units would requirements of this rule, and, as the actual state goals vary among states still be able to help sources meet discussed in section V.A.6.b. and to reflect the differences in generation emission rate-based standards of section VIII below, we agree. mix among states in the baseline year.) performance through the creation and e. Consistent regionalized approach to Further description of the steps in this use of credits, as noted in section quantification of emission reductions overall process is contained in the V.A.6.b. and section VIII.K.1.a.(8), and from all building blocks. In the June preamble sections addressing the would help sources meet mass-based 2014 proposal, the EPA treated each of individual building blocks (sections the building blocks differently with standards of performance through V.C., V.D., and V.E.), CO2 emission reduced utilization of fossil generating respect to the regional scale on which performance rate computation (section the building block was applied for capacity leading to reduced CO2 VI), and state goal computation (section emissions at affected EGUs. However, purposes of assessing the emission VII), as well as the GHG Mitigation consistent with the reasons just reductions achievable through use of Measures TSD for the CPP Final Rule that building block. Building block 1 discussed for not reflecting preservation and the CO2 Emission Performance Rate of existing nuclear capacity in the was quantified at a national scale, and Goal Computation TSD for the CPP identifying a single heat rate BSER—namely, that such preservation Final Rule available in the docket. does not actually reduce existing levels improvement opportunity applicable on average to all coal-fired steam EGUs. Compared to the more state-focused of emissions from affected EGUs—the quantification approach selected in the rule does not allow preservation of Building block 2 was quantified at the scale of each individual state, proposal, and as recognized in the generation from existing or relicensed NODA, a regionalized approach better nuclear capacity to serve as the basis for considering the amount of generation that could be shifted from steam EGUs reflects the interconnected system creation of credits that individual within which interdependent affected affected EGUs could use for compliance, to NGCC units within the state, although we solicited comment on considering EGUs actually carry out planning and as further discussed in section operations in order to meet electricity 388 generation shifts at a broader regional VIII.K.1.a.(8). demand. We have already discussed the d. Exclusion from the BSER of scale. The RE component of building relevance of the interconnected system emission reductions from demand-side block 3 was quantified at a regional and the interdependent operations of EE. The June 2014 proposal included scale using RPS information as a proxy EGUs as factors supporting demand-side EE measures in building for RE development potential, and the consideration of building blocks 2 and block 4 as part of the BSER. The EPA regional results were then applied to 3 as elements of the BSER for this took comment on the attributes of each each state in the region using the state’s pollutant and this industry, and these of the proposed building blocks, and baseline data; an alternative same factors support quantifying the building block 4 was a topic of methodology on which we requested emission reductions achievable through considerable controversy among comment quantified the RE component building blocks 2 and 3 on a commenters. While many commenters using a techno-economic approach on a regionalized basis. Because it better recognized demand-side EE as an state-specific basis. In the October 2014 reflects how the industry works, a integral part of the electricity system, NODA, we requested comment on using regionalized approach also better emphasized its cost-effectiveness as a a techno-economic approach to quantify represents the full scope of emission means of reducing CO emissions from RE generation potential at a regional 2 reduction opportunities available to the utility power sector, and strongly scale and took broad comment on individual affected EGUs through the supported its inclusion in the BSER, strategies for better aligning the BSER normal transactional processes of the other commenters expressed significant with the regionally interconnected 389 industry, which do not stop at state concerns. electrical grid. We also solicited borders but rather extend throughout As explained in section V.B.3.c.(8) comment on the appropriate regional these interconnected regions. With below, our traditional interpretation and boundaries or regional structure to facilitate this approach. respect to building block 1, which 388 As with generation from existing RE capacity, For the final rule, with the benefit of comprises types of emission reduction generation from existing nuclear capacity will comments received in response to these measures that in other rulemakings continue to make compliance with mass-based proposals and alternatives, we have under CAA section 111 would typically standards easier to achieve by making the overall adopted a consistent regionalized be evaluated on a nationwide basis, for amount of fossil fuel-fired generation that is required to meet the demand for energy services approach to quantification of emission this rule, as discussed in section V.C. lower than it would otherwise be, thereby keeping below, we are quantifying the emission 389 CO2 emissions lower than they would otherwise be. 79 FR 64543, 64551–52. reductions achievable through building

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00078 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64739

block 1 on a regional basis in order to planned and operated; they are autonomously. The need to maintain treat the building blocks consistently connected to each other only through common frequency and stable voltage and to ensure that for each region the low-capacity direct current (DC) tie levels throughout the interconnections quantification of the BSER represents lines. Each interconnection is managed requires constantly changing flows of only as much potential emission to maintain a single frequency and to electricity between the planning and reduction from building block 1 as our maintain stable voltage levels operating subregions within each analysis of historical data indicates can throughout the interconnection. interconnection. be achieved on average by the affected Physically, each interconnection Because each interconnection is a EGUs in that region. functions as a large pool, where all freely flowing AC grid, any power Characterizing and quantifying the electricity delivered to the electric grid generated or consumed flows through measures included in the BSER on a flows by displacement over all the entire interconnection in real time; regional basis rather than a state-limited transmission lines in the as a result of this highly interconnected basis is also appropriate because states interconnection and must be nature of the power system, the can establish standards of performance continually balanced with load to management of generation and load on that incorporate emissions trading, ensure reliable electricity service to the grid must be carefully maintained. including trading between and among customers throughout each This management is carried out EGUs operating in different states, and interconnection. ‘‘Since power flows on principally by subregional entities thus provide EGUs the opportunity to all transmission paths, it is not responsible for the operation of the grid, trade. Emissions trading provides at uncommon to find circumstances in but this operation must be coordinated least one mechanism by which owners which part of a power delivery within in real time to ensure the reliability of of affected EGUs can access any of the one balancing area flows on the system. Regional operators must building blocks at other locations. With transmission lines in adjoining areas, or coordinate the dispatch of power, not emissions trading, an affected EGU part of a power delivery between two only in their own areas, but also with whose access to heat rate improvement balancing areas flows over the the other subregions within the opportunities, incremental generation transmission facilities of a third interconnection. Although this from existing NGCC units, or generation area.’’ 391 The interconnections are the coordination has always been from new RE generating capacity is ‘‘complex machines’’ within which important, grid planning and relatively favorable can overcomply EGUs plan, coordinate, and operate, management has evolved to be with its own standard of performance manifesting a degree of both long-term increasingly interconnection-wide, and sell rate-based emission credits or and real-time interdependence that is through the development of larger mass-based emission allowances to unique to this industry. We concluded regional entities, such as RTO/ISOs, or other affected EGUs. Purchase of the that, absent a compelling reason to large-utility dispatch across multiple credits or allowances by the other EGUs adopt a smaller regional scale for balancing areas. As a result, the fact that represents cross-investment in the evaluation of CO2 emission reduction much of the necessary coordination for emission reduction opportunities, and opportunities for the electric power the interconnections is performed such cross-investment can be carried sector—which we have not found, as regionally on a partially decentralized out on as wide a geographic scale as discussed below—the interconnections basis (at least in the case of the Eastern trading rules allow. should be the regions used for and Western Interconnections) or occurs The regions we have determined to be evaluation of the BSER for CO2 emission through the operation of automated appropriate for the regionalized reductions from the electric power equipment and the physics of the grid approach in the final rule are the sector because of the fundamental does not render the subregions more Eastern, Western, and Texas characteristics of electricity, the relevant than the interconnections as Interconnections.390 In determining that industry’s basic interconnected physical the appropriate regional level for the ultimate regions within which infrastructure, and the interdependence electricity supply and demand must quantification of the BSER was the level of the affected EGUs within each of the interconnection, the EPA balance. interconnection. Moreover, some planning and considered several factors. First, Second, we considered whether the consistent with our goal of aligning standard setting activities are interconnection subregions for which undertaken explicitly at the regulation with the reality of the various planning and operational interconnected electricity system, we interconnection level. For example, functions are carried out by separate interconnections also have considered the regional scale on which institutional actors would represent electricity is actually produced, interconnection reliability operating more appropriate regions than the entire 392 physically coordinated, and consumed limits (IROLs). A joint FERC–NERC interconnnections, and concluded that report on the September 8, 2011 in real time—specifically the Eastern, they would not. Interconnection Western, and Texas Interconnections. Arizona-Southern California outages planning and management follows the outlined the importance of IROLs.393 The Bulk Power System (BPS) in the NERC functional model, which defines contiguous U.S. (including adjacent subregional areas and regional entities 392 portions of Canada and Mexico) consists For example, the Eastern Interconnection has within each interconnection for the Reliability Standard IRO–006–EAST–1, of these three interconnections, which purposes of balancing generation with Transmission Loading Relief Procedure for the are alternating current (AC) power grids load and ensuring that reliability is Eastern Interconnection, available at http:// www.nerc.com/files/IRO–006–EAST–1.pdf where power flows freely from maintained. While a variety of generating sources to consuming loads. (providing an ‘‘Interconnection-wide transmission organizations plan and operate these loading relief procedure (TLR) for the Eastern These interconnections are separately subregions, those activities always occur Interconnection that can be used to prevent and/or in the context of the interconnections, mitigate potential or actual System Operating Limit 390 The Texas Interconnection encompasses the (SOL) and Interconnection Reliability Operating portion of the Texas electricity system commonly and the subregions cannot be operated Limit (IROL) exceedances to maintain reliability of known as ERCOT (for the Electric Reliability the Bulk Electric System (BES).’’). Council of Texas). The state of Texas has areas 391 Casazza, J. and Delea, F., Understanding 393 FERC–NERC, Arizona-Southern California within the Eastern and Western Interconnections as Electric Power Systems, IEEE Press, at 188 (2d ed. Outages on September 8, 2011: Causes and well as the Texas Interconnection. 2010). Continued

VerDate Sep<11>2014 22:36 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00079 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64740 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

The report noted that to ensure the utility transmission provider to The importance that Congress, DOE, reliable operation of the bulk power participate in a regional transmission FERC, and NERC each place upon the system, entities must identify a plan for planning process that produces a interconnections for electric reliability IROLs to avoid cascading outages. ‘‘In regional transmission plan. FERC also and operational issues is another factor order to ensure the reliable operation of required neighboring transmission supporting our decision to set the the BPS, entities are required to identify planning regions to coordinate with interconnections as the regional and plan for IROLs, which are SOLs each other. This interregional boundaries for the establishment of that, if violated, can cause instability, coordination includes identifying BSER. The utilization of the three uncontrolled separation, and cascading methods for evaluating interregional interconnections for both planning and outages. Once an IROL is identified, transmission facilities as well as reliability purposes is a clear indication system operators are then required to establishing a common method or of the importance that electricity system create plans to mitigate the impact of methods of cost allocation for regulators, operators, and industry place exceeding such a limit to maintain interregional transmission facilities. upon the interconnections. Those system reliability.’’ 394 In addition to Congressional, DOE, responsible for the electricity system Congress recognized the significance and FERC recognition of the importance recognize the need to ensure that there of the three interconnections in the of the three interconnections, NERC also is a free flow of electricity throughout American Recovery and Reinvestment considers them to be significant. NERC each interconnection such that Act of 2009 (Recovery Act) when it Organizational Standards ‘‘are based transmission planning and reliability provided $80 million in funding for upon certain Reliability Principles that analysis are occurring at the interconnection-based transmission define the foundation of reliability for interconnection level. Further, this 395 planning. In order to fulfill this North American bulk electric vigilance with respect to considering Congressional mandate, DOE and FERC systems.’’ 399 These principles take a reliability from an interconnection-wide signed a memorandum of understanding broad view of electric system reliability, basis recognizes that each of the to enumerate their roles ‘‘for activities considering the reliability of interconnections behaves as a single related to the Resource Assessment and interconnected bulk electric systems. machine where ‘‘outages, generation, Interconnection Planning project funded For example, Reliability Principle 1 transmission changes, and problems in by the American Recovery and states, ‘‘Interconnected bulk electric any one area in the synchronous Reinvestment Act of 2009 (Recovery systems shall be planned and operated network can affect the entire Act). Among the objectives of the in a coordinated manner to perform network.’’ 404 By setting the three project is to facilitate the development reliably under normal and abnormal interconnections as the regions for or strengthening of capabilities in each conditions as defined in the NERC purposes of BSER, we are acting of the three interconnections serving the standards.’’ 400 NERC took a similarly consistent with the way in which contiguous lower forty-eight States, to broad view of system reliability when it planning, reliability, and industry prepare analyses of transmission delegated its authority to monitor and experts view the electricity system. requirements under a broad range of enforce mandatory reliability standards alternative futures and develop long- An additional factor weighing against to a single Regional Entity in both the term interconnection-wide transmission the use of planning or operational Western and Texas Interconnections plans.’’ 396 DOE issued awards to five subregions of the interconnections as (WECC in the West and the Texas organizations that performed work in the regions for our BSER analysis for Reliability Entity in the ERCOT region this rule is that the borders of those the Western, Eastern, and Texas 401 Interconnections to develop long-term of Texas). Moreover, both WECC and subregions occasionally change as ERCOT have interconnection-wide planning and management functions interconnection-wide transmission 402 expansion plans.397 reliability standards. The Eastern evolve or as owners of various portions In Order No. 1000, FERC also took a Interconnection has multiple reliability of the grid change affiliations. This is broader regional view of transmission regions with some differences in not a merely theoretical consideration; planning.398 FERC required each public standards, but power flows and numerous ISO/RTO and other regional reliability are managed through a single boundaries have substantially changed Recommendations (Apr. 2012), available at http:// Reliability Coordinator Information in recent years. For example, in 2012, www.ferc.gov/legal/staff-reports/04–27–2012-ferc- System that tracks power flows for all Duke Energy Ohio and Duke Energy nerc-report.pdf. transmission transactions.403 Kentucky integrated into PJM.405 The 394 FERC–NERC, Arizona-Southern California Outages on September 8, 2011: Causes and following year, in December 2013, 399 NERC, Reliability and Market Interface Recommendations, at 97 (Apr. 2012), available at Entergy and its six utility operating http://www.ferc.gov/legal/staff-reports/04–27–2012- Principles, at 1, available at http://www.nerc.com/ pa/Stand/Standards/ companies joined MISO, creating the ferc-nerc-report.pdf. 406 ReliabilityandMarketInterfacePrinciples.pdf. MISO South Region. The integration 395 American Reinvestment and Recovery Act of 400 2009, Title IV, Public Law 111–5 (2009). NERC, Reliability and Market Interface 396 Principles, at 1, available at http://www.nerc.com/ (Apr. 20, 2009), available at http://www.eia.gov/ Memorandum of Understanding Between the _ _ U.S. Department of Energy and the Federal Energy pa/Stand/Standards/ electricity/data/eia411/nerc glossary 2009.pdf. Regulatory Commission, available at http:// ReliabilityandMarketInterfacePrinciples.pdf. 404 Casazza, J. and Delea, F., Understanding www.ferc.gov/legal/mou/mou-doe-ferc.pdf. 401 NERC, Key Players, available at http:// Electric Power Systems, IEEE Press, at 159 (2d ed. 397 DOE, Recovery Act Interconnection www.nerc.com/AboutNERC/keyplayers/Pages/ 2010). Transmission Planning, available at http:// default.aspx. 405 PJM, Duke Energy Ohio, Inc., and Duke Energy energy.gov/oe/services/electricity-policy- 402 WECC, Standards, available at https:// Kentucky, Inc., Successfully Integrated Into PJM coordination-and-implementation/transmission- www.wecc.biz/Standards/Pages/Default.aspx (last (Jan. 3, 2012), available at http://www.pjm.com/∼/ planning/recovery-act. visited July 3, 2015); Texas Reliability Entity, media/about-pjm/newsroom/2012-releases/ 398 Transmission Planning and Cost Allocation by Reliability Standards, available at http:// 20120103-duke-ohio-and-kentucky-integrate-into- Transmission Owning and Operating Public www.texasre.org/standards_rules/Pages/ pjm.ashx. Utilities, Order No. 1000, FERC Stats. & Regs. Default.aspx (last visited July 3, 2015). 406 South Region Integration, available at https:// ¶ 31,323 (2011), order on reh’g, Order No. 1000–A, 403 The NERC glossary defines the Reliability www.misoenergy.org/WhatWeDo/ 139 FERC ¶ 61,132, order on reh’g, Order No. 1000– Coordinator Information System as the ‘‘system that StrategicInitiatives/SouthernRegionIntegration/ B, 141 FERC ¶ 61,044 (2012), aff’d sub nom. S.C. Reliability Coordinators use to post messages and Pages/SouthernRegionIntegration.aspx (noting that Pub. Serv. Auth. v. FERC, 762 F.3d 41 (D.C. Cir. share operating information in real time.’’ NERC, the creation of the MISO South Region ‘‘brought 2014). Glossary of Terms Used in Reliability Standards over 18,000 miles of transmission, ∼50,000

VerDate Sep<11>2014 22:36 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00080 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64741

of MISO South correspondingly led to available from the building blocks at on which affected EGUs may typically changes in NERC’s regional assessment scales smaller than the engage in energy and capacity areas.407 FERC also recently approved interconnections. We concluded that no transactions necessitate evaluating the the integration of the Western Areas reduction in scale was needed due to emission reductions available from the Power Administration—Upper Great such constraints. The same industry building blocks at scales smaller than Plains, Basin Electric Power trends that are reflected in the BSER— the interconnections, and again Cooperative, and Heartland Consumers the changing efficiencies and mix of concluded that a smaller scale was not Power District into SPP.408 existing fossil EGUs and the necessary or justified. We first note that Additionally, PacifiCorp and the CAISO development of RE throughout each electricity trading occurs today recently began operating the western interconnection—as well as the throughout the interconnection through Energy Imbalance Market (EIM).409 management of the interconnected grid RTO/ISO markets and active spot Other entities such as NV Energy, as loads are reduced through EE, which markets, often over large areas such as Arizona Public Service Co., and Puget is not reflected in the final BSER, are RTO/ISOs, or managed over large Sound Energy are planning to already driving power system dispatch areas outside RTOs. These participate in the EIM in the future.410 development and are being managed trades result in interconnection-wide The EIM ‘‘creates significant reliability through interconnection-wide planning, changes in flow that are managed in real and renewable integration benefits for coordination and operations, and will time. Moreover, the exchange of power consumers by sharing and economically continue to be managed in that manner is not limited to these areas. For dispatching a broad array of in the future with or without this rule. example, RTOs regularly manage flows resources.’’ 411 This history of changing While electricity supply and demand between RTOs, and EGUs near the regional boundaries leads us to the must be balanced in real time in a boundaries of RTOs impact multiple conclusion that selecting smaller manner that observes all security subregions across the interconnections, regional boundaries for purposes of constraints at that point in time, and key so that any subregional boundaries that setting the BSER would merely aspects of that management are carried might be evaluated for potential represent a snapshot of current, out at a subregional scale, the emissions relevance as trading region boundaries changeable regional boundaries. As we standards established in this rule can be will change as conditions and EGU have seen with recent, large-scale met over longer timeframes through choices change, while interconnection changes regarding ISO/RTO boundaries processes managed at larger geographic boundaries will remain stable. and NERC reliability assessment areas, scales, just as they are today. We believe In addition, the final rule permits such regions would likely not stand the this rule will reinforce these trading of rate-based emission credits or test of the time, nor would smaller developments and help provide a secure mass-based emission allowances. regional boundaries accurately reflect basis for moving forward. If a local Emission allowances and other electricity flows on the grid. The EPA transmission constraint requires that for commodities associated with electricity believes that the interconnections are reliability reasons a higher-emitting generation activities, such as RECs, the most stable and reasonable regional resource must operate during a certain which, again, represent investments in boundaries for setting BSER. period of time in preference to a lower- pollution control measures, are already Third, we considered whether emitting resource that would otherwise traded separately from the underlying transmission constraints, and the fact be the more economic choice when all electric energy and capacity. There is no reason that whatever geographic limits that the specific locations of generation costs are considered, nothing in this may exist for electricity and capacity resources and loads within each rule prevents the higher-emitting source transactions by an affected EGU should interconnection clearly matter to grid from being operated. If the same also limit the EGU’s transactions for planning and operations, necessitate transmission constraint causes the same validly issued rate-based emission evaluation of the emission reductions conditions to occur frequently, the extra credits or mass-based emission cost associated with finding alternative megawatts of generation capacity, and ∼30,000 MW allowances. In fact, as discussed below, ways to reduce emissions will provide of load into the MISO footprint.’’). the final rule not only allows national 407 an economic incentive for concerned NERC previously included Entergy and its six trading without regard to the operating areas as part of the SERC Assessment parties to explore ways to relieve the Areas. NERC, 2014 Summer Reliability Assessment interconnection boundaries, but also transmission constraint. If relieving the includes a number of options that (May 2014), available at http://www.nerc.com/pa/ constraint would be more costly than RAPA/ra/Reliability%20Assessments%20DL/ readily facilitate states’ and utilities’ 2014SRA.pdf. ‘‘MISO now coordinates all RTO employing alternative measures to very extensive reliance on emissions activities in the newly combined footprint, reduce emissions, the rule allows consisting of all or parts of 15 states with the trading. It is appropriate for the rule to parties to pursue those alternative take this approach, in part, because the integration of Entergy and other MISO South emission reduction measures. entities. This transition has led to substantial non-local nature of the impacts of CO2 changes to MISO’s market dispatch, creating the Accommodation of intermittent pollution do not necessitate geographic potential for unanticipated flows across the constraints and evaluation of constraints, and in the absence of a following systems: Tennessee Valley Authority alternatives for relieving or working policy reason to constrain the (TVA), Associated Electric Cooperative Inc. (AECI), around them have been routine and Southern Balancing Authority.’’ Id. at 7. geographic scope of trading, the largest 408 SPP, FERC approves Integrates System joining operating and planning practices within possible scope is the most efficient SPP (Nov. 12, 2014), available at http:// the utility power sector for many years; scope. www.spp.org/publications/ the rule will not change these basic f. Uniform CO2 emission performance FERC%20approves%20IS%20membership.pdf. economic practices that occur today. 409 NREL, Energy Imbalance Market, available at rates by technology subcategory. In http://www.nrel.gov/electricity/transmission/ The 2022–29 schedule for the rule’s conjunction with the refinements to the energy_imbalance.html. interim goals and the 2030 schedule for interpretations of section 111 reflected 410 CAISO, EIM Company Profiles (May 2015), the rule’s final goals allow time for in the final rule, the EPA has refined the available at http://www.caiso.com/Documents/ planning and investment comparable to methodology for applying the BSER to EIMCompanyProfiles.pdf. the sector’s typical planning horizons. 411 CAISO, Energy Imbalance Market, available at the affected EGUs so as to incorporate http://www.caiso.com/informed/pages/ Finally, the EPA also considered performance rates that are uniform stakeholderprocesses/energyimbalancemarket.aspx. whether the smaller geographic scales across technology subcategories.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00081 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64742 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

Specifically, the final rule establishes across the contiguous U.S. and increase for which emission performance rates a performance rate of 1305 lbs. per net the ability of states and affected EGUs are computed, the combustion turbines MWh for all affected steam EGUs to coordinate emission reduction in two of the interconnections have nationwide and a performance rate of strategies, including through the use of relatively greater opportunities to 771 lbs. per net MWh for all affected emission trading mechanisms if states replace their generation with generation stationary combustion turbines choose to allow such mechanisms, from new RE generating capacity than nationwide. The computations of these which we consider likely. combustion turbines in the third performance rates and the Having determined that the interconnection.413 determinations of state goals reflecting performance rates computed on a In addition, using the least stringent the performance rates are described in regional basis merit consideration as rate provides greater ‘‘headroom’’—that sections VI and VII of the preamble, nationally applicable performance rates, is, emission reduction opportunities respectively. As described above, in its we are also determining that the beyond those reflected in the proposed rule and NODA, the EPA objectives of achievability and performance rates—to affected EGUs in solicited comment on a number of flexibility would best be met by using the interconnections that do not set the proposals to reflect the regional nature the least stringent of the regional nationwide level. This greater of the electricity system in the performance rates for the three ‘‘headroom’’ provides greater methodology for quantifying the interconnections for each technology nationwide compliance flexibility and emission limitations reflective of the subcategory as the basis for nationally assurance that the standards set by the BSER. At the same time, the EPA also uniform performance rates for that states based on the emission guidelines consistently emphasized the need for technology subcategory rather than by will be achievable at reasonable cost strategies to ensure the achievability using the most stringent of the regional and without adverse impacts on and flexibility of the established performance rates.412 Under this reliability. This is because affected emission limitations and to increase approach, the CO2 emission EGUs in the interconnections that do opportunities for interstate and performance rate reflecting the BSER for not set the nationwide level have more industry-wide coordination. This all steam EGUs is uniform across the opportunities to directly invest in each modification is consistent with a contiguous U.S., regardless of the state of the building blocks in their respective number of comments we received in or interconnection where the steam regions, and affected EGUs in the response to those proposals. The EGUs are located. While it is true that interconnection that does set the commenters took the position that the steam EGUs in the Western and Texas nationwide level may in effect invest in proposed state goals varied too much Interconnections have opportunities to the opportunities in the other among states and unavoidably implied, implement the measures in the building interconnections through trading. At the or would inevitably result in, states blocks to a greater extent than the steam same time, our approach still represents establishing inconsistent standards of EGUs in the Eastern Interconnection— the degree of emission limitation performance for sources of the same for example, under building block 2, achievable through use of an technology type in their respective they have relatively greater amounts of appropriately large and diverse set of states, which in the commenters’ view incremental NGCC generation available emission reduction opportunities and was not appropriate under section 111. to replace their generation in all years can therefore reasonably be considered for which performance rates were the ‘‘best’’ system of emission reduction Having determined to adopt regional computed—we do not conclude that for each technology subcategory. alternatives for computing the emission this means that the EGUs in all three Our approach in this rulemaking thus reductions achievable under each interconnections should be assigned the not only addresses the comments we building block, the EPA has further most stringent CO emission received regarding potentially disparate determined to exercise discretion not to 2 performance rate computed for any of impacts of the approach presented in subcategorize based on the regions, and the three regions. Applying nationally the proposal, it is also generally instead to apply a nationally uniform the performance rate computed for the consistent with the approach we have CO 2 emission performance rate for each interconnection with the lease stringent taken in other NSPS rulemakings, where source subcategory. Evaluating the rate ensures that the emission standards of performance or emission emission reduction opportunities limitations are achievable by the guidelines have typically been achievable through application of the affected EGUs in all three established at uniform stringencies for BSER on a broad regionalized basis, interconnections. The use of a common all units in a given source subcategory, which is appropriate for the reasons CO emission performance rate across and where once the best system of discussed above, makes it possible to 2 all of the steam EGUs in all three emission reduction has been identified, express the degree of emission regions also allocates the burdens of the stringencies are generally set based on limitation reflecting the BSER as CO 2 BSER equally across the steam EGU what is reasonably achievable using that emission performance rates that are source subcategory. The same is true for system. uniform for all affected EGUs in a the combustion turbine source technology subcategory within each 413 subcategory, even though, in any year As discussed in section VI and the CO2 region. However, the goals and Emission Performance Rate and State Goal strategies embodied in the EPA’s Computation TSD, the emission performance rates 412 The Eastern, Western, and Texas for each technology subcategory are computed by proposed rule are best effected by Interconnections each encompass large and diverse region for each year from 2022 through 2030, and setting uniform emission performance populations of EGUs with numerous and diverse the region with the least stringent emission rate for rates nationally and not just regionally, opportunities to reduce CO2 emissions through a particular subcategory, whose rate therefore is application of the measures in each of the three used for all three regions, can differ across years. as recognized by commenters favoring building blocks. Based on these considerations of In the case of the steam EGU subcategory, the the use of nationally uniform scale and diversity, we conclude that each of the nationwide rate for all years is the rate computed performance rates by technology interconnections is sufficiently representative of the for the Eastern Interconnection. In the case of the subcategory. Nationally uniform source subcategories and emission reduction NGCC subcategory, the nationwide rate is the rate emission performance rates create opportunities encompassed in the BSER to computed for the Texas Interconnection for the potentially serve as the basis for CO2 emission years from 2022 through 2026 and the rate greater parity among the emission performance rates applicable to the respective computed for the Eastern Interconnection for the reduction goals established for states source subcategories on a nationwide basis. years from 2027 through 2030.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00082 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64743

Providing each state with a state- achievability and flexibility of the broad comment on this proposed specific weighted average rate-based emission guidelines and increasing timing. Although the proposal provided goal allows the state to determine how opportunities for interstate and flexibility in the timing with which the emission reduction requirements industry-wide coordination. We emission reductions could be made over should be allocated among the state’s consequently apply the same emission the course of the 2020–2029 period in affected EGUs. We continue to believe performance rates to coal-fired units in order to achieve compliance with the that, as in the proposal, this is an states with heavy reliance on coal- emission limitations applicable to that important source of flexibility for states fueled generation as we do to coal-fired interim period, many commenters in developing their section 111(d) plans. units in other states, which produces perceived the start of the period as too Accordingly, in this final rule we are more stringent state goals than at soon and stated that it provided providing uniform CO2 emission proposal for the states with the highest insufficient time for planning and performance rates for each source concentrations of coal-fired generation. investments necessary for sources to subcategory and also translating those At the same time, the final goals for begin implementation activities while rates to state-specific weighted average some states are less stringent than their maintaining reliable electricity supplies. rate-based goals. For additional proposed goals. For example, a goal The EPA has considered these flexibility, we are also translating the based on the least stringent regional comments and in the final rule has state-specific rate-based goals into state- rates is less stringent for some states established an interim compliance specific mass-based goals. Our than a goal based on state-specific period of 2022–2029, providing two determinations of the emission emission reduction opportunities would additional years for planning and performance rates are described in be. Accordingly, the differences among investment before the start of section VI below, and our the final state goals are generally smaller compliance. We are persuaded by determinations of the rate-based and than the differences among the comments and by our own further mass-based state goals are described in proposed state goals. All of the final analysis that this timeframe is section VII below. rate-based state goals are necessarily in appropriate and will, in combination with the glide path of emission We note here that the weighted- the range bounded by the CO2 emission reductions reflected in the final building average state goals reflect the performance rate for NGCC units and the CO emission performance rate for blocks and the states’ flexibility to application of the uniform CO emission 2 2 steam EGUs because all of the state define their own paths of emission performance rates for affected steam goals are computed as a weighted reductions over the interim period (as EGUs and affected NGCC units to the average of those two performance rates, discussed in section VIII), provide respective units in each subcategory in and this range is narrower than the adequate time for necessary planning each state. Each state goal therefore range of state goals in the proposal. and investment activities. This will reflects uniform stringency of emission The computations of the uniform CO2 enable the final rule’s requirements to reduction requirements with respect to emission performance rates are shown be implemented in an orderly manner affected units in each source in the CO2 Emission Performance Rate while reliability of electricity supplies is subcategory, but also reflects the EGU and Goal Computation TSD for the CPP maintained. Further discussion is fleet composition and historical Final Rule. These uniform emission provided in the sections of the preamble generation specific to that particular performance rates are applicable to the addressing the individual building state. Compared to the computation states and areas of Indian country 414 blocks (sections V.C., V.D., and V.E.) approach reflected in the proposed state located in the contiguous U.S. that have and on electricity system reliability goals, the revised approach to quantify affected EGUs.415 We have not in this (section VIII.G.2.). the BSER on a regional basis and to rule applied the uniform emission The initial compliance date of 2022, translate the results into nationally performance rates to Alaska, Hawaii, coupled with the fact that the 2030 uniform emission performance rates by Puerto Rico, or Guam—states and standard is phased in over the source subcategory results in more territories that have otherwise affected subsequent eight years, affords affected stringent goals (compared to the EGUs but are isolated from the three EGUs the benefit of having an extended proposal) for states whose generation major interconnections—and will planning period before they need to has historically been most heavily determine how to address the incur any significant obligations. Where concentrated at coal-fired steam EGUs. requirements of section 111(d) with needed, states may take the period This shift is an expected consequence of respect to these jurisdictions at a later through September 2018 to develop the use of uniform performance rates by time. Further discussion regarding the their final plans, and affected EGUs will source subcategory. At proposal, these isolated jurisdictions can be found in be able to work with the states during states’ goals reflected artificial section VII.F. of the preamble. that period to develop compliance assumptions in the selected goal g. Establishment of a 2022–2029 approaches. States will also have the quantification methodology that to a interim compliance period. The June flexibility to select their own emissions considerable extent limited their 2014 proposal separately quantified trajectories in such a way that certain emission reduction opportunities based emission limitations applicable to an emission reduction measures could be on their states’ borders, and the interim 2020–29 period and to the implemented later in the interim period proposed goals therefore were less period beginning in 2030. The EPA took (again, provided that their affected stringent in states which had substantial EGUs still meet the interim performance coal generation and little local NGCC 414 As explained in section III.A. above, an Indian rates or interim goal over the interim capacity. The final rule more tribe whose area of Indian country has affected period as a whole). As a result, if the EGUs will have the opportunity but not the realistically recognizes that emission obligation to seek authority to develop and affected EGUs in those states need to reduction opportunities, like other implement a section 111(d) plan. If no tribal plan incur any expenses before the adoption aspects of the interconnected electricity is approved, the EPA has the responsibility to of the final state plans, those expenses system, are regional and are not establish a plan if it determines that such a plan is need not be more than minimal. It is constrained by state borders. The final necessary or appropriate. worth noting that an earlier state plan 415 As noted earlier, there are currently no rule also reflects the EPA’s emphasis in affected EGUs in Vermont or the District of submission date provides regulated the proposal on ensuring the Columbia. sources with more certainty and time to

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00083 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64744 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

plan for compliance, but has no effect individual building block, the EPA has As discussed above, one of the on the time when compliance must be reexamined the data and assumptions modifications being made in this rule is achieved, as the mandatory compliance used at proposal in light of comments the establishment of uniform period begins in 2022 for all states. solicited and has made a number of performance rates by technology Some states that already have refinements in the final rule based on subcategory, which enhances the rule’s established programs for limiting CO2 that information. The refinements are achievability and flexibility and emissions from power plants may adopt discussed in the preamble sections for facilitates coordination among the states and submit to the EPA state plans by each building block (sections V.C., V.D., and across the industry. However, in the September 6, 2016. In those states, and V.E.) and emission performance rate first instance, the emission reductions sources will already have developed computation (section VI) and in the achievable through use of the building compliance approaches to meet state GHG Mitigation Measures TSD for the blocks are being evaluated on a regional law requirements. Other states that CPP Final Rule and the CO2 Emission basis that reflects the regional nature of submit plans by September 6, 2016, may Performance Rate and Goal the interconnected electricity system be expected to work with their affected Computation TSD for the CPP Final and the region-wide scope of EGUs to determine a reasonable Rule. As previously noted, viewed in opportunities available for affected compliance approach, in light of the fact terms of projected nationwide emission EGUs to access emission reduction that compliance is not required to begin reductions (but not necessarily with measures. The EPA recognizes that the until 2022. It is also possible that some respect to each individual state), these emission reduction opportunities under states will submit neither final state refinements generally tend to make the these building blocks vary by region plans nor initial submittals by interim goals somewhat less stringent because of regional differences in the September 6, 2016, and that the EPA than at proposal and the 2030 goals existing mix of types of fossil fuel-fired will promulgate federal plans. Sources somewhat more stringent than at EGUs and the available opportunities to in those states will have more than five proposal. In addition to the changes increase low- and zero-carbon years to meet their 2022 compliance described above, the refinements generation. Consequently, in order to obligations, a lengthy period that will include the following: achieve uniform performance rates by afford them the opportunity to plan • technology subcategory, while before incurring significant Use of regional rates ranging from 2.1 percent to 4.3 percent (rather than 6 percent) respecting these regional differences in expenditures. as the average heat rate improvement emission reduction opportunities, we These periods of time are consistent opportunity achievable by steam units under have determined that it is reasonable with current industry practice in building block 1. not to establish the stringency of the changing generation or adding new • Use of 75 percent of summer capacity BSER separately by region based on the generation. For example, in June 2015, (rather than 70 percent of nameplate maximum emission reduction that Alabama Power Company announced capacity) as the target capacity factor for would be achievable in that region, but plans to acquire 500 MW of RE existing NGCC units under building block 2. • instead to establish uniform stringency generation over the next six years. This Use of updated information from the across all regions at a level that is amount would make up between four National Renewable Energy Laboratory (NREL) on RE costs and potential, and achievable at reasonable cost in any and five percent of Alabama Power’s region. Thus, for each technology generation mix.416 In addition, the study revision of the list of quantified RE technologies to exclude landfill gas under subcategory, the BSER is the of utility IRPs placed in the docket for combination of the elements described 417 building block 3. this rulemaking shows that sources above at the combined stringency that is are able to replace coal-fired generation 4. Determination of the BSER reasonably achievable in the region with natural-gas fired generation and In this rule, the EPA is finalizing as where the CO2 emission performance add incremental amounts of RE (as well rates determined to be achievable at as take other actions, such as implement the BSER a combination of building blocks 1, 2, and 3, with refinements as reasonable cost by the EGUs in that demand-side EE programs), on a gradual subcategory through application of the basis, after a several-year lead time, over discussed below. The building blocks building blocks were least stringent.418 an extended period, as provided for constitute the BSER from the perspective of the source category as a This approach is consistent with the under the final rule. EPA’s efforts to enhance the h. Refinements to stringency for whole. Each building block can be achievability and flexibility of the rule individual building blocks. For each implemented through standards of performance set by the states and and to promote interstate and industry coordination and reflects the regional 416 Alabama Power Co., ‘‘Petition for a Certificate includes a set of actions that individual of Convenience and Necessity,’’ submitted to the sources can use to achieve the emission strategies emphasized in the proposal Alabama Public Service Commission (June 25, limitations reflecting the BSER. These and the NODA. It is also consistent with 2015) (petition requests ‘‘a certificate of actions and mechanisms, which include the approach we have taken in other convenience and necessity for the construction or NSPS rulemakings, where the degree of acquisition of renewable energy and reduced generation and emissions environmentally specialized generating resources trading approaches where the state-set emission limitation achievable through and the acquisition of rights and the assumption of standards of performance incorporate payment obligations under power purchase 418 The determinations of stringency for each arrangements pertaining to renewable energy and trading and which may be understood source subcategory were made independently for environmentally specialized generating resources, as part of the BSER, will be discussed each year from 2022 through 2030, and in the case together with all transmission facilities, fuel supply below in section V.A.5. Each of the of the NGCC category, the limiting region changed and transportation arrangements, appliances, building blocks consists of measures over time. Thus, for the NGCC category, the uniform appurtenances, equipment, acquisitions and CO2 emission performance rate is based on the commitments necessary for or incident thereto’’) that the source category and individual stringency achievable in the Texas Interconnection (included in the docket for this rulemaking). See affected EGUs have already for the years from 2022 through 2026 and the Swartz, Kristi, ‘‘Alabama Power plan would demonstrated the ability to implement. stringency achievable in the Eastern dramatically boost its renewables portfolio,’’ E&E In quantifying the application of each Interconnection for the years from 2027 through Publishing, July 16, 2015. 2030. For the steam EGU subcategory, the uniform 417 building block, the EPA has identified See memorandum entitled ‘‘Review of Electric CO2 emission performance rate is based on the Utility Integrated Resource Plans’’ (May 7, 2015) reasonable levels of stringency rather stringency achievable in the Eastern available in the docket. than the maximum possible levels. Interconnection in all years.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00084 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64745

the application of the BSER for each of the ‘‘best system of emission electricity system, absent other subcategory of affected sources reduction . . . adequately incentives to reduce generation and CO2 generally has been determined not on demonstrated.’’ Building block 1 is a emissions from coal-fired EGUs, heat the basis of what is achievable by the ‘‘system of emission reduction’’ for rate improvements and consequent sources that can reduce emissions most steam EGUs because owners of these variable cost reductions at those EGUs easily, but instead on the basis of what EGUs can take actions that will improve would cause them to become more is reasonably achievable through the their heat rates and thereby reduce their competitive compared to other EGUs application of the BSER across a range rates of CO2 emissions with respect to and increase their generation, leading to of sources. This approach also provides generation. smaller overall reductions in CO2 compliance headroom—in addition to The EPA has analyzed the technical emissions (depending on the CO2 the headroom provided by our approach feasibility, costs, and magnitude of CO2 emission rates of the displaced to setting the stringency for each emission reductions achievable through generating capacity). Unless mitigated, individual building block—for affected heat rate improvements at coal-fired the occurrence of a rebound effect EGUs in regions where additional steam EGUs based on engineering would reduce the emission reductions emission reductions can be achieved at studies and on these EGUs’ reported achieved by building block 1, reasonable cost, thereby promoting operating and emissions data. We exacerbating the inadequacy of emission nationwide compliance flexibility. conclude that taking action to improve reductions that is the basis for our Further, because we are authorizing heat rates is a common and well- conclusion that building block 1 alone states to establish standards of established practice within the industry would not represent the BSER for this performance that incorporate trading that is capable of achieving meaningful industry. However, we believe that our without geographic restrictions, the reductions in CO2 emissions at concern about the potential rebound opportunity of affected EGUs to engage reasonable cost, although, as discussed effect can be readily addressed by in emissions trading, to the extent earlier, we also conclude that the ensuring that the BSER also reflects quantity of emission reductions allowed under the relevant section other CO2 reduction strategies that 111(d) plans, ensures the availability of achievable through heat rate encourage increases in generation from additional, lower-cost emission improvement measures is insufficient lower- or zero-carbon EGUs, thereby reduction opportunities in other regions for these measures alone to constitute allowing building block 1 to be that will also promote compliance the BSER. Specifically, we have considered an appropriate part of the determined that an average heat rate flexibility and reduce compliance costs. BSER for CO2 emissions at affected As discussed in section XI of the improvement ranging from 2.1 to 4.3 EGUs as long as the building block is preamble and the Regulatory Impact percent by all affected coal-fired EGUs, applied in combination with other Analysis, application of the BSER depending on the region, is an element building blocks. determined as summarized above is of the BSER, based on the inclusion of projected to result in substantial and those amounts of improvement in the b. Building block 2. Building block meaningful reductions of CO three regions, determined through our 2—substituting generation from less 2 carbon-intensive affected EGUs emissions. regional analysis. Our analysis and Briefly, the elements of the BSER are: conclusions are discussed in Section (specifically ‘‘existing’’ NGCC units, meaning units that were operating or Building block 1: Improving heat rate at V.C. below and in the GHG Mitigation had commenced construction as of affected coal-fired steam EGUs in Measures TSD for the CPP Final Rule. January 8, 2014) for generation from the specified percentages. Additional analysis and conclusions Building block 2: Substituting increased with respect to cost reasonableness are most carbon-intensive affected EGUs—is generation from existing affected discussed in section V.A.4.d. below. a component of the BSER for steam NGCC units for generation from Consideration of other BSER factors EGUs because generation shifts that will affected steam EGUs in specified also favors a conclusion that building reduce the amount of CO2 emissions at quantities. block 1 is a component of the BSER. For higher-emitting EGUs and from the Building block 3: Substituting example, with respect to non-air health source category as a whole are generation from new zero-emitting RE and environmental impacts, heat rate technically feasible, are of reasonable generating capacity for generation improvements cause fuel to be used cost, and perform well with respect to from affected EGUs in specified more efficiently, reducing the volumes other factors relevant to a determination quantities. of, and therefore the adverse impacts of the ‘‘best system of emission associated with, disposal of coal reduction . . . adequately a. Building block 1. Building block combustion solid waste products. By demonstrated.’’ Building block 2 is a 1—improving heat rate at affected coal- definition, heat rate improvements do ‘‘system of emission reduction’’ for fired steam EGUs—is a component of not cause increases in net energy usage. steam EGUs because incremental the BSER with respect to coal-fired Although we are justifying building generation from existing NGCC units steam EGUs 419 because the measures block 1 as part of the BSER without will result in reduced generation and the affected EGUs may undertake to reference to technological innovation, emissions from steam EGUs, and owners achieve heat rate improvements are we also consider technological of steam EGUs can, and many do, invest technically feasible and of reasonable innovation in the alternative, and we in incremental generation from NGCC cost, and perform well with respect to note that building block 1 encourages units through a variety of possible other factors relevant to a determination the spread of more advanced technology mechanisms. A steam EGU investing in to EGUs currently using components incremental generation from NGCC 419 For the reasons discussed in the proposal, the EPA is not determining that heat rate improvements with older designs. units may choose to reduce its own at other types of affected EGUs, such as NGCC units As noted in the June 2014 proposal, generation or may maintain its and oil-fired and natural gas-fired steam EGUs, are the EPA is concerned about the generation level and choose to allow the components of the BSER. However, all types of potential ‘‘rebound effect’’ associated reduction in generation to occur at other affected EGUs would be able to employ heat rate improvements as measures to help achieve with building block 1 if applied in steam EGUs through the coordinated compliance with their assigned standards of isolation. More specifically, we noted planning and operation of the performance. that in the context of the integrated interconnected electricity system. An

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00085 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64746 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

affected EGU may also invest in practices used to achieve compliance operation of the integrated electricity emission reductions from building block with environmental requirements in an system, subject to the collective 2 through the mechanism of engaging in economical manner. These industry emission reduction requirements that emissions trading where the EGU is trends are further discussed in section will be imposed on affected EGUs in operating under a standard of V.D. Thus, legislative history, regulatory order to meet the emissions standards performance that incorporates trading. precedent, and industry practice representing the BSER, an increase in The EPA’s analysis and conclusions support interpreting the broad term NGCC generation will be offset regarding the technical feasibility, costs, ‘‘system of emission reduction’’ as elsewhere in the interconnection by a and magnitude of CO2 emission including substituting lower-emitting decrease in other generation. Because of reductions achievable at high-emitting generation for higher-emitting the need to meet the collective emission EGUs through generation shifts to generation through generation shifts reduction requirements, the decrease in lower-emitting affected EGUs are among affected EGUs. generation resulting from that discussed in Section V.D. below. An important additional coordinated operation is most likely to Additional analysis and conclusions consideration supporting the be generation from an affected steam with respect to cost reasonableness are determination that building block 2 is EGU. Measures taken by affected EGUs discussed in section V.A.4.d. below. We adequately demonstrated as a ‘‘system that result in emission reductions from consider generation shifts among the of emission reduction’’ is that owners of other EGUs in the source category may large number of diverse EGUs that are affected steam EGUs have the ability to appropriately be deemed measures to linked to one another and to customers invest in generation shifts as a way of implement or apply the ‘‘system of by extensive regional transmission grids reducing emissions. The owner of an emission reduction’’ of substituting to be a routine and well-established affected EGU could invest in such lower-emitting generation for higher- operating practice within the industry generation shifts in several ways, emitting generation. that is used to facilitate the achievement including by increasing operation of an Consideration of other BSER factors of a wide variety of objectives, including NGCC unit that it already owns or by also supports a determination to include environmental objectives, while meeting purchasing an existing NGCC unit and building block 2 as a component of the the demand for electricity services. In increasing operation of that unit. BSER. For example, we expect that the interconnected and integrated Increases in generation by NGCC units building block 2 would have positive electricity industry, fossil fuel-fired over baseline levels can also serve as the non-air health and environmental steam EGUs are able to reduce their basis for creation of CO2 ERCs—that is, impacts. Coal combustion for electricity generation and NGCC units are able to instruments representing the ability of generation produces large volumes of increase their generation in a incremental electricity generated by solid wastes that require disposal, with coordinated manner through NGCC units to cause emission some potential for adverse mechanisms—in some cases centralized reductions at affected steam EGUs, as environmental impacts; these wastes are and in others not—that regularly deal distinct from the incremental electricity not produced by natural gas with such changes on both a short-term itself. Again, it is important to note that combustion. The intake and discharge of and a longer-term basis. Our analysis the acquisition of such ERCs represents water for cooling at many EGUs also demonstrates that the emission an investment in the actions of the carries some potential for adverse reductions that can be achieved or facility or facilities whose alteration of environmental impacts; NGCC units supported by such generation shifts are utilization levels generated the generally require less cooling water than substantial and of reasonable cost. emissions rate improvement or steam EGUs.420 With respect to energy Further, both the achievability of this reduction. In the context of the BSER, impacts, building block 2 represents building block and the reasonableness purchase of instruments representing replacement of electrical energy from of its costs are supported by the fact that the emissions-reducing benefit of an one generator with electrical energy there has been a long-term trend in the action is simply a medium of from another generator that consumes industry away from coal-fired investment in the underlying emissions less fuel, so the overall energy impact generation and toward NGCC generation reduction action. These mechanisms are should be a reduction in fuel for a variety of reasons. discussed further in section V.A.5. In consumption by the overall source Building block 2 is adequately this rule, the EPA is establishing category as well as by individual demonstrated as a ‘‘system of emission minimum criteria for the creation of affected coal-fired steam EGUs. reduction’’ for affected steam EGUs. As valid ERCs by NGCC units and for the Although for purposes of this rule we discussed in section V.B., since the time use of such ERCs by affected steam consider the incentive for technological of the 1970 CAA Amendments, the EGUs for demonstrating compliance innovation only in the alternative, we utility power sector has recognized that with emission rate-based standards of note that building block 2 promotes generation shifts are a means of performance established under state greater use of the NGCC technology controlling air pollutants; in the 1990 plans. The existence of minimum installed in the existing fleet of NGCC CAA Amendments, Congress recognized criteria will ensure that crediting units, which is newer and more that generation shifts among EGUs are a mechanisms are feasible and will advanced than the technology installed means of reducing emissions from this facilitate the development of organized in much of the older existing fleet of sector; and generation shifts similarly markets to simplify the process of steam EGUs. For all these reasons, the have been recognized as a means of buying and selling ERCs. The minimum reducing emissions under trading criteria are discussed in section VIII of 420 For example, according to a DOE/NETL study, programs established by the EPA to this preamble. the relative amount of water consumption for a new implement the Act’s provisions. It is We note that an affected EGU pulverized coal plant is 2.5 times the consumption for a new NGCC unit of similar size. ‘‘Cost and common practice in the industry to investing in building block 2 to reduce Performance Baseline for Fossil Energy Plants: account for the cost of emission emissions may, but need not, also Volume 1: Bituminous Coal and Natural Gas to allowances as a variable cost when choose to reduce its own generation as Electricity,’’ Rev 2a, September 2013, National making security-constrained, cost-based part of its approach for meeting the Energy Technology Laboratory Report DOE/NETL– 2010/1397. EPA believes the difference would on dispatch decisions; doing so integrates standard of performance assigned to it average be even more pronounced when comparing generation shifts into the operating by its state. Through the coordinated existing coal and NGCC units.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00086 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64747

measures in building block 2 qualify as adequately demonstrated.’’ Building provide energy security by replacing a component of the ‘‘best system of block 3 is a ‘‘system of emission some fossil fuel-fired generation. Both emission reduction . . . adequately reduction’’ for all affected EGUs because Congress and the EPA have previously demonstrated.’’ incremental RE generation will result in established frameworks under which RE It should be observed that, by reduced generation and emissions from generation could be used as a means of definition of the elements of this affected EGUs, and owners or operators achieving emission reductions from the building block, the shifts in generation of affected EGUs can apply or utility power sector, as discussed in taking place under building block 2 implement building block 3 through a section V.B. Investment in RE occur entirely among existing EGUs number of actions. For example, they generation has grown rapidly, such that subject to this rulemaking.421 Through can invest in incremental RE generation in recent years the amount of new RE application of this building block either directly or through the purchase generating capacity brought into service considered in isolation, some affected of ERCs. An affected EGU investing in has been comparable to the amount of EGUs—mostly coal-fired steam EGUs— incremental RE generation may choose new fossil fuel-fired capacity. Rapid would reduce their generation and CO2 to reduce its own generation by a growth in RE generation is projected to emissions, while other affected EGUs— corresponding amount or may choose to continue as costs of RE generation fall NGCC units—would increase their allow the reduction in generation to relative to the costs of other generation generation and CO2 emissions. occur at other affected EGUs through the technologies. These trends are further However, because for each MWh of coordinated planning and operation of discussed in section V.E. Interpretation generation, NGCC units produce fewer the interconnected electricity system. of a ‘‘system of emission reduction’’ as CO2 emissions than coal-fired steam An affected EGU can also invest in RE including RE generation for purposes of EGUs, the total quantity of CO2 generation by means of engaging in this rule is thus supported by legislative emissions from all affected EGUs in emissions trading where the EGU is history, regulatory precedent, and aggregate would decrease without a operating under a standard of industry practice. reduction in total electricity generation. performance that incorporates trading. Also supporting the determination In the context of the integrated The EPA’s analysis and conclusions that building block 3 is adequately electricity system, where the operation regarding the technical feasibility, costs, demonstrated as a ‘‘system of emission of affected EGUs of multiple types is and magnitude of the measures in reduction’’ is the fact that owners of routinely coordinated to provide a building block 3 are discussed in affected EGUs have the ability to invest highly substitutable service, and in the Section V.E. below. Additional analysis in RE generation as a way of reducing context of CO2 emissions, where and conclusions with respect to cost emissions. As with building block 2, location is not a consideration (in reasonableness are discussed in section this can be accomplished in several contrast with other pollutants), a V.A.4.d. below. We consider ways. For example, the owner of an measure that takes advantage of that construction and operation of expanded affected EGU could invest in new RE integration to reduce CO2 emissions RE generating capacity to be proven, generating capacity and operate that from the overall set of affected EGUs is well-established practices within the capacity in order to obtain ERCs. readily understood as a means to industry consistent with recent industry Alternatively, the affected EGU could implement a ‘‘system of emission trends. States are already pursuing purchase ERCs created based on the reduction’’ for CO2 emissions at affected policies that encourage production of operation of an unaffiliated RE EGUs even if the measure would greater amounts of RE, such as the generating facility, effectively investing increase CO2 emissions from a subset of establishment of targets for procurement in the actions at another site that allow those affected EGUs. Indeed, some of renewable generating capacity. CO2 emission reductions to occur. These industry participants are already Moreover, as discussed earlier, markets mechanisms are discussed further in moving in this direction for this purpose are likely to develop for ERCs that section V.A.5. As with building block 2, (while other participants are moving in would facilitate investment in increased in this rule the EPA is establishing the same direction for other purposes). RE generation as a means of helping minimum criteria for the creation of Standards of performance that sources comply with their standards of valid ERCs by new RE generators and incorporate emissions trading can performance; indeed, markets for RECs, for the use of such ERCs by affected facilitate the implementation of such a which similarly facilitate investment in EGUs for demonstrating compliance ‘‘system’’ and such approaches have RE for other purposes, are already well- with emission rate-based standards of already been used in the electricity established. As noted in Section V.A.5. performance established under state industry to address CO2 as well as other below, an allowance system or tradable plans. The existence of minimum pollutants, as discussed above. emission rate system would provide criteria will ensure that crediting c. Building block 3. Building block incentives for affected EGUs to reduce mechanisms are feasible and will 3—substituting generation from their emissions as much as possible facilitate the development of organized expanded RE generating capacity for where such reductions could be markets to simplify the process of generation from affected EGUs—is a achieved economically (taking into buying and selling credits. The component of the BSER because the account the value of the emission minimum criteria are discussed in expansion and use of renewable credits or allowances), including by section VIII of the preamble. generating capacity to reduce emissions substituting generation from new RE As with building block 2, an affected from affected EGUs is technically generating capacity for their own EGU investing in building block 3 to feasible, is of reasonable cost, and generation, or could provide a reduce emissions may, but need not, performs well with respect to other mechanism, as stated above, for such also choose to reduce its own generation factors relevant to a determination of the sources to invest in or acquire such as part of its approach for meeting the ‘‘best system of emission reduction . . . generation. standard of performance assigned to it Building block 3 is adequately by its state. Through the coordinated 421 For purposes of this rulemaking, ‘‘existing’’ demonstrated as a ‘‘system of emission operation of the integrated electricity EGUs include units under construction as of reduction’’ for all affected EGUs. As system, subject to the collective January 8, 2014, the date of publication in the Federal Register of the proposed carbon pollution discussed in section II, RE generation requirements that will be imposed on standards for new fossil fuel-fired EGUs. has been relied on since the 1970s to affected EGUs in order to meet the

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00087 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64748 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

emissions standards representing the Moreover, as also discussed below, the standards to choose among multiple BSER, an increase in RE generation will combination qualifies as the ‘‘best’’ means of reducing emissions. be offset elsewhere in the system that is ‘‘adequately With respect to the quantity of interconnection by a decrease in other demonstrated.’’ The combination is emission reductions expected to be generation. Because of the need to meet technically feasible; it is capable of achieved from building block 1 in the collective requirements, the achieving meaningful reductions in CO2 particular, the BSER encompassing all decrease in generation resulting from emissions from affected EGUs at a three building blocks is a substantial that coordinated operation is most likely reasonable cost; it also performs well improvement over building block 1 in to be generation from an affected EGU. against the other BSER factors; and its isolation. As noted earlier, the EPA is Measures taken by affected EGUs that components are well-established. The concerned that implementation of result in emission reductions from other combination of the three building blocks building block 1 in isolation not only sources in the source category may will achieve greater CO2 emission would achieve insufficient emission appropriately be deemed methods to reductions at reasonable costs than reductions assuming generation levels implement the ‘‘system of emission possible combinations with fewer from affected steam EGUs were held reduction.’’ building blocks and will also perform constant, but also has the potential to The renewable capacity measures in better against other BSER factors. We result in a ‘‘rebound effect.’’ The nature building block 3 generally perform well therefore find the combination of all of the potential rebound effect is that by against other BSER criteria. Generation three building blocks to be the ‘‘best causing affected steam EGUs to improve from wind turbines and solar voltaic system of emission reduction . . . their heat rates and thereby lower their installations, two common renewable adequately demonstrated’’ for reducing variable operating costs, building block technologies, does not produce solid CO2 emissions at affected EGUs. 1 if implemented in isolation would waste or require cooling water, a better As already discussed, each of the make those EGUs more competitive environmental outcome than if that individual building blocks generally relative to other, lower-emitting fossil amount of generation had instead been performs well with respect to the BSER fuel-fired EGUs, possibly resulting in produced at a typical range of fossil factors identified by the statute and the increased generation and higher fuel-fired EGUs. With respect to energy D.C. Circuit. (The exception, which we emissions from the affected steam EGUs impacts, fossil fuel consumption will have pointed out above, is that building in spite of their lower emission rates. decrease both for the source category as block 1, if implemented in isolation, Combining building block 1 with the a whole and for individual affected would achieve an insufficient other building blocks addresses this EGUs. Although the variable nature of magnitude of emission reductions to be concern by ensuring that owner/ generation from renewable resources considered the BSER.) The EPA expects operators of affected steam EGUs as a such as wind and solar units requires that combinations of the building blocks group would have appropriate special consideration from grid would perform better than the incentives not only to improve the operators to address possible changes in individual building blocks. Beginning steam EGUs’ efficiency but also to operating reserve requirements, with the most obvious and important reduce generation from those EGUs renewable generation has grown quickly advantage, combinations of the building consistent with replacement of in recent years, as discussed above, and blocks will achieve greater emission generation by low- or zero-emitting grid planners and operators have proven reductions than the individual building EGUs. While combining building block capable of addressing any consequent blocks would in isolation, assuming that 1 with either building block 2 or 3 changes in requirements through the building blocks are applied with the should address this concern, the ordinary processes. The EPA believes same stringency. Because fossil fuel- combination of all three building blocks that planners and operators will be fired EGUs generally have higher addresses it more effectively by similarly capable of addressing any variable costs than other EGUs, it will strengthening the incentives to reduce changes in requirements due to future generally be fossil fuel-fired generation generation from affected steam EGUs. growth in renewable generation through that is replaced when low-variable cost The combination of all three building ordinary processes, but notes that in RE generation is increased. At the levels blocks is also of reasonable cost, for a addition, the reliability safety valve in of stringency determined to be number of independent reasons this rule, discussed in section VIII.G.2, reasonable in this rule, opportunities to described below. The emission will ensure the absence of adverse deploy building block 2 to replace reductions associated with the BSER energy impacts. With respect to higher-emitting generation and to determined in this rule are significant, technological innovation, which we deploy building block 3 to replace any necessary, and achievable. As discussed consider for the BSER only in the emitting generation are not exhausted. in section V.A.1. above, the alternative, incentives for expansion of Thus, as the system of emission Administrator must take cost into renewable capacity encourage reduction is expanded to include each account when determining that the technological innovation in improved of these building blocks, the emission measures constituting the BSER are renewable technologies as well as more reductions that will be achieved adequately demonstrated, and the extensive deployment of current increase. Administrator has done so here. Below, advanced technologies. For all these Because the stringency and timing of we summarize information on the cost reasons, the measures in building block emission reductions achievable through of the building block measures and 3 qualify as a component of the ‘‘best use of each individual building block discuss the several independent reasons system of emission reduction . . . have been set based on what is for the Administrator’s determination adequately demonstrated.’’ achievable at reasonable cost rather than that the costs of the building block 1, 2, d. Combination of all three building the maximum achievable amount, the and 3 measures, alone or in blocks. The final BSER includes a stringency of the combination of combination, are reasonable. In combination of all three building blocks. building blocks is also reasonable, and considering whether these costs are For the reasons described below, and the combination provides headroom and reasonable, the EPA considered the similar to each of the building blocks, additional flexibility for states in setting costs in light of both the observed and the combination must be considered a standards of performance and for projected effects of GHGs in the ‘‘system of emission reduction.’’ sources in complying with those atmosphere, their effect on climate, and

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00088 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64749

the public health and welfare risks and occur at more efficient affected EGUs, at improvements will have the largest impacts associated with such climate a relatively higher cost; however, this is impacts and produce the highest change, as described in Section II.A. a consequence of the greater emission returns, given consideration of projected The EPA focused on public health and reductions that can be achieved by changes in dispatch patterns—will tend welfare impacts within the U.S., but the combining building blocks, not an to mitigate any deterioration in the cost impacts in other world regions indication that any individual building of CO2 emission reductions achievable strengthen the case for action because block has become more expensive through heat rate improvements. impacts in other world regions can in because of the combined deployment. In contrast with those prior examples, turn adversely affect the U.S. or its Also, the EPA recognizes that when combining the building blocks also citizens. In looking at whether costs building block 1 is combined with the produces interactive dynamics that were reasonable, the EPA also other building blocks, the combination significantly reduce the cost for CO2 considered that EGUs are by far the has the potential to raise the cost of the reductions represented in the individual largest emitters of GHGs among portion of the overall emission building blocks (and whose omission stationary sources in the U.S., as more reductions achievable through heat rate would therefore make the weighted fully set forth in section II.B. improvements relative to the cost of average overstate costs). Foremost As described in sections V.C. through those same reductions if building block among these dynamics is the V.E. and the GHG Mitigation Measures 1 were implemented in isolation stabilization of wholesale power prices. TSD, the EPA has determined that the (assuming for purposes of this When assessed individually, building cost of each of the three building blocks discussion that the rebound effect is not blocks 2 and 3 have opposite impacts on is reasonable. In summary, these cost an issue and that the affected steam wholesale power prices, although in estimates are $23 per ton of CO2 EGUs would in fact reduce their each case, the direction of the wholesale reductions for building block 1, $24 per emissions if building block 1 were power price impact corresponds to an ton for building block 2, and $37 per ton implemented in isolation).422 However, increasing cost of that building block in for building block 3. The EPA estimates we believe that the cost of emission isolation. For example, building block 2 that, together, the three building blocks reductions achieved through heat rate promotes more utilization of existing are able to achieve CO2 reductions at an improvements in the context of a three- NGCC capacity, which (assessed on its average cost of $30 per ton, which the building block BSER will remain own) would increase natural gas EPA likewise has determined is reasonable for two reasons. First, as consumption and therefore price, in reasonable. The $30 per ton estimate is discussed in section V.C. below, even turn raising wholesale power prices an average of the estimates for each when conservatively high investment (which are often determined by gas-fired building block, weighted by the total costs are assumed, the cost of CO2 generators as the power supplier on the estimated cumulative CO2 reductions emission reductions achievable through margin); this dynamic puts upward for each of these building blocks over heat rate improvements is low enough pressure on the cost of achieving CO2 the 2022–2030 period. While it is that the cost per ton of CO2 emission reductions through shifting generation possible to weight each building block reductions will remain reasonable even from steam EGUs to NGCC units.423 by other amounts, the EPA believes that if that cost is substantially increased. Meanwhile, building block 3 increases weighting by cumulative CO2 reductions Second, although under a BSER RE deployment; because RE generators best reflects the average cost of total encompassing all three building blocks have very little variable cost, an increase reduction potential across the three the volume of coal-fired generation will in RE generation replaces other supply building blocks. The EPA considers decrease, that decrease is unlikely to be with higher variable cost, which would each of these cost levels reasonable for spread uniformly among all coal-fired yield lower wholesale power prices. purposes of the BSER established for EGUs. It is more likely that some coal- Lower wholesale power prices would this rule. fired EGUs will decrease their make further RE deployment less The EPA views the weighted average generation slightly or not at all while competitive against generation from cost estimate as a conservatively high others will decrease their generation by existing emitting sources; while this estimate of the cost of deploying all larger percentages or cease operations dynamic would generally reduce three building blocks simultaneously. altogether. We would expect EGU electricity prices to consumers, it also The simultaneous application of all owners to take these changes in EGU puts upward pressure on the cost of three building blocks produces operating patterns into account when achieving CO2 reductions through interactive dynamics, some of which considering where to invest in heat rate increased RE deployment.424 Applying could increase the cost and some of improvements, with the result that there building blocks 2 and 3 together which could decrease the cost will be a tendency for such investments produces significantly more CO2 represented in the individual building to be concentrated in EGUs whose reductions at a relatively lower cost blocks. For example, one dynamic that generation output is expected to because the countervailing nature of would tend to raise costs (and whose decrease the least. This enlightened bias these wholesale power price dynamics omission would therefore make the in spending on heat rate mitigates the primary cost drivers for weighted average understate costs) is improvements—that is, focusing each building block.425 that the emission reduction measures investments on EGUs where such associated with building blocks 2 and 3 423 The EPA’s cost-effectiveness estimate of $24 both prioritize the replacement of 422 If an EGU produces less generation output, per ton for building block 2 reflects these market higher-cost generation (from affected then an improvement in that EGU’s heat rate and dynamics. 424 steam EGUs in the case of building rate of CO2 emissions per unit of generation The EPA’s cost-effectiveness estimate of $37 produces a smaller reduction in CO2 emissions. If per ton for building block 3 reflects these market block 2 and from all affected EGUs in the investment required to achieve the dynamics. the case of building block 3). The EPA improvement in heat rate and emission rate is the 425 Notwithstanding the interactive dynamics that recognizes that the increased magnitude same regardless of the EGU’s generation output, improve the cost effectiveness of emission of generation replacement when then the cost per unit of CO2 emission reduction reductions when building blocks 2 and 3 are will be higher when the EGU’s generation output implemented together, we also consider each of building blocks 2 and 3 are is lower. Commenters have also stated that these building blocks to be independently of implemented together necessitates that operating at lower capacity factors may cause units reasonable cost, so that either building block 2 or some of the generation replacement will to experience deterioration in heat rates. Continued

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00089 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64750 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

429 The EPA believes the dynamics costs that are reasonable for the BSER MWh. These estimated CO2 reduction tending to cause the weighted average for this rule. costs of $3 to $14 per MWh to achieve above to overstate costs of the In assessing cost reasonableness for the CO2 emission performance rates are combination of building blocks are the BSER determination for this rule, either less than the ranges of $14 to $18 greater than the dynamics tending to the EPA has compared the estimated and $13 to $16 per MWh to install and cause costs to be understated, and that operate a wet or dry scrubber, or in the costs discussed above to two types of the weighted average costs are therefore case of CO emission reductions at a cost benchmark. The first type of 2 conservatively high. Analysis performed steam unit achieved through building by the EPA at an earlier stage of the benchmark comprises costs that affected block 3, near the low end of the ranges rulemaking supports this conclusion. At EGUs incur to reduce other air of scrubber costs. This comparison proposal, the EPA evaluated the cost of pollutants, such as SO2 and NOX. In demonstrates that the costs associated increasing NGCC utilization (building order to address various environmental with the BSER in this rule are block 2) and deploying incremental RE requirements, many coal-fired EGUs reasonable compared to the costs that generation (building block 3) have been required to decide between affected EGUs commonly face to comply independently, as well as the cost of either shutting down or installing and with other environmental requirements. simultaneously increasing NGCC operating flue gas desulfurization (FGD) The second type of benchmark utilization and incremental RE equipment—that is, wet or dry comprises CO2 prices that owners of generation. The average cost (in dollars scrubbers—to reduce their SO2 affected EGUs use for planning purposes per ton of CO2 reduced) was less for the emissions. The fact that many of these in their IRPs. Utilities subject to combined building block scenario, EGUs have chosen scrubbers in requirements to prepare IRPs commonly showing that the net outcome of the preference to shutting down is evidence include assumptions regarding future interactivity effects described above is a that scrubber costs are reasonable, and environmental regulations that may reduction in cost per ton when we believe that the cost of these controls become effective during the time compared to cost estimates that do not can reasonably serve as a cost horizon covered by the IRP, and incorporate this interactivity.426 benchmark for comparison to the costs assumptions regarding CO2 regulations A final reason why the EPA considers of this rule. We estimate that for a 300– are often represented in the form of the weighted-average cost above 700 MW coal-fired steam EGU with a assumed prices per ton of CO2 emitted conservatively high is that simply heat rate of 10,000 Btu per kWh and or reduced. A survey of the CO2 price combining the building blocks at their operating at a 70 percent utilization rate, assumptions from 46 recent IRPs shows full individual stringencies overstates the annualized costs of installing and a range of CO2 prices in the IRPs’ the stringency of the BSER. As reference cases of $0 to $30 per ton, and operating a wet scrubber are discussed in section V.A.3.f and section a range of CO prices in the IRPs’ high approximately $14 to $18 per MWh and 2 VI, the BSER reflects the combined cases from $0 to $110 per ton.430 In the annualized costs of installing and degree of emission limitation achieved comparison, the conservatively high, operating a dry scrubber are through application of the building weighted-average cost of $30 per ton approximately $13 to $16 per MWh.427 blocks in the least stringent region. By removed described above is at the high definition, in the other two regions, the In comparison, we estimate that for a end of the range of reference case BSER is less stringent than the simple coal-fired steam EGU with a heat rate of assumptions but at the low end of the combination of the three building blocks 10,000 Btu per kWh, assuming the range of the high case assumptions. The whose stringency is represented in the conservatively high cost of $30 per ton costs of the individual building blocks weighted-average cost above. of CO2 removed through the are likewise well within the range of the The cost estimates for each of the combination of all three building blocks, high case assumptions, and either at or three building blocks cited above—$23, the cost of reducing CO2 emissions by slightly above the high end of the $24, and $37 per ton of CO2 reductions the amount required to achieve the reference case assumptions. This from building blocks 1, 2, and 3, uniform CO2 emission performance rate comparison demonstrates that the costs respectively—are each conservatively for steam EGUs of 1,305 lbs. CO2 per associated with the BSER in this rule are high for the reasons discussed in section MWh would be equivalent to reasonable compared to the expectations V.C., V.D., and V.E. below. Likewise, the approximately $11 per MWh. The of the industry for the potential costs of $30 per ton weighted-average cost of all comparable costs for achieving the CO2 regulation. three building blocks is a conservatively required emission performance rate for In addition to comparison to these high estimate of the cost of the steam EGUs through use of the benchmarks, there is a third combination of the three individual individual building blocks range from independent way in which EPA has building block costs, as described above. $8 to $14 per MWh. For an NGCC unit considered cost. In light of the severity While conservatively high, and with a heat rate of 7,800 Btu per kWh, of the observed and projected climate especially so in the case of the $30 per assuming a conservatively high cost of change effects on the U.S., U.S. ton weighted-average cost, these interests, and U.S. citizens, combined $37 per ton of CO2 removed through the estimates fall well within the range of use of building block 3,428 the cost of with EGUs’ large contribution to U.S. GHG emissions, the costs of the BSER reducing CO2 emissions by the amount 3 alone, or combinations of the building blocks that measures are reasonable when include either but not both of these two building required to achieve the uniform CO2 emission performance rate for NGCC compared to other potential control blocks, could be the BSER if a court were to strike measures for this sector available under down the other building block, as discussed in units of 771 lbs. CO2 per MWh would section V.A.7. below. (We also note in section be equivalent to approximately $3 per V.A.7. that a combination of building blocks 2 and 429 For details of these computations, see the 3 without building block 1 could be the BSER if a memorandum ‘‘Comparison of building block costs court were to strike down building block 1.) 427 For details of these computations, see the to FGD costs’’ available in the docket. 426 Specifically, at proposal the EPA quantified memorandum ‘‘Comparison of building block costs 430 See Synapse Energy Economics Inc., 2015 the average cost, in dollar per ton of CO2 reduced, to FGD costs’’ available in the docket. Carbon Dioxide Price Forecast (March 3, 2015) at of building blocks 1, 2, and 3 ($22.5 per ton) to be 428 The comparison for an NGCC unit considers 25–28, available at http://www.synapse- less than the cost of either building block 2 ($28.9 only building block 3 because building blocks 1 and energy.com/sites/default/files/2015%20Carbon%20 per ton) or building block 3 ($23.4 per ton) alone. 2 do not apply to NGCC units. Dioxide%20Price%20Report.pdf.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00090 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64751

section 111. Given EGUs’ large typically used to assess the avoided whether other combinations of the contribution to U.S. GHG emissions, any damages as a result of regulatory actions building blocks, such as a combination attempt to address the serious public (i.e., benefits of rulemakings that lead to of building blocks 1 and 2 or a health and environmental threat of an incremental reduction in cumulative combination of building blocks 1 and 3, 434 climate change must necessarily include global CO2 emissions). The central could be the BSER. We believe that any significant emission reductions from values for the SC–CO2 range from $40 such combination is technically feasible this sector. The agency would therefore per short ton in 2020 to $48 per short and would be a ‘‘system of emission consider even relatively high costs— ton in 2030.435 The weighted-average reduction’’ capable of achieving which these are not—to be reasonable. cost estimate of $30 per ton is well meaningful reductions in CO2 emissions Imposing only the lower cost reduction below this range. from affected EGUs at a reasonable cost. measures in building block 1 would not Finally, the EPA notes that the As with the combination of three achieve sufficient reductions given the combination of all three building blocks building blocks discussed above, any scope of the problem and EGUs’ would perform consistently with the combination of building blocks would contribution to it. While the EPA also individual building blocks with respect achieve greater emission reductions considered measures such as CCS to non-air energy and environmental than the individual building blocks retrofits for all fossil-fired EGUs or co- impacts. There is no reason to expect an encompassed in that combination firing at all steam units, the EPA adverse non-air environmental or energy would achieve if implemented in determined that these costs were too impact from deployment of the isolation. Further, the cost of any high when considered on a sector-wide combination of the three building combination would be driven basis. Furthermore, the EPA has not blocks, whether considered on a source- principally by the combined stringency identified other measures available by-source basis, on a sector-wide or and would remain reasonable in under section 111 that are less costly national basis, or both. In fact, the aggregate, such that the conclusions on and would achieve emission reductions combination of the building blocks, like cost reasonableness discussed in section that are commensurate with the scope of the building blocks individually, as V.A.4.d. would continue to apply. We the problem and EGUs’ contribution to discussed above, would be expected to have already noted our determination it. Thus, the EPA determined that the produce non-air environmental co- that building block 1 in isolation is not costs of the measures in building blocks benefits in the form of reduced water the BSER because it would not produce 1, 2 and 3, individually or in usage and solid waste production (and, a sufficient quantity of emission combination, are reasonable because in addition to these non-air reductions. A combination of building they achieve an appropriate balance environmental co-benefits, would also block 1 with one of the other building between cost and amount of reductions be expected to reduce emissions of non- blocks would produce greater emission given the other potential control CO2 air pollutants such as SO2, NOX, reductions and would not be subject to measures under section 111. and mercury). Likewise, with respect to this concern. Any combination of As required under Executive Order technological innovation, which we building blocks including building 12866, the EPA conducts benefit-cost consider only in the alternative, the block 1 and at least one other building analyses for major Clean Air Act building blocks in combination would block would also address the concern rules.431 While benefit-cost analysis can have the same positive effects that they about potential ‘‘rebound effect,’’ help to inform policy decisions, as would have if implemented discussed above, that could occur if permissible and appropriate under independently. building block 1 were implemented in governing statutory provisions, the EPA e. Other combinations of the building isolation. Finally, there is no reason to does not use a benefit-cost test (i.e., a blocks. The EPA has considered expect any combination of the building determination of whether monetized blocks to have adverse non-air energy or benefits exceed costs) as the sole or Under Executive Order 12866 (May 2013, Revised environmental impacts, and the primary decision tool when required to July 2015), Interagency Working Group on Social implications for technological Cost of Carbon, with participation by Council of consider costs or to determine whether Economic Advisers, Council on Environmental innovation, which we consider only in to issue regulations under the Clean Air Quality, Department of Agriculture, Department of the alternative, would likewise be Act, and is not using such a test here.432 Commerce, Department of Energy, Department of positive for any combination of the Nonetheless, the EPA observes that the Transportation, Environmental Protection Agency, building blocks because those National Economic Council, Office of Energy and costs of the building block 1, 2 and 3 Climate Change, Office of Management and Budget, implications are positive for the measures, both individually and Office of Science and Technology Policy, and individual building blocks and there is combined as discussed in this section Department of Treasury (May 2013, Revised July no reason to expect negative interaction above, are less than the central estimates 2015). Available at: https://www.whitehouse.gov/ from a combination of building blocks. sites/default/files/omb/inforeg/scc-tsd-final-july- of the social cost of carbon. Developed 2015.pdf> Accessed 7/11/2015. For these reasons, any combination of by an interagency workgroup, the social 434 the building blocks (but not a BSER The SC–CO2 estimates do not include all cost of carbon (SC–CO2) is an estimate important damages because of current modeling comprising building block 1 in of the monetary value of impacts and data limitations. The 2014 IPCC report isolation) could be the BSER if it were associated with marginal changes in observed that SC–CO2 estimates omit various not for the fact that a BSER comprising 433 impacts that would likely increase damages. See CO2 emissions in a given year. It is IPCC, 2014: Climate Change 2014: Impacts, all three of the building blocks will Adaptation, and Vulnerability. Contribution of achieve greater emission reductions at a 431 The EPA’s regulatory impact analysis for this Working Group II to the Fifth Assessment Report of reasonable cost and is therefore rule, which appropriately includes a representation the Intergovernmental Panel on Climate Change. ‘‘better.’’ As discussed below in section of the flexibility available under the rule to comply Cambridge University Press, Cambridge. https:// using a combination of BSER and non-BSER www.ipcc.ch/report/ar5/wg2/. V.A.7., we intend for the individual 435 building blocks to be severable, such measures (such as demand-side energy efficiency) The 2010 and 2013 TSDs present SC–CO2 in is discussed in section XI of the preamble. 2007$ per metric ton. The unrounded estimates that if a court were to deem building 432 See memo entitled ‘‘Consideration of Costs from the current TSD were adjusted to (1) 2011$ block 2 or 3 defective, but not both, the and Benefits Under the Clean Air Act’’ available in using GDP Implicit Price Deflator (1.061374), http:// BSER would comprise the remaining the docket. www.bea.gov/iTable/index_nipa.cfm and (2) short 433 Estimates are presented in the Technical tons using the conversion factor of 0.90718474 building blocks. Support Document: Technical Update of the Social metric tons in a short ton. These estimates were f. Achievability of emission limits. As Cost of Carbon for Regulatory Impact Analysis rounded to two significant digits. noted, based on the BSER, the EPA has

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00091 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64752 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

established a source subcategory- achieve the emission performance rate • Directly investing in, or purchasing ERCs specific emission performance rate for for NGCC units.437 created as a result of, incremental generation fossil steam units and one for NGCC from existing NGCC units (building block 2). Commenters have raised questions • Directly investing in, or purchasing ERCs units. As discussed in section V.A.1.c., about whether particular circumstances created as a result of, generation from new or for new sources, standards of could arise, such as the sudden loss of uprated RE generators (building block 3). performance must be ‘‘achievable’’ certain generation assets, that would • Reducing its utilization, coupled with under CAA section 111(a)(1), and the cause the implementation of the direct investment in or purchase of ERCs D.C. Circuit has identified criteria for building blocks to cause reliability representing building blocks 2 and 3 as 436 problems, and have cautioned that these indicated above. achievability. In this rule, the EPA is • Investing in surplus emission rate taking the approach that while the states circumstances could preclude reductions at other affected EGUs through the are not required to adopt those source implementation of the building blocks purchase or other acquisition of rate-based subcategory-specific emission and thus achievement of the emission emission credits. performance rates as the standards of performance rates. Commenters have A source to which a state applies a performance for their affected EGUs, also raised concerns about whether mass-based limit can achieve the limit those rates must be achievable by the affected EGUs with limited remaining through a combination of the following steam generator and NGCC useful lives can implement the building set of measures (to the extent allowed by subcategories, respectively. In addition, blocks and achieve the emission the state plan), all of which are likewise the EPA is assuming that the performance rates. We address those components of the BSER: concerns in section VIII, where we achievability criteria in the case law for • Reducing its heat rate (building block 1). new sources apply to existing sources authorize state plans to include a • reliability mechanism and discuss Reducing its utilization and allowing its under section 111(d). For the reasons generation to be replaced or avoided through discussed next, for this rule, the source affected EGUs with limited remaining the routine operation of industry reliability useful lives. Accordingly, we conclude subcategory-specific emission planning mechanisms and market incentives. that the source subcategory-specific • performance rates are achievable in Investing in surplus emission reductions emission performance standards are at other affected EGUs through the purchase accordance with those criteria in the achievable in accordance with the case or other acquisition of mass-based emission case law. law. allowances. As noted, the building blocks include 5. Actions Under the BSER That Sources The EPA has determined appropriate several features that assure that affected CO2 emission performance rates for each EGUs may implement them. The Can Take To Achieve Standards of Performance of the two source subcategories as a building blocks may be implemented whole achievable through application of through a range of methods, including Based on the determination of the the building blocks. The wide ranges of through the purchase of ERCs and BSER described above, the EPA has measures included in the BSER and emission trading. In addition, the identified a performance rate of 1305 available to individual sources as building blocks incorporate lbs. per net MWh for affected steam indicated above provide assurance that ‘‘headroom.’’ Moreover, the source EGUs and a performance rate of 771 lbs. the source category as a whole can subcategory-specific emission per net MWh for affected stationary achieve standards of performance performance rates apply on an annual or combustion turbines. The computations consistent with those emissions longer basis, so that short-term issues of these performance rates and the standards using components of the need not jeopardize compliance. In determinations of state goals reflecting BSER, whether states choose to establish addition, we quantify the emission these rates are described in sections VI emission rate-based limits or mass- performance rates based on the degree and VII of the preamble, respectively. based limits. The wide ranges of of emission limitation achievable by Under section 111(d), states measures included in the BSER also affected EGUs in the region where determine the standards of performance provide assurance that each individual application of the combined building for individual sources. The EPA is affected EGU could achieve the standard blocks results in the least stringent authorizing states to express the of performance its state establishes for it emission rate. Because the means to standards of performance applicable to using components of the BSER. Of implement the building blocks are affected EGUs as either emission rate- course, sources may also employ widely available and because of the just- based limits or mass-based limits. As measures not included in the BSER, to the extent allowed under the applicable noted flexibilities and approaches to the described above, the sets of actions that state plan. emission performance rates, all types of sources can take to comply with these standards implement or apply the BSER In the remainder of this subsection, affected steam generating units, we discuss further how affected EGUs operating throughout the lower-48 states and, in that sense, may be understood as part of the BSER. can use each of the measures listed and under all types of regulatory above to achieve emission rate-based regimes, are able to implement building A source to which a state applies an forms of performance standards and blocks 1, 2 and 3 and thereby achieve emission rate-based limit can achieve mass-based forms of performance the emission performance rate for fossil the limit through a combination of the standards, indicating that all types of steam units, and all types of NGCC units following set of measures (to the extent owner/operators of affected EGUs—i.e., operating in all states under all types of allowed by the state plan), all of which vertically integrated utilities and regulatory requirements are able to are components of the BSER, again, in merchant generators; investor-owned, implement building block 3 and thereby the sense that they implement or apply government-owned, and customer- it: owned (cooperative) utilities; and • Reducing its heat rate (building block 1). 436 See Essex Chem. Corp. v. Ruckelshaus, 486 owner/operators of large, small, and F.2d 427, 433–34 (D.C. Cir. 1973), cert. denied, 416 single-unit fleets of generating units— U.S. 969 (1974); Nat’l Lime Ass’n v. EPA, 627 F.2d 437 We discuss the ability of affected EGUs to 416, 433, n.46 (D.C. Cir. 1980); Sierra Club v. Costle, implement the building blocks in more detail in have the ability to implement each of 657 F.2d 298, 377 (D.C. Cir. 1981) (citing Nat’l Lime sections V.C., V.D., and V.E. and the accompanying the building blocks in some way. In the Ass’n v. EPA, 627 F.2d 416 (D.C. Cir. 1980). support documents. following subsection we discuss the use

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00092 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64753

of measures not in the BSER that can involve an organized market.438 As ownership of the RE generating help sources achieve the standards of discussed earlier, based on observation capacity, a bilateral transaction with the performance. of market behavior both inside and owner/operator of the RE generating a. Use of BSER measures to achieve outside the electricity industry, we capacity, or a transaction for ERCs an emission rate-based standard. Under expect that intermediaries will seek through an intermediary, which could, an emission-rate based form of opportunities to participate in such but need not, involve an organized performance standards, compliance is transactions and that organized markets market.439 As discussed earlier, based nominally determined through a are likely to develop as well if section on observation of market behavior both comparison of the affected EGU’s 111(d) plans authorize the use of ERCs. inside and outside the electricity emission rate to the emission rate While the opportunity to acquire ERCs industry, we expect that intermediaries standard. The emissions-reducing through common ownership of NGCC will seek opportunities to participate in impact of BSER measures that reduce facilities might not extend to owner/ such transactions and that organized CO2 emissions through reductions in the operators of single EGUs or small fleets, markets are likely to develop as well if quantity of generation rather than all owner/operators would have the section 111(d) plans authorize the use of through reductions in the amount of ability to engage in bilateral or ERCs. While the opportunity to acquire CO2 emitted per unit of generation intermediated purchase transactions for ERCs through common ownership of RE would not be reflected in an affected ERCs just as they can engage in generating facilities might not extend to EGU’s emission rate computed solely transactions for other kinds of goods owner/operators of single EGUs or small based on measured stack emissions and and services. fleets, all owner/operators would have measured electricity generation but can In section VIII.K below, the EPA sets the ability to engage in bilateral or readily be reflected in an emission rate out the minimum criteria that must be intermediated purchase transactions for computation by averaging ERCs satisfied for generation and issuance of ERCs just as they can engage in acquired by the affected EGU into the a valid ERC based upon incremental transactions for other kinds of goods rate computation. electricity generation by an existing and services. In section VIII.K, we discuss the NGCC unit. Those criteria generally In section VIII.K below, the EPA sets processes for issuance and use of ERCs concern ensuring that the physical basis out the minimum criteria that must be that can be included in the emission for the ERC—i.e., qualifying generation satisfied for generation and issuance of rate computations that affected EGUs by an existing NGCC unit and the NGCC a valid ERC based upon generation from perform to demonstrate compliance unit CO2 emissions associated with that new RE generating capacity. Those with an emission rate standard. This qualifying generation—is adequately criteria generally concern assuring that ERC mechanism is analogous to the monitored and that there is an adequate the physical basis for the ERC—i.e., approach the EPA has used to reflect administrative process for tracking generation by qualifying new RE building blocks 2 and 3 in the uniform credits to avoid double-counting. In the capacity—is adequately monitored and emission rates representing the BSER, as case of ERCs related to building block 2, that there is an adequate administrative discussed in section VI below. As the monitoring criteria would generally process for tracking credits to avoid summarized below and as discussed in be satisfied by standard 40 CFR part 75 double-counting.440 greater detail in section VIII.K, the monitoring. As with building block 2, the owner/ existence of a clearly feasible path for The owner/operator of an affected operator of an affected EGU would use usage of ERCs ensures that emission steam EGU would use the ERCs it has the ERCs it has acquired for reductions achievable through acquired for compliance—whether compliance—whether acquired through implementation of the measures in acquired through ownership of NGCC ownership of qualifying RE generating building blocks 2 and 3 are available to capacity, a bilateral transaction, or an capacity, a bilateral transaction, or an assist all affected EGUs in achieving intermediated transaction—by adding intermediated transaction—by adding compliance with standards of the ERCs to its measured net generation the ERCs to its measured net generation performance based on the BSER. when computing its CO2 emission rate when computing its CO2 emission rate (1) Building block 1. for purposes of demonstrating The owner/operator of an affected for purposes of demonstrating compliance with its emission rate-based compliance with its emission rate-based steam EGU can take steps to reduce the standard of performance. unit’s heat rate, thereby lowering the standard of performance. (3) Building block 3. (4) Reduced generation. unit’s CO emission rate. Examples of 2 The owner/operator of an affected The owner/operator of an affected actions in this category are included in EGU can average the EGU’s emission EGU can reduce the unit’s generation section V.C. below and in the GHG rate with ERCs issued on the basis of and reflect that reduction in the form of Mitigation Measures TSD for the CPP generation from new (i.e., post-2012) RE a lower emission rate provided that the Final Rule. Any type of owner/operator generating capacity, including both owner/operator also acquires some can take advantage of this measure. amount of ERCs to use in computing the (2) Building block 2. newly constructed capacity and new uprates to existing RE generating unit’s emission rate for purposes of The owner/operator of an affected demonstrating compliance. As EGU can average the EGU’s emission capacity. As permitted under the EGU’s state’s section 111(d) plan, the owner/ rate with ERCs issued on the basis of 439 operator of the affected EGU could As with building block 2, each of these incremental generation from an existing methods of implementing building block 3 meets NGCC unit. As permitted under the accomplish this through either common the criteria for the BSER in that (i) as we discuss EGU’s state’s section 111(d) plan, the in section V.E. and supporting documents, each of 438 Each of these methods of implementing these methods is adequately demonstrated; (ii) the owner/operator of the affected EGU building block 2 meets the criteria for the BSER in costs of each of these methods on a source-by- could accomplish this through either that (i) as we discuss in section V.D. and supporting source basis are reasonable, as discussed above; and common ownership of the NGCC unit, documents, each of these methods is adequately (iii) none of these methods causes adverse energy a bilateral transaction with the owner/ demonstrated;(ii) the costs of each of these methods impacts or non-quality environmental impacts. on a source-by-source basis are reasonable, as 440 The possible use of types of RE generating operator of the NGCC unit, or a discussed above; and (iii) none of these methods capacity that are not included in the BSER is transaction for ERCs through an causes adverse energy impacts or non-quality discussed in section V.A.6. and section VIII of the intermediary, which could but need not environmental impacts. preamble.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00093 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64754 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

permitted under the EGU’s state’s EGU or through a bilateral transaction measures. The relative simplicity of the section 111(d) plan, the ERCs could be with the other affected EGU, or the mechanics of monitoring and acquired through investment in owner/operator of the affected EGU can determining compliance are significant incremental generation from existing acquire credits in a transaction through advantages inherent in the use of mass- NGCC capacity, generation from new RE an intermediary, which could, but need based standards rather than emission generating capacity, or purchase from an not, involve an organized market. As rate-based standards. entity with surplus ERCs. If the owner/ discussed earlier, based on observation (1) Building block 1. operator does not average any ERCs into of market behavior both inside and The owner/operator of an affected the unit’s emission rate, reducing the outside the electricity industry, we steam EGU can take steps to reduce the unit’s own generation will expect that intermediaries will seek unit’s heat rate, thereby lowering the proportionately reduce both the opportunities to participate in such unit’s CO2 mass emissions. Examples of numerator and denominator of the transactions and that organized markets actions in this category are included in fraction and therefore will not affect the are likely to develop as well if section section V.C. below and in the GHG computed emission rate (unless the unit 111(d) plans and/or standards of Mitigation Measures TSD for the CPP retires, reducing its emission rate to performance established thereunder Final Rule. Any type of owner/operator zero). However, if the owner/operator authorize emissions trading. While the can take advantage of this measure. does average ERCs into the unit’s opportunity to acquire credits through (2) Reduced generation. emission rate, then a proportional common ownership might not extend to The owner/operator of an affected reduction in both the numerator and the owner/operators of single EGUs or small EGU can reduce its generation, thereby portion of the denominator representing fleets, all owner/operators would have lowering the unit’s CO2 mass emissions. the unit’s measured generation will the ability to engage in bilateral or Any type of owner/operator can take amplify the effect of the acquired ERCs intermediated purchase transactions for advantage of this measure. Although in the computation, with the result that credits just as they can engage in some action or combination of actions to the more the unit reduces its generation, transactions for other kinds of goods increase lower-carbon generation or the fewer ERCs will be needed to reach and services. reduce electricity demand somewhere a given emission rate-based standard of Further details regarding the possible in the interconnected electricity system performance. All owner/operators have use of rate-based emission credits in a of which the affected EGU is a part will the ability to reduce generation, and as state plan (using ERCs issued on the be required to enable electricity supply discussed above all also would be basis of investments in building blocks and demand to remain in balance, the capable of acquiring ERCs, so all would 2 and 3 and potentially other measures affected EGU does not need to monitor be capable of reflecting reduced as the credits) are provided in section or track those actions in order to use its utilization in their emission rates for VIII.K. reduction in generation to help achieve purposes of demonstrating compliance. b. Use of BSER measures to achieve a compliance with the mass-based (5) Emissions trading approaches. mass-based standard. Under a mass- standard. Instead, multiple participants To the extent allowed under based form of the standard, compliance in the interconnected electricity system standards of performance that is determined through a comparison of will act to ensure that supply and incorporate emissions trading or the affected EGU’s monitored mass demand remain in balance, subject to otherwise through the relevant section emissions to a mass-based emission the complex and constantly changing 111(d) plans, the owner/operator of an limit. Although a state could choose to set of constraints on operation of the affected EGU can acquire tradable rate- impose specific mass-based limits that system, just as those participants have based emission credits representing an each EGU would be required to meet on routinely done for years. investment in surplus emission rate a physical basis, in past instances where Of course, if the owner/operator of the reductions not needed by another mass-based limits have been established affected EGU wishes to play a direct role affected EGU and can average those for large numbers of sources it has been in driving the increase in lower-carbon credits into its own emission rate for typical for the limit on each affected generation or demand-side EE required purposes of demonstrating compliance EGU to be structured as a requirement to offset a reduction in the affected with its rate-based standard of to periodically surrender a quantity of EGU’s generation, the owner/operator performance. The approach would have emission allowances equal to the may do so as part of whatever role it to be authorized in the appropriate source’s monitored mass emissions. The happens to play as a participant in the section 111(d) plan and would have to EPA believes that section 111(d) interconnected electricity system. conform to the minimum conditions for encompasses the flexibility for plans to However, the owner/operator will such approaches described in section impose mass-based standards in the achieve the benefit that reduction in VIII below. As we have repeatedly typical manner where the standard of generation brings toward compliance noted, based on our reading of the performance for each affected EGU with the mass-based standard whether it comment record and the discussions consists of a requirement to surrender takes those additional actions itself or that occurred during the outreach emission allowances rather than a instead allows other participants in the process, it is reasonable to presume that requirement to physically comply with interconnected electricity system to play such authorization will be forthcoming a unit-specific emissions cap. that role. from states that submit plans Measurements of mass emissions at a (3) Emissions trading approaches. establishing rate-based standards of given affected EGU capture reductions To the extent allowed under the performance for their affected EGUs. in the EGU’s emissions arising from relevant section 111(d) plans—as the Under a rate-based emissions trading both reductions in generation and record indicates that it is reasonable to approach, credits are initially created reductions in the emission rate per expect it will be—the owner/operator of and issued according to processes MWh. Accordingly, under a mass-based an affected EGU can acquire tradable defined in the state plan. After credits standard there is no need to provide a mass-based emission allowances are initially issued, the owner/operator mechanism such as the ERC mechanism representing investment in surplus of an affected EGU needing additional described above in order to properly emission reductions not needed by credits can acquire credits through account for emission reductions another affected EGU and can aggregate common ownership of another affected attributable to particular types of BSER those allowances with any other

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00094 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64755

allowances it already holds for purposes more of the building blocks is not VIII.K. includes a discussion of the of demonstrating compliance with its implemented to the degree that the EPA issuance of ERCs based on various non- mass-based standard of performance. has determined to be reasonable for BSER measures. Affected EGUs could The approach would have to be purposes of quantifying the BSER. In use such ERCs to the extent permitted authorized in the appropriate section this way, non-BSER measures provide by the relevant section 111(d) plans. 111(d) plan and would have to conform additional flexibility to states in The remainder of this section to the minimum conditions for such establishing standards of performance discusses some specific types of non- approaches described in section VIII for affected EGUs through section 111(d) BSER measures. The first set discussed below. plans and to individual affected EGUs includes measures that can reduce the Under a mass-based emissions trading for achieving those standards. amount of CO2 emitted per MWh of approach, the total number of Any of the non-BSER measures generation, and the second set discussed allowances to be issued is defined in the described below would help the affected includes measures that can reduce CO2 state plan, and affected EGUs may source category as a whole achieve emissions by reducing the amount of obtain an initial quantity of allowances emission limits consistent with the generation from affected EGUs. In some through an allocation or auction BSER. The non-BSER measures either cases, considerations related to use of process. After that initial process, the reduce the amount of CO2 emitted per these measures for compliance are owner/operator of an affected EGU MWh of generation from the set of discussed below in section VIII on state needing additional allowances can affected EGUs or reduce the amount of plans. The EPA notes that this is not an acquire allowances through common generation, and therefore associated CO2 exhaustive list of non-BSER measures ownership of another affected EGU or emissions, from the set of affected that could be employed to reduce CO2 through a bilateral transaction with the EGUs. However, the manner in which emissions from affected EGUs, but other affected EGU, or the owner/ the various non-BSER measures would merely a set of examples that illustrate operator of the affected EGU can acquire help individual affected EGUs meet the extent of the additional flexibility allowances in a transaction through an their individual standards of such measures provide to states and intermediary, which could but need not performance varies according to the affected EGUs under the final rule. involve an organized market. As type of measure and the type of a. Non-BSER measures that reduce discussed earlier, based on observation standard of performance—i.e., whether CO2 emissions per MWh generated. In of market behavior both inside and the standard is emission rate-based or the June 2014 proposal, the EPA outside the electricity industry, we mass-based. discussed several potential measures expect that intermediaries will seek In general, a non-BSER measure that that could reduce CO2 emissions per opportunities to participate in such reduces the amount of CO2 emitted per MWh generated at affected EGUs but transactions and that organized markets MWh of generation at an affected EGU that were not proposed to be part of the are likely to develop as well if section will reduce the amount of CO2 BSER. The measures discussed included 111(d) plans authorize the use of emissions monitored at the EGU’s stack heat rate improvements at affected EGUs emissions trading. While the (assuming the quantity of generation is other than coal-fired steam EGUs; fuel opportunity to acquire allowances held constant). Measures of this type switching from coal to natural gas at through common ownership might not can help the EGU meet either an affected EGUs, either completely extend to owner/operators of single emission rate-based or mass-based (conversion) or partially (co-firing); and EGUs or small fleets, all owner/ standard of performance. carbon capture and storage by affected operators would have the ability to Other non-BSER measures do not EGUs. One reason for not proposing to engage in bilateral or intermediated reduce an affected EGU’s CO2 emission consider these measures to be part of the purchase transactions for allowances rate but rather facilitate reductions in BSER was that they were more costly just as they can engage in transactions CO2 emissions by reducing the amount than the BSER measures. Another for other kinds of goods and services. of generation from affected EGUs. Under reason was that the emission reduction Further details regarding the possible a mass-based standard, the collective potential was limited compared to the use of mass-based emission allowances reduction in emissions from the set of potential available from the measures in a state plan are provided in section affected EGUs is reflected in the that were proposed to be included in the VIII.J. collective monitored emissions from the BSER. However, we also noted that set of affected EGUs. An individual EGU circumstances could exist where these 6. Use of Non-BSER Measures To that reduces its generation and measures could be sufficiently attractive Achieve Standards of Performance emissions will be able to use the to deploy, and that the measures could In addition to the BSER-related measure to help achieve its mass-based be used to help affected EGUs achieve measures that affected EGUs can use to limit. Individual EGUs that do not emission limits consistent with the achieve the standards of performance reduce their generation and emissions BSER. set in section 111(d) plans, there are a will be able to use the measure, if the In the final rule, the EPA has reached variety of non-BSER measures that relevant section 111(d) plans provide for determinations consistent with the could also be employed (to the extent allowance trading, by purchasing proposal with respect to these measures: permitted under a given plan). This emission allowances no longer needed namely, that they do not merit inclusion final rule does not limit the measures by EGUs that have reduced their in the BSER, but that they are capable that affected EGUs may use for emissions. of helping affected EGUs achieve achieving standards of performance to Under an emission rate-based compliance with standards of measures that are included in the BSER; standard, non-BSER measures that performance and are likely to be used thus, the existence of these non-BSER reduce generation from affected EGUs for that purpose by some units. To the measures provides flexibility allowing but do not reduce an affected EGU’s extent that they are selectively the individual affected EGUs and the emission rate generally can facilitate employed, they provide flexibility for source category to achieve emission compliance by serving as the basis for the source category as a whole and for reductions consistent with application ERCs that affected EGUs can average individual affected EGUs to achieve of the BSER at the levels of stringency into their emission rates for purposes of emission limits reflective of the BSER, reflected in this final rule even if one or demonstrating compliance. Section as discussed above.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00095 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64756 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

(1) Heat rate improvement at affected 40 percent in the case of conversion may be limited, where feasible the EGUs other than coal-fired steam EGUs. from 100 percent coal to 100 percent potential CO2 emission rate Building block 1 reflects the natural gas, and proportionately smaller improvements can be substantial: opportunity to improve heat rate at coal- for partial co-firing of coal with natural Depending on the process used, the fired steam EGUs but not at other gas. The primary reason for not efficiency with which fuel is converted affected EGUs. As the EPA stated at considering this measure part of the to useful energy can be increased by 25 proposal, the potential CO2 reductions BSER, both at proposal and in this final percent or more. The final rule allows available from heat rate improvements rule, is that it is more expensive than an owner/operator applying CHP at coal-fired steam EGUs are much the BSER measures. In particular, technology to an affected EGU to larger than the potential CO2 reductions combusting natural gas in a steam EGU account for the increased efficiency by available from heat rate improvements is less efficient and generally more counting the useful thermal output as at other types of EGUs, and comments costly than combusting natural gas in an additional MWh of generation, thereby offered no persuasive basis for reaching NGCC unit. For the category as a whole, lowering the unit’s computed emission a different conclusion. Nevertheless, we CO2 emissions can be achieved far more rate and assisting with achievement of recognize that there may be instances cheaply by combusting additional an emission rate-based standard of where an owner/operator finds heat rate natural gas in currently underutilized performance. (The EPA notes that improvement to be an attractive option NGCC capacity and reducing generation unless the unit also reduced its fuel at a particular non-coal-fired affected from coal-fired steam EGUs (building usage, the addition of the capability to EGU, and nothing in the rule prevents block 2) than by combusting natural gas capture waste heat and produce useful the owner/operator from implementing instead of coal in steam EGUs. thermal output would not reduce the such a measure and using it to help Some owner/operators are already unit’s mass emissions and therefore achieve a standard of performance. converting some affected EGUs from would not directly help the unit achieve (2) Carbon capture and storage at coal to natural gas, and it is apparent a mass-based standard of affected EGUs. that the measure can be attractive performance.441) Another approach for reducing CO2 compared to alternatives in certain b. Non-BSER measures that reduce emissions per MWh of generation from circumstances, such as when a unit CO2 emissions by reducing fossil fuel- affected EGUs is the application of must meet tighter unit-specific limits on fired generation. carbon capture and storage (CCS) emissions of non-GHG pollutants, the A second group of non-BSER technology. Consistent with the June options for meeting those emission measures has the potential to reduce 2014 proposal, we are determining that limits are costly, and retirement of the CO2 emissions from affected EGUs by use of full or partial CCS technology unit would necessitate transmission reducing the amount of generation from should not be part of the BSER for upgrades that are costly or cannot be those EGUs. As discussed above, under existing EGUs because it would be more completed quickly. CO2 emission a section 111(d) plan with mass-based expensive than the measures reductions achieved in these situations standards of performance, no special determined to be part of the BSER, are available to help achieve emission action is required to enable measures of particularly if applied broadly to the limits consistent with the BSER. this nature to help the source category overall source category. At the same (4) Fuel switching to biomass at as a whole and individual affected EGUs time, we note that retrofit of CCS affected EGUs. achieve their emission limits, because technology may be a viable option at Some affected EGUs may seek to co- the CO2-reducing effects are captured in some individual facilities, particularly fire qualified biomass with fossil fuels. monitored stack emissions. However, where the captured CO2 can be used for The EPA recognizes that the use of some under a section 111(d) plan with rate- enhanced oil recovery (EOR). For biomass-derived fuels can play an based standards of performance, example, construction of one CCS important role in controlling increases affected EGUs would need to acquire retrofit application with EOR has of CO2 levels in the atmosphere. As with ERCs based on the non-BSER activities already been completed at a unit at the the other non-BSER measures discussed that could be averaged into their Boundary Dam plant in Canada, and in this section, the EPA expects that use emission rate computations for purposes construction of another CCS retrofit of biomass may be economically of determining compliance with their application with EOR is underway at attractive for certain individual sources standards of performance. the W.A. Parish plant in Texas. We even though on a broader scale it would (1) Demand-side EE. expect the costs of CCS to decline as likely be more expensive or less One of the major approaches available implementation experience increases. achievable than the measures for achieving CO2 emission reductions CO2 emission rate reductions achieved determined to be part of the BSER. from the utility power sector is demand- through retrofit of CCS technology Section VIII.I.2.c describes the process side EE. In the June 2014 proposal, the would be available to help affected and considerations for states proposing EPA identified demand-side EE as one EGUs achieve emission limits consistent to use different kinds of biomass in state of the four proposed building blocks for with the BSER. State plan plans. the BSER. We continue to believe that considerations related to CCS are (5) Waste heat-to-energy conversion at significant emission reductions can be discussed in section VIII.I.2.a. affected EGUs. achieved by the source category through (3) Fuel switching to natural gas at Certain affected EGUs in urban areas use of such measures at reasonable affected EGUs. or located near industrial or commercial costs. In fact, we believe that the In the proposal we discussed the facilities with needs for thermal energy potential emission reductions from opportunity to reduce CO2 emissions at may be able add new equipment to demand-side EE rival those from an individual affected EGU by switching capture some of the waste heat from building blocks 2 and 3 in magnitude, fuels at the EGU, particularly by their electricity generation processes and that demand-side EE is likely to switching from coal to natural gas. Most and use it to create useful thermal coal-fired EGUs could be modified to output, thereby engaging in combined 441 However, the EPA notes that a state could burn natural gas instead, and the heat and power (CHP) production. establish a mechanism for encouraging affected EGUs to apply CHP technology under a mass-based potential CO2 emission reductions from While the set of affected EGUs in plan, for example, through awards of emission this measure are large—approximately locations making this measure feasible allowances to CHP projects.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00096 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64757

represent an important component of CO2 emissions, and the continued believes it is reasonable to consider some state plans, particularly in commitment of the owner/operators to generation from these fuels and instances where a state prefers to completion of the units is essential in technologies to be forms of RE develop a plan reflecting the state order to realize that result. Accordingly, generation, the fact that they can measures approach discussed in section a section 111(d) plan may rely on ERCs produce stack emissions containing CO2 VIII below. We also expect that many issued on the basis of generation from means that a section 111(d) plan seeking sources would be interested in these units and other new nuclear units. to permit use of such generation to serve including demand-side EE in their For the same reason, a plan may rely on as the basis for issuance of ERCs must compliance strategies to the extent ERCs issued on the basis of generation include appropriate consideration of permitted, and we received comment from uprates to the capacity of existing feedstock characteristics and climate that it should be permitted. nuclear units. Requirements for state benefits. Specifically, the use of some For the reasons discussed in section plan provisions intended to serve this kinds of biomass has the potential to V.B.3.c.(8) below, the EPA has purpose are discussed in section VIII.K. offer a wide range of environmental determined not to include demand-side (3) Zero-emitting RE generating benefits, including carbon benefits. EE in the BSER in this final rule. technologies not reflected in the BSER. However these benefits can only be However, the final rule authorizes The range of available zero-emitting realized if biomass feedstocks are generation avoided through investments RE generating technologies is broader sourced responsibly and attributes of in demand-side EE to serve as the basis than the range of RE technologies the carbon cycle related to the biomass for issuance of ERCs when appropriate determined to be suitable for use in feedstock are taken into account. conditions are met. In section VIII.K quantification of building block 3 as an Section VIII.I.2.c describes the process below, the EPA sets out the minimum element of the BSER. Examples of and considerations for states proposing criteria that must be satisfied for additional zero-emitting RE to use biomass in state plans. Section generation and issuance of a valid ERC technologies not included in the BSER VIII.K describes additional provisions based upon implementation of new that could be used to achieve emission related to ERCs. demand-side EE programs. Those limits consistent with the BSER include (5) Waste heat-to-electricity criteria generally concern ensuring that offshore wind, distributed solar, and conversion at non-affected facilities. the physical basis for the ERC—in this fuel cells. These technologies were not Industrial facilities that install new case, generation avoided through included in the range of RE technologies equipment to capture waste heat from implementation of demand-side EE quantified for the BSER because they are an existing combustion process and measures—is adequately evaluated, generally more expensive than the then use the waste heat to generate measured, and verified and that there is measures that were included and the electricity—a form of combined heat an adequate administrative process for other measures in the BSER. However, and power (CHP) production—can tracking credits. these technologies are equally capable produce generation that replaces Through their authority over legal of replacing generation from affected generation from affected EGUs and requirements such as building codes, EGUs and thereby reducing CO2 thereby reduces CO2 emissions. A states have the ability to drive certain emissions. Further, as with any section 111(d) plan may rely on ERCs types of demand-side EE measures that technology, there are likely to be certain issued on the basis of generation of this are beyond the reach of private-sector circumstances where the costs of these nature provided that the facility does entities. The EPA recognizes that, by technologies are more attractive relative not generate and sell sufficient definition, this type of measure is to alternatives, making the technologies electricity to qualify as a new EGU for beyond the ability of affected EGUs to likely to be deployed to some extent. purposes of section 111(b) and is not invest in either directly or through Indeed, distributed solar is already covered under section 111(d) for bilateral arrangements. However, the being widely deployed in much of the another source category. More final rule also authorizes generation U.S. and offshore wind, while still information is provided in section avoided through such state policies to unusual in this country, has been VIII.K. serve as the basis for issuance of ERCs extensively deployed in some other (6) Reduction in transmission and that in turn can be used by affected parts of the world. We expect distribution line losses. EGUs. The section 111(d) plan would innovation in RE generating Reductions of electricity line losses need to include appropriate provisions technologies to continue, making such incurred from the transmission and for evaluating, measuring, and verifying technologies even more attractive over distribution system between the points the avoided MWh associated with the time. A section 111(d) plan may rely on of generation and the points of state policies, consistent with the ERCs issued on the basis of generation consumption by end-users allow the criteria discussed in section VIII.K from new and uprated installations of same overall demand for electricity below. (2) New or uprated nuclear generating these technologies. The necessary state services to be met with a smaller overall capacity. plan provisions are discussed in section quantity of electricity generation. Such In the June 2014 proposal, the EPA VIII.K. reductions in generation quantities included generation from the five (4) Non-zero-emitting RE generating would tend to reduce generation by nuclear units currently under technologies. affected EGUs, thereby reducing CO2 Generation from new or expanded construction as part of the proposed emissions. The opportunity for facilities that combust qualified biomass BSER. As discussed above in section improvement is large because, on or biogenic portions of municipal solid V.A.3.c., upon consideration of average, line losses account for waste (MSW) to produce electricity can comments, we have determined that approximately seven percent of all also replace generation from affected generation from these units should not electricity generation. The EPA EGUs and thereby control CO levels in be part of the BSER. However, we 2 recognizes that, in general, only the the atmosphere.442 While the EPA continue to observe that the zero- of waste prevention and all other productive uses emitting generation from these units 442 The EPA and many states have recognized the of waste materials to reduce the volume of disposed would be expected to replace generation importance of integrated waste materials waste materials (see section VIII for more from affected EGUs and thereby reduce management strategies that emphasize a hierarchy discussion of waste-to-energy strategies).

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00097 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64758 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

owner/operators of the transmission and building blocks would lead to adverse 1. The EPA’s Authority To Determine distribution facilities have the ability to non-air environmental or energy the BSER undertake line loss reduction impacts or impose a risk to the In this section, we explain why the investments, and that merchant reliability of electricity supplies. EPA, and not the states, has the generators may have little opportunity In the event that a court should deem authority to determine the BSER and, to engage a contractor to pursue such building block 2 or 3 defective, but not therefore, the level of emission opportunities on a bilateral basis. limitation required from the existing Nevertheless, for entities that do have both, the standards and state goals can sources in the source category in section the opportunity to make such be recomputed on the basis of the 111(d) rulemaking and the associated investments, generation avoided remaining building blocks. All of the state plans. through investment that reduces data and procedures necessary to CAA section 111(d)(1) requires the transmission and distribution line losses determine recomputed state goals using EPA to establish a section 110-like may serve as the basis for issuance of any combination of the building blocks procedure under which each state ERCs that in turn can be used by are set forth in the CO2 Emission submits a plan that ‘‘establishes affected EGUs. Further information is Performance Rate and Goal standards of performance for any provided in section VIII.K. Computation TSD for the CPP Final existing source of air pollutant’’ and Rule available in the docket. 7. Severability ‘‘provides for the implementation and The EPA intends that the components B. Legal Discussion of Certain Aspects enforcement of such standards of of the BSER summarized above be of the BSER performance.’’ As CAA section 111(d) severable. It is reasonable to consider was originally adopted in the 1970 CAA the building blocks severable because This section includes a legal analysis Amendments, however, state plans were the building blocks do not depend on of various aspects of EPA’s required to establish ‘‘emission one another. Building blocks 2 and 3 are determination of the BSER, including standards’’—an undefined term—rather feasible and demonstrated means of responses to some of the major adverse than ‘‘standards of performance,’’ a term reducing CO2 emissions from the utility comments. These aspects include (1) the that was limited to CAA section power sector that can be implemented EPA’s authority to determine the BSER; 111(b).446 The 1970 provision was in independently of the other building (2) the approach to subcategorization; effect when the EPA issued the 1975 blocks. If implemented in combination (3) the EPA’s basis for determining that implementing regulations for CAA with at least one of the other building building blocks 2 and 3 qualify as part section 111(d),447 which remain in blocks, building block 1 is also a of the BSER under CAA sections effect to this day. feasible and demonstrated means of 111(d)(1) and (a)(1), notwithstanding These regulations establish a reducing CO2 emission from the utility commenters’ arguments that these cooperative framework that is similar to power sector.443 As discussed in building blocks cannot be considered that under CAA section 110. First, the sections V.C. through V.E. below, we part of the BSER because they are not EPA develops ‘‘emission guidelines’’ for have determined that each building based on measures integrated into the source categories, which are defined as block is independently of reasonable design or operation of the affected a final guideline document reflecting ‘‘the degree of emission reduction cost whether or not the other building source’s own production processes or blocks are applied, and that alternative achievable through the application of methods or because they are dependent combinations of the building blocks are the best system of emission reduction on actions by entities other than the likewise of reasonable cost, and we have . . . which the Administrator has determined reasonable schedules and affected source; (4) the relationship determined has been adequately stringencies for implementation of each between an affected EGU’s demonstrated.’’ Then, the states submit building block independently, based on implementation of building blocks 2 implementation plans to regulate any factors that generally do not vary and 3 and CO2 emissions reductions; (5) existing sources.448 depending on the implementation of how reduced generation relates to the The preamble to these regulations other building blocks. BSER; (6) reasons why, contrary to carefully considered the allocation of Further, building block 2, building assertions by commenters, this rule is responsibilities as between the EPA and block 3, and all combinations of the within the EPA’s statutory authority, is the states for purposes of CAA section building blocks (implemented on the not inconsistent with the Federal Power 111(d), and concluded that the EPA is schedules and at the stringencies Act or state laws governing public responsible for determining the level of determined to be reasonable in this rule) utility commissions, and does not result emission limitation from the source would achieve meaningful degrees of in what the U.S. Supreme Court category, while the states have the emission reductions,444 although less described as ‘‘an enormous and responsibility of assigning emission than the combination of all three transformative expansion in [the] EPA’s requirements to their sources that building blocks. No combination of the regulatory authority’’; 445 and (7) reasons assured their achievement of that level that, contrary to assertions by of emission limitation.449 The EPA 443 The heat rate improvement measures included in building block 1 are capable of being commenters, the stringency of the BSER 446 See 1970 CAA Amendments, § 4, 84 Stat. at implemented independently of the measures in the for this rule for CO emissions from 2 1683–84. Subsequently, in 1977, Congress replaced other building blocks but, as discussed earlier, existing affected EGUs is not the term ‘‘emission standard’’ with ‘‘standards of unless at least one other building block is also performance.’’ See 1977 CAA Amendments, § 109, implemented, a ‘‘rebound effect’’ arising from inconsistent with the stringency of the improved competitiveness and increased generation BSER for the rules the EPA is 91 Stat. at 699. 447 at the EGUs implementing heat rate improvements See ‘‘State Plans for the Control of Certain promulgating at the same time for CO2 Pollutants From Existing Facilities,’’ 40 FR 53340 could weaken or potentially even eliminate the emissions from new or modified ability of building block 1 to achieve CO2 emission (Nov. 17, 1975). reductions. affected EGUs. 448 See ‘‘State Plans for the Control of Certain 444 This conclusion would not extend to a BSER Pollutants From Existing Facilities,’’ 40 FR 53340 comprising solely building block 1, in part because (Nov. 17, 1975). of the possibility of rebound effects discussed 445 Util. Air Reg. Group v. EPA, 134 S. Ct. 2427, 449 As we made clear in the proposed rulemaking, earlier. 2444 (2014). we are not re-opening these regulations (on the

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00098 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64759

explained ‘‘that some substantive same reasons discussed in the preamble The EPA’s longstanding and consistent criterion was intended to govern not to the 1975 implementing regulations. interpretation of CAA section 111(d) is only the Administrator’s promulgation In addition, in the legislative history also ‘‘evidence showing that the statute of standards but also [her] review of of the 1977 CAA Amendments, when is in fact not ambiguous,’’ and that the state plans.’’ 450 The EPA added, ‘‘it Congress replaced the term ‘‘emission EPA’s interpretation should be would make no sense to interpret [CAA] standards’’ under CAA section 111(d)(1) adopted.457 section 111(d) as requiring the with the term ‘‘standards of Lastly, this interpretation is consistent Administrator to base approval or performance,’’ Congress endorsed the with the Supreme Court’s reading of disapproval of state plans solely on overall approach of the implementing CAA section 111(d) in American procedural criteria. Under that regulations, which lends further Electric Power Co. There, the Court interpretation, states could set credence to the proposition that the EPA explained that ‘‘EPA issues emissions extremely lenient standards—even has the responsibility for determining guidelines, see 40 CFR 60.22, .23 (2009); standards permitting greatly increased the ‘‘best system of emission reduction’’ in compliance with those guidelines emissions—so long as [the] EPA’s and the amount of emission limitation and subject to federal oversight, the procedural requirements were met.’’ 451 from the existing sources. Specifically, States then issue performance standards The EPA concluded that ‘‘emission in the House report that introduced the for stationary sources within their guidelines, each of which will be substantive changes to CAA section 111, jurisdiction, § 7411(d)(1).’’ 458 subjected to public comment before the Committee explained that ‘‘[t]he As noted in the response to comment final adoption, will serve [the] function’’ Administrator would establish document, some commenters agreed of providing substantive criteria ‘‘in guidelines as to what the best system for with our interpretation, just discussed, advance to the states, to industry, and each category of existing sources is.’’ 453 while others argued that the states to the general public’’ to aid states in States, on the other hand, ‘‘would be should be given the authority to ‘‘developing and enforcing control plans responsible for determining the determine the best system of emission under [CAA] section 111(d).’’ 452 Thus, applicability of such guidelines to any reduction and, therefore, the level of the implementing regulations make particular source or sources.’’ 454 The emission limitation from their sources. clear that the EPA is responsible for use of the term ‘‘guidelines,’’ which For the reasons just discussed, this latter determining the level of emission does not appear in CAA section 111(d), interpretation is an incorrect limitation that the state plans must indicates Congress was aware of and interpretation of CAA section 111(d)(1) achieve. approved of the approach taken in the and (a)(1), and we are not compelled to In 1977, Congress revised CAA EPA’s implementing regulations for abandon our longstanding practice. section 111(d) to require that the states establishing guidelines, which 2. Approach to Subcategorization adopt ‘‘standards of performance,’’ as determine the BSER. At a minimum, if As noted above, in this rule, we are defined under CAA section 111(a)(1). As Congress disapproved of the EPA’s noted above, a standard of performance treating all fossil fuel-fired EGUs as a implementing regulations, we would single category, and, in the emission is defined as ‘‘a standard for emissions not expect the House report to adopt the of air pollutants which reflects the EPA’s terminology to clarify CAA degree of emission limitation achievable before September 20, 1994), 60 FR 65387 (Dec. 19, section 111(d). 1995), 40 CFR 60.30b–.39b (as amended in 1997, through the application of the best In addition, Congress expressly 2001, and 2006); Subpart Cc (municipal solid waste system of emission reduction which referred to our ‘‘guidelines’’ in CAA landfills), 61 FR 9905 (Mar. 12, 1996), 40 CFR 60.30c–.36c (as amended in 1998, 1999, and 2000); ... the Administrator determines has section 129, added as part of the 1990 been adequately demonstrated.’’ Subpart Cd (sulfuric acid production units), 60 FR CAA Amendments. Congress added 65387 (Dec. 19, 1995), 40 CFR 60.30d–.32d; Subpart (Emphasis added.) By its terms, this CAA section 129 to address solid waste Ce (hospital/medical/infectious waste incinerators), provision provides that the EPA has the combustion and specifically directed 62 FR 48348 (Sept. 15, 1997), 40 CFR 60.30e–.39e (as amended in 2009 and 2011); Subpart BBBB responsibility of determining whether the Administrator to establish the ‘‘best system of emission reduction’’ (small municipal waste combustion units ‘‘guidelines (under section 111(d) and constructed on or before August 30, 1999), 65 FR is ‘‘adequately demonstrated.’’ By giving this section) and other requirements 76738 (Dec. 6, 2000), 40 CFR 60.1500–.1940; the EPA this responsibility, this Subpart DDDD (commercial and industrial solid applicable to existing units.’’ 455 This provision is clear that Congress assigned waste incineration units that commenced reference also indicates that Congress the role of determining the ‘‘best system construction on or before November 30, 1999), 65 was aware of and approved the EPA’s FR 75338 (Dec. 1, 2000), 40 CFR 60.2500–.2875 (as of emission reduction’’ to the EPA. Even regulations under section 111(d). amended in 2005, 2011, and 2013); Subpart FFFF if the provision may be considered to be (other solid waste incineration units that The EPA has followed the same silent or ambiguous on that question, commenced construction on or before December 9, approach described in the the EPA reasonably interprets the 2004), 70 FR 74870 (Dec. 16, 2005), 40 CFR implementation regulations in all its 60.2980–.3078 (as amended in 2006); Subpart provision to assign the responsibility of rulemakings under section 111(d). Thus, HHHH (coal-electric utility steam generating units), identifying the ‘‘best system of emission 70 FR 28606 (May 18, 2005) (subsequently vacated in all cases, the EPA has identified the reduction’’ to the Administrator for the by the D.C. Circuit in New Jersey v. EPA, 517 F.3d type of emission controls for the source 574 (D.C. Cir. 2008)); Subpart MMMM (existing category and the level of emission sewage sludge incineration units), 76 FR 15372 issue of the authority to determine the BSER or any limitation based on those controls.456 (Mar. 21, 2011), 40 CFR 60.5000–.5250; ‘‘Phosphate other issue, unless specifically indicated otherwise) Fertilizer Plants, Final Guideline Document in this rulemaking, and our discussion of these Availability,’’ 42 FR 12022 (Mar. 1, 1977) (not regulations in responding to comments does not 453 H.R. Rep. No. 95–294, at 195 (May 12, 1977) codified); ‘‘Kraft Pulp Mills; Final Guideline constitute a re-opening. (emphasis added). Document; Availability,’’ 44 FR 29828 (May 22, 450 ‘‘State Plans for the Control of Certain 454 H.R. Rep. No. 95–294, at 195 (May 12, 1977) 1979) (not codified); and ‘‘Primary Aluminum Pollutants from Existing Facilities,’’ 40 FR 53340, (emphasis added). Plants; Availability of Final Guideline Document,’’ 53342 (Nov. 17, 1975). 455 CAA section 129(a)(1)(A) (emphasis added). 45 FR 26294 (Apr. 17, 1980) (not codified). 451 ‘‘State Plans for the Control of Certain 456 See 40 CFR part 60, subpart Ca (large 457 Scalia, Antonin, Judicial Deference to Pollutants from Existing Facilities,’’ 40 FR 53340, municipal waste combustors), 56 FR 5514 (Feb. 11, Administrative Interpretations of Law, 1989 Duke 53343 (Nov. 17, 1975). 1991), 40 CFR 60.30a–.39a (subsequently L.J. 511, 518; see Riverkeeper v. Entergy, 556 U.S. 452 ‘‘State Plans for the Control of Certain withdrawn and superseded by Subpart Cb, see 60 208, 235 (2009). Pollutants from Existing Facilities,’’ 40 FR 53340, FR 65387 (Dec. 19, 1995)); Subpart Cb (large 458 Am. Elec. Power Co. v. Connecticut, 131 S. Ct. 53343 (Nov. 17, 1975). municipal waste combustors constructed on or 2527, 2537–38 (2011).

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00099 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64760 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

guidelines that we are promulgating In addition, there are numerous In addition, a section 111(d) rule with this rule, we are treating steam possible criteria to use in presents less of a need to subcategorize EGUs and combustion turbines as subcategorizing, including, among because the states retain great flexibility separate subcategories. We are others, subcategorizing on the basis of in assigning standards of performance to determining the BSER for steam EGUs age; size; steam conditions (i.e., their affected EGUs. Thus, a state can, and the BSER for combustion turbines, subcritical or supercritical); type of fuel, if it wishes, impose different emission and applying the BSER to each including type of coal (i.e., lignite, reduction obligations on its sources, as subcategory to determine a performance bituminous, and sub-bituminous), and long as the overall level of emission rate for that subcategory. We are not coal refuse; and method of combustion limitation is at least as stringent as the further subcategorizing among different (i.e., fluidized bed combustion, emission guidelines, as discussed types of steam EGUs or combustion pulverized coal combustion, and below. This means that if a state is turbines. gasification). In addition, there are concerned that its different sources have This approach is fully consistent with different possible combinations of those different capabilities for compliance, it the provisions of section 111(d), which categories. At least some of those can adjust the standards of performance simply require the EPA to determine the criteria do not have logical cut-points. in imposes on its sources accordingly. BSER, do not prescribe the method for Furthermore, we have not been 3. Building Blocks 2 and 3 as a ‘‘System doing so, and are silent as to presented with, nor can we discern, a subcategorization. This approach is also of Emission Reduction’’ method of subcategorizing based on fully consistent with other provisions in a. Overview. these or other criteria that is appropriate CAA section 111, which require the As we explain above, the emission in light of the BSER for the affected EPA first to list source categories that performance rates that we include in EGUs and their ability to meet the may reasonably be expected to endanger this rule’s emission guidelines are emission limits. Moreover, our approach public health or welfare 459 and then to achievable by the affected EGUs through of not further subcategorizing as regulate new sources within each such the application of the BSER, which between different types of steam EGUs source category,460 and which grant the includes the three building blocks. or combustion turbines reflects the EPA discretion whether to subcategorize Commenters object that building blocks reasonable policy that affected EGUs new sources for purposes of 2 (generation shift) and 3 (RE) cannot, determining the BSER.461 with higher emission rates should as a legal matter, be considered part of For this rule, our approach of reduce their emissions by a greater the BSER under CAA section 111(d)(1) subcategorizing between steam EGUs percentage than affected EGUs with and (a)(1). These commenters explain and combustion turbines is reasonable lower emission rates, and can do so by that in their view, under CAA section because building blocks 1 and 2 apply implementing the BSER we are 111, the emission performance rates only to steam EGUs. No further identifying. must be based on, and therefore the subcategorization is appropriate because BSER must be limited to, methods for each affected EGU can achieve the New Fossil-Fuel Fired Steam Generating Units; emission control that the owner/ Revisions to Reporting Requirements for Standards performance rate by implementing the of Performance for New Fossil-Fuel Fired Steam operator of the affected source can BSER. Specifically, as noted, each Generating Units: Final Rule,’’ 63 FR 49442 (Sept. integrate into the design or operation of affected EGU may take a range of actions 16, 1998) and ‘‘Proposed Revision of Standards of the source itself, and cannot be based on including investment in the building Performance for Nitrogen Oxide Emissions From actions taken beyond the source or New Fossil-Fuel Fired Steam Generating Units: 463 blocks, replacing or reducing Proposed Revisions,’’ 62 FR 36948, 36943 (July 9, actions involving third-party entities. generation, and emissions trading, as 1997) (establishing a single NOX emission limit for For these reasons, these commenters enabled or facilitated by the new fossil-fuel fired steam generating units, and not argue that the phrase ‘‘system of implementation programs the states subcategorizing, because the affected units could emission reduction’’ cannot be implement the BSER of SCR and achieve the adopt. Further, in the case of a rate- promulgated emission limits) with ‘‘National based state plan, several other Emission Standards for Hazardous Air Pollutants 463 See, e.g., comments by UARG at 6–7 compliance options not included in the From Coal and Oil-Fired Electric Utility Steam (‘‘Standards promulgated under section 111 must be BSER for this rule are also available to Generating Units and Standards of Performance for source-based and reflect measures that the source’s Fossil-Fuel-Fired Electric Utility, Industrial- owner can integrate into the design or operation of all affected sources, including Commercial-Institutional, and Small Industrial- the source itself. A standard cannot be based on investment in demand-side EE Commercial-Institutional Steam Generating Units: actions taken beyond the source itself that somehow measures. Such compliance options Final Rule,’’ 77 FR 9304 (Feb. 16, 2012) (MATS reduce the source’s utilization.’’); comments by help affected sources achieve rule) and ‘‘National Emission Standards for UARG at 31 (the building blocks other than Hazardous Air Pollutants From Coal and Oil-Fired building block 1 take a ‘‘ ‘beyond-the-source’ compliance under a mass-based plan, Electric Utility Steam Generating Units and approach’’ and ‘‘impermissibly rely on measures even if indirectly. Our approach to Standards of performance for Fossil-Fuel-Fired that go beyond the boundaries of individual subcategorization in this rule is Electric Utility, Industrial-Commercial-Institutional, affected EGUs and that are not within the control consistent with our approach to and Small Industrial-Commercial-Institutional of individual EGU owners and operators’’); Steam Generating Units: Proposed Rule,’’ 76 FR comments by UARG at 33 (the ‘‘system’’ of emission subcategorization in previous section 24976, 25036–37 (May 3, 2011) (subcategorizing reduction ‘‘can refer only to reductions resulting 111 rules for this industry, in which we coal fired units designed to burn coal with greater from measures that are incorporated into the source determined whether or not to than or equal to 8,300 Btu/lb (for Hg emissions itself;’’ section 111 is ‘‘designed to improve the subcategorize on the basis of the ability only), coal-fired units designed to burn coal with emissions performance of new and existing sources less than 8,300 Btu/lb (for Hg emissions only), IGCC in specific categories based on the application of of affected EGUs with different units, liquid oil units, and solid oil-derived units; achievable measures implemented in the design or characteristics (e.g., size or type of fuel evaluating ‘‘subcategorization of lignite coal vs. production process of the source at reasonable used) to implement the BSER and other coal ranks; subcategorization of Fort Union cost.’’); comments by American Chemistry Council achieve the emission limits).462 lignite coal vs. Gulf Coast lignite coal vs. other coal et al. (‘‘Associations’’) at 60–61 (EPA’s proposed ranks; subcategorization by EGU size (i.e., MWe); BSER analysis is unlawful because it ‘‘looks beyond subcategorization of base load vs. peaking units the fence line of the fossil fuel-fired EGUs that are 459 CAA section 111(b)(1)(A). (e.g., low capacity utilization units); the subject of this rulemaking;’’ ‘‘the standard of 460 CAA section 111(b)(1)(B). subcategorization of wall-fired vs. tangentially-fired performance must . . . be limited to the types of 461 CAA section 111(b)(2). units; and subcategorization of small, non-profit- actions that can be implemented directly by an 462 Compare ‘‘Revision of Standards of owned units vs. other units;’’ but deciding not to existing source within [the appropriate] class or Performance for Nitrogen Oxide Emissions From adopt those latter subcategorizations). category.’’).

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00100 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64761

interpreted to include building blocks 2 supported by the legislative history of that includes building blocks 2 and 3 is and 3. CAA section 111(d)(1) and (a)(1), which consistent with Congress’s intent to We disagree with these comments, indicates Congress’s intent to give the address urgent environmental problems and note that other commenters were EPA broad discretion in determining the and to protect public health and welfare supportive of our determination to basis for CAA section 111 control against risks, as well as Congress’s include building blocks 2 and 3. Under requirements, particularly for existing expectation that American industry CAA section 111(d)(1) and (a)(1), the sources, and Congress’s intent to would be able to develop the innovative EPA’s emission guidelines must authorize the EPA to consider measures solutions necessary to protect public establish achievable emission limits that could be carried out by parties health and welfare. based on the ‘‘best system of emission other than the affected sources; and our Congress passed the CAA, including reduction . . . adequately interpretation is reasonable in light of its several amendments, to protect demonstrated.’’ While some comparisons to CAA provisions that public health and welfare from commenters assert that emission give the EPA similar authority to ‘‘mounting dangers,’’ including ‘‘injury guidelines must be limited in the consider such measures and to CAA to agricultural crops and livestock, manner summarized above, the phrase provisions that would preclude the EPA damage to and the deterioration of ‘‘system of emission reduction,’’ by its from considering such measures. property, and hazards to air and ground terms and when read in context, In addition to the reasons stated transportation.’’ 467 In doing so, contains no such limits. To the contrary, above, the EPA’s interpretation is also Congress established numerous its plain meaning is deliberately broad reasonable for the following reasons: (i) programs to address air pollution and is capacious enough to include Building blocks 2 and 3 fit well within problems and provided the EPA with actions taken by the owner/operator of the structure and economics of the guidance and flexibility in carrying out a stationary source designed to reduce utility power sector. (ii) Fossil fuel-fired many of those programs. Even if we emissions from that affected source, EGUs are already implementing the were to accept commenters’ view that including actions that may occur off-site measures in these building blocks for the system of emission reduction and actions that a third party takes various reasons, including for purposes identified as best here is not integrated pursuant to a commercial relationship into the design or operation of the of reducing CO2 emissions. (iii) with the owner/operator, so long as Interpreting the phrase ‘‘system of regulated sources, in the context of this those actions enable the affected source emission reduction’’ to incorporate industry and this pollutant it is to achieve its emission limitation. Such building blocks 2 and 3 is consistent reasonable to reject the narrow actions include the measures in with (a) other provisions in the CAA, interpretation urged by some building blocks 2 and 3, which, when including the acid rain provisions in commenters that the ‘‘system of implemented by an affected source, Title IV and the SIP provisions in CAA emission reduction’’ applicable to the enable the source to achieve their section 110, along with the EPA’s affected EGUs must be limited to only emission limits because of the unique regulations implementing the CAA SIP those measures that can be integrated characteristics of the utility power requirements concerning interstate into the design or operation of the sector. For purposes of this rule, we transport and regional haze, each of source itself. The plain language of the consider a ‘‘system of emission which is based on at least some of the statute does not support such an reduction’’—as defined under CAA same measures included in building interpretation, and to adopt it would section 111(a)(1) and applied under blocks 2 and 3; (b) prior EPA action limit the ‘‘system of emission CAA section 111(d)(1)—to encompass a reduction’’ to measures that are either under CAA section 111(d), including broad range of pollution-reduction substantially more expensive or the 2005 Clean Air Mercury Rule,465 actions, which includes the measures in substantially less effective at reducing which is based on some of the same building blocks 2 and 3. Furthermore, emissions than the measures in building measures in building blocks 2 and 3; (c) the measures in building blocks 2 and blocks 2 and 3, notwithstanding the the various provisions of the CAA that 3 fall squarely within EPA’s historical absence of any statutory language authorize emissions trading, because interpretation of section 111, pursuant imposing such a limit. Such a result emissions trading entails a source to which the focus for the BSER has would be contrary to the goals of the meeting its emission limitation based on been on how to most cleanly produce a CAA and would ignore the facts that the actions of another entity; and (d) the good, not on how much of the good sources in the electric generation pollution prevention provisions of the should be produced. industry routinely address planning and Our interpretation that a ‘‘system of CAA, which make clear that a primary operating objectives on a broad, multi- emission reduction’’ is broad enough to goal of the CAA is to encourage federal source basis using the measures in include the measures in building blocks and state actions that reduce or building blocks 2 and 3 and would seek 2 and 3 is supported by the following: eliminate, through any measures, the to use building blocks 2 and 3 (as well amount of pollution produced at the as non-BSER measures) to comply with Our interpretation of the phrase ‘‘system 466 of emission reduction’’ is consistent source. (iv) Lastly, interpreting the whatever emission standards are set as with its plain meaning and statutory phrase ‘‘system of emission reduction’’ a result of this rule. Indeed, as already context; our interpretation to authorize the EPA, in formulating its observed, building blocks 2 and 3 are accommodates the very design of CAA BSER determination, to weigh a broad already being used to reduce emissions, section 111(d)(1), which covers a range range of emission-reducing measures and to do so specifically by operation of of source categories and air the industry’s inherent multi-source 465 This rule was vacated by the D.C. Circuit on 464 pollutants; our interpretation is other grounds. New Jersey v. EPA, 517 F.3d 574, functions. 583–84 (D.C. Cir. 2008), cert. denied sub nom. Util. Although the BSER provisions are 464 Because it is designed to apply to a range of Air Reg. Group v. New Jersey, 555 U.S. 1169 (2009). sufficiently broad to include, for air pollutants not regulated under other provisions, 466 As noted in the Legal Memorandum, in several affected EGUs, the measures in building CAA section 111(d) may be described as a ‘‘catch- of these rulemakings and in the course of litigation, blocks 2 and 3, they also incorporate all’’ or ‘‘gap-filler.’’ As such, a ‘‘system of emission the fossil fuel-fired electric power sector has taken reduction’’ as applied under CAA section 111(d) positions that are consistent with the EPA’s significant constraints on the types of should be interpreted flexibly to accommodate this interpretation that the BSER may include building role. blocks 2 and 3. 467 CAA section 101(a)(2).

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00101 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64762 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

measures that may be included in the a standard for emissions of air pollutants implementable by the sources BSER. We discuss those constraints at which reflects the degree of emission themselves. the end of this section. They include the limitation achievable through the application As a practical matter, the ‘‘source’’ of the best system of emission reduction includes the ‘‘owner or operator’’ of any section 111(d)(1) and (a)(1) which (taking into account the cost of requirements that emission reductions achieving such reduction and any nonair building, structure, facility, or occur from the affected sources; that the quality health and environmental impact and installation for which a standard of emission performance standards for energy requirements) the Administrator performance is applicable. For instance, which the BSER forms the basis be determines has been adequately under CAA section 111(e), it is the achievable; that the system of emission demonstrated. ‘‘owner or operator’’ of a source who is reduction be adequately demonstrated; Pursuant to this definition, it is clear prohibited from operating ‘‘in violation and that the EPA account for cost, non- that a ‘‘system of emission reduction’’ of any standard of performance air quality impacts, and energy serves as the basis for emission limits applicable to such source.’’ 471 requirements in determining the ‘‘best’’ embodied by CAA section 111 Thus, a ‘‘system of emission system of emission reduction that is standards. For this reason, emission reduction’’ for purposes of CAA section adequately demonstrated. The limits must be ‘‘achievable’’ through the 111(d) means a set of measures that constraints included in these statutory ‘‘application’’ of the ‘‘best’’ ‘‘system of source owners or operators can requirements do not preclude building emission reduction’’ ‘‘adequately implement to achieve an emission blocks 2 and 3 from the BSER. In demonstrated.’’ Under CAA section limitation applicable to their existing interpreting these statutory 111(d)(1), such a limit is established for source.472 requirements for determining the BSER, ‘‘any existing source,’’ which is defined In contrast, a ‘‘system of emission the EPA is consistent with past practice as any existing ‘‘building, structure, reduction’’ does not include actions that and current policy for both section 111 facility, or installation which emits or only a state or other governmental entity regulatory actions as well as regulatory may emit any air pollutant.’’ 469 could take that would have the effect of actions under other CAA provisions for Although a ‘‘system of emission reducing emissions from the source the electric power sector, under which reduction’’ lays the groundwork for category, and that are beyond the ability the EPA has generally taken the CAA section 111 standards, the term of the affected sources’ owners/ approach of basing regulatory ‘‘system’’ is not defined in the CAA. As operators to take or control. requirements on controls and measures a result, we look first to its ordinary Additionally, actions that a source designed to reduce air pollutants from meaning. owner or operator could take that would the production process without limiting Abstractly, the term ‘‘system’’ means not have the effect of reducing the aggregate amount of production. a set of things or parts forming a emissions from the source category, This approach has been inherent in our complex whole; a set of principles or such as purchasing offsets, would also past interpretation and application of procedures according to which not qualify as a ‘‘system of emission section 111 and we maintain this something is done; an organized scheme reduction.’’ interpretation in this rulemaking.468 or method; and a group of interacting, Building blocks 2 and 3 each fall While inclusion of building blocks 2 interrelated, or interdependent within the meaning of a ‘‘system of and 3 is consistent with our elements.470 As a phrase, ‘‘system of emission reduction’’ because they interpretation of the statutory emission reduction’’ takes a broad consist of measures that the owners/ requirements, inclusion of building meaning to serve a singular purpose: It operators of the affected EGUs can block 4 is not, and for that reason, we is a set of measures that work together implement to achieve their emission are declining to include building block to reduce emissions. limits. In doing so, the affected EGUs in the BSER. Finally, we briefly note When read in context, the phrase will achieve the overall emission additional constraints that focus the ‘‘system of emission reduction’’ carries reductions the EPA identifies in this BSER identified for new sources under important limitations: because the rule. We describe these building block section 111(b) on controls that assure ‘‘degree of emission limitation’’ must be 2 and 3 measures in detail elsewhere in that sources are well-controlled at the ‘‘achievable through the application of this rule, including the specific actions time of construction. the best system of emission reduction,’’ that owners/operators of affected EGUs b. System of emission reduction as a (emphasis added), the ‘‘system of can take to implement the measures. broad range of measures. emission reduction’’ must be limited to It should be noted that defining the (1) Plain meaning and context of a set of measures that work together to scope of a ‘‘system of emission ‘‘system of emission reduction.’’ reduce emissions and that are reduction’’ is not the end of our inquiry The phrase ‘‘system of emission under CAA section 111(a)(1); rather, as reduction’’ appears in the definition of 469 See CAA section 111(d)(1) (applying a noted above, a standard of performance a ‘‘standard of performance’’ under CAA standard of performance to any existing source); must reflect the application of the ‘‘best (a)(6) (defining the term ‘‘existing source’’ as any system of emission reduction . . . section 111(a)(1). That definition reads: stationary source other than a new source); and (a)(3) (defining the term ‘‘stationary source’’ as ‘‘any adequately demonstrated.’’ (Emphasis 468 As we note in section V.A., this rulemaking building, structure, facility, or installation which presents a unique set of circumstances, including emits or may emit any air pollutant,’’ however, 471 While this section provides for enforcement in the global nature of CO2 and the emission control explaining that ‘‘[n]othing in subchapter II [i.e., the context of new sources, a CAA section 111(d) challenges that CO2 presents (which limit the Title II] of this chapter relating to nonroad engines plan must provide for the enforcement of a standard availability and effectiveness of control measures), shall be construed to apply to stationary internal of performance for existing sources. combined with the facts that the electric power combustion engines.’’) 472 Some commenters read the proposed industry (including fossil fuel-fired steam 470 Oxford Dictionary of English (3rd ed.) (2010), rulemaking as taking the position that the phrase generators and combustion turbines) is highly available at http://www.oxforddictionaries.com/us/ ‘‘system of emission reduction’’ includes anything integrated, electricity is fungible, and generation is definition/american_english/system; see also whatsoever that reduces emissions, and criticized substitutable (which all facilitate the generation American Heritage Dictionary (5th ed.) (2013), that interpretation as too broad. See UARG shifting measures encompassed in building blocks available at http://www.yourdictionary.com/ comment, at 3–4. We are not taking that 2 and 3). Our interpretation of section 111 as system#americanheritage; and The American interpretation here. In this final rule, we agree that focusing on limiting emissions without limiting College Dictionary (C.L. Barnhart, ed. 1970) (‘‘an the phrase should be limited to exclude, inter alia, aggregate production must take into account those assemblage or combination of things or parts actions beyond the ability of the owners/operators unique circumstances. forming a complex or unitary whole’’). to control.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00102 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64763

added.) Thus, in determining the BSER, may be) harmful to public health or including any source category that the the Administrator must first determine welfare but are not’’ criteria or EPA identifies under subsection whether the available systems of hazardous air pollutants.473 Congress 111(b)(1)(A) as meeting the criteria of, in emission reduction are ‘‘adequately enacted CAA section 111(d) to cover general, causing or contributing demonstrated,’’ based on the criteria, this third category of air pollutants and, significantly to air pollution that may described above, set out by Congress in in this sense, Congress designed it to reasonably be anticipated to endanger the legislative history and the D.C. apply to any air pollutants that were not public health or welfare—along with the Circuit in case law. After identifying the otherwise regulated as toxics or NAAQS wide range of air pollutants. ‘‘adequately demonstrated’’ systems of pollutants.474 This would include air Because Congress designed CAA emission reduction, the Administrator pollutants that the EPA might later, section 111(d) to cover a wide range of then selects the ‘‘best’’ of these, based when more information became air pollutants—including ones that on several factors, including amount of available, designate as NAAQS or Congress may not have been aware of at emission reduction, cost, non-air quality hazardous air pollutants, as well as air the time it enacted the provision—and health and environmental impact and pollutants that Congress may not have a wide range of industries, it is logical energy requirements. Only after the been aware of at the time.475 In that Congress intended that the BSER Administrator weighs all of these addition, the indications are that provision, as applied to CAA section considerations can she determine the Congress expected CAA section 111(d) 111(d), have a broad scope so as to BSER and, based on that, establish a to be a significant source of regulatory accommodate the range of air pollutants standard of performance under CAA activity, by some measures, more active and source categories. section 111(b) or an emission guideline than CAA section 112. This is evident (b) Legislative history of CAA section under CAA section 111(d). because Congress expected that CAA 111. For purposes of this final rule, it is section 111(d) would cover more air (i) Breadth of ‘‘system of emission not necessary to enumerate all of the pollutants than either CAA section 109/ reduction.’’ types of measures that do or do not 110 (criteria pollutants) or CAA section The phrase ‘‘system of emission constitute a ‘‘system of emission 112 (hazardous air pollutants).476 In reduction,’’ particularly as applied reduction.’’ What is relevant is that addition, in the 1990 CAA under CAA section 111(d), should be building blocks 2 and 3 each qualify as Amendments, Congress enacted CAA broadly interpreted consistent with its part of the ‘‘system of emission section 129 to achieve emission plain meaning but also in light of its reduction.’’ As noted, they focus on reductions from a major source category, legislative history. The version of CAA supply-side activities and they each solid waste incinerators, and established section 111(d)(1) that Congress adopted constitute measures that the affected CAA section 111(d) as the basic as part of the 1970 CAA Amendments EGUs can implement that will allow mechanism for that provision. The EPA read largely as CAA section 111(d)(1) those EGUs to achieve the degree of subsequently promulgated a number of does at present, except that it required emission limitation that the EPA has CAA section 129/111(d) rulemakings.477 states to impose ‘‘emission standards’’ identified based on those building Finally, it should be noted that Congress on any existing source. (Congress blocks. Further, these building blocks designed CAA section 111(d) to cover a replaced that term with ‘‘standards of also satisfy the other statutory criteria wide range of source categories— performance’’ in the 1977 CAA enumerated in CAA section 111(a)(1). Amendments.) The 1970 CAA (2) Other indications that the BSER 473 40 FR 53340, 53340 (Nov. 17, 1975) (EPA Amendments version of CAA section provisions encompass a broad range of regulations implementing CAA section 111(d)). 111(d)(1) neither defined ‘‘emission measures. 474 See S. Rep. No. 91–1196, at 20 (Sept. 17, standards’’ nor imposed restrictions on 1970), 1970 CAA Legis. Hist. at 420 (‘‘It should be The EPA’s plain meaning noted that the emission standards for pollutants the EPA in determining the basis for the interpretation that the BSER provisions which cannot be considered hazardous (as defined emission standards.478 in CAA section 111(d)(1) and (a)(1) are in section 115 [i.e., the bill’s version of CAA section For new sources, CAA section designed to include a broad range of 112] could be established under section 114 [i.e., 111(b)(1)(B), as enacted in the 1970 the bill’s version CAA section 111]. Thus, there measures, including building blocks 2 should be no gaps in control activities pertaining CAA Amendments (and as it largely still and 3, is supported by several other to stationary source emissions that pose any indications in the CAA and the significant danger to public health or welfare.’’). 478 Although not defined under CAA section 111, legislative history of section 111. 475 See S. Rep. No. 91–1196, at 20 (Sept. 17, the term was used in other provisions and defined (a) Scope of CAA section 111(d)(1). 1970), 1970 CAA Legis. Hist. at 420. in some of them. The term was defined under the First, the broad scope of CAA section 476 See S. Rep. No. 91–1196, at 9; 18–20, 1970 CAA’s citizen suit provision. See 1970 CAA CAA Legis. Hist. at 418–20. The Senate Committee Amendments, Pub. L. 91–604, § 12, 84 Stat. 1676, 111(d)(1) supports our interpretation of Report identified 14 substances as subject to the 1706 (Dec. 31, 1970) (defined as ‘‘(1) a schedule or the BSER because a wide range of provision that became section 111(d), four timetable of compliance, emission limitation, control measures is appropriate for the substances as hazardous air pollutants that would standard of performance or emission standard, or be regulated under the provision that became (2) a control or prohibition respecting a motor wide range of source categories and air section 112, and 5 substances as criteria pollutants vehicle fuel or fuel additive .... .’’). Congress also pollutants covered under CAA section that would be regulated under the provisions that used it in the CAA’s NAAQS provisions and in 111(d). became sections 109–110 (and more ‘‘as knowledge CAA section 112. Under the CAA’s NAAQS In the 1970 CAA Amendments, increases’’). In particular, the Report recognized provisions (i.e., the ‘‘Ambient Air Quality and Congress established a regulatory regime that in particular, relatively few air pollutants may Emission Standards’’ provisions), Congress directed qualify as hazardous air pollutants, but that other the EPA to issue information on ‘‘air pollution for existing stationary sources of air air pollutants that did not qualify as hazardous air control techniques,’’ and include data on ‘‘available pollutants that may be envisioned as a pollutants would be regulated under what became technology and alternative methods of prevention three-legged stool, designed to address section 111(d). and control of air pollution’’ as well as on ‘‘three categories of pollutants emitted 477 See, e.g., Standards of Performance for New ‘‘alternative fuels, processes, and operating methods Stationary Sources and Emission Guidelines for which will result in elimination or significant from stationary sources’’: (1) Criteria Existing Sources: Hospital/Medical/Infectious reduction of emissions.’’ Id., § 4, 84 Stat. at 1679. pollutants (identified under CAA Waste Incinerators, 62 FR 48348, 48359 (Sept. 15, Similarly, under CAA section 112, the section 109 and regulated under section 1997); Standards of Performance for New Stationary Administrator was required to ‘‘from time to time, 110); (2) hazardous air pollutants Sources and Emission Guidelines for Existing issue information on pollution control techniques Sources: Commercial and Industrial Solid Waste for air pollutants’’ subject to emission standards. (identified and regulated under section Incineration Units, 65 FR 75338, 75341 (Dec. 1, Id., 84 Stat. at 1685. These statements provide 112); and (3) ‘‘pollutants that are (or 2000). additional context for the term’s broad intent.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00103 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64764 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

reads), required the EPA to promulgate contrasted with the House bill, which new sources be well-controlled at the ‘‘standards of performance,’’ and would have restricted performance source, in light of their expected lengthy defined that term, much like the present standards to economically feasible useful lives. definition, as emission standards based technical controls. In 1977, Congress amended CAA on the ‘‘best system of emission Following the House-Senate section 111(a)(1) to limit the types of reduction . . . adequately Conference, the enacted version of the controls that could be the basis of demonstrated.’’ This quoted phrase was legislation defined a ‘‘standard of standards of performance for new not included in either the House or performance’’ to mean sources to technological controls. Senate versions of the provision, and, a standard for emissions of air pollutants Congress was clear, however, that instead, was added during the joint which reflects the degree of emission existing source standards, which were conference between the House and limitation achievable through the application no longer developed as ‘‘emission Senate. The conference report of the best system of emission reduction standards,’’ would not be limited to accompanying the text offers no which (taking into account the cost of technological measures. Specifically, clarifications. achieving such reduction) the Administrator the 1977 CAA Amendments revised The House and Senate bills do, determines has been adequately CAA section 111(a)(1) to require all new 484 however, provide some insights. The demonstrated. sources to meet emission standards House bill, H.R. 17255, would have While the phrase ‘‘system of emission based on the reductions achievable required new sources of non-hazardous reduction’’ was not discussed in the through the use of the ‘‘best air pollutants to ‘‘prevent and control Conference Report, an exhibit titled technological system of continuous such emissions to the fullest extent ‘‘Summary of the Provisions of emission reduction.’’ 486 According to compatible with the available Conference Agreement on the Clean Air the legislative history, [t]his mean[t] that technology and economic feasibility, as Amendments of 1970’’ was added to the new sources may not comply merely by determined by the Secretary.’’ 479 The record during the Senate’s consideration burning untreated fuel, either oil or Senate bill, S. 4358, would have of the Conference Report and sheds coal.’’ 487 The new requirement established ‘‘Federal standards of some light on the phrase. According to stemmed in part from Congress’s performance for new sources,’’ which, the summary, ‘‘[t]he agreement concern over the shocks that the country in turn, were to ‘‘reflect the greatest authorizes regulations to require that experienced during the 1973–74 Arab degree of emission control which the new major industry plants such as Oil Embargo, which led Congress to Secretary determines to be achievable power plants, steel mills, and cement revise CAA section 111 to ‘‘encourage through application of the latest plants achieve a standard of emission and facilitate the increased use of coal, available control technology, processes, performance based on the latest and to reduce reliance (by new and old operating methods, or other available control technology, processes, sources alike), upon petroleum to meet alternatives.’’ 480 The Senate Committee operating methods, and other emission requirements.’’ 488 Imposing a Report explains that ‘‘performance alternatives.’’ 485 In light of this new technological requirement (along standards should be met through summary, the phrase ‘‘system of with a new percentage reduction application of the latest available emission reduction’’ appears to blend requirement) under CAA section 111 emission control technology or through the broad spirit of S. 4358 (which was designed to ‘‘force new sources to other means of preventing or controlling required the ‘‘latest available control burn high-sulfur fuel thus freeing low- air pollution.’’ 481 This Report further technology, processes, operating sulfur fuel for use in existing sources elaborates that the term ‘‘standards of methods, or other alternatives’’) with where it is harder to control emissions performance’’ the cost concerns identified in H.R. and where low-sulfur fuel is needed for compliance.’’ 489 Congress nonetheless refers to the degree of emission control which 17255 (which required consideration of can be achieved through process changes, ‘‘economic feasibility’’ when recognized that despite narrowing new operation changes, direct emission control, or establishing federal emission standards source standards to the best other methods. The Secretary should not for new stationary sources). This history ‘‘technological system of continuous make a technical judgment as to how the strongly suggests that Congress intended emission reduction,’’ many ‘‘innovative standard should be implemented. He should to authorize the EPA to consider a wide approaches may in fact reduce the determine the achievable limits and let the range of measures in calculating a economic and energy impact of owner or operator determine the most standard of performance for stationary emissions control,’’ and the economic, acceptable technique to apply.482 sources. At a minimum, there is no Administrator should still be Thus, the Senate bill clearly envisioned indication that Congress intended to encouraged to consider other that standards of performance would preclude measures or actions such as technologically based techniques for not be based on a particular technology the ones in building blocks 2 and 3 from emissions reduction, including or even a particular method to prevent the EPA’s assessment of the BSER. ‘‘precombustion cleaning or treatment of or control air pollution.483 This vision Notwithstanding this broad approach, fuels.’’ 490 This is discussed in more as we discuss in the Legal detail below. 479 H.R. 17255, § 5, 1970 CAA Legis. Hist. at 921– Memorandum, the legislative history of Despite these changes with respect to 22. The reference to ‘‘Secretary’’ was to the new sources, the 1977 CAA Secretary of Health Education and Welfare, which, the 1970 CAA Amendments also at the time, was the agency with responsibility for indicates that Congress intended that Amendments further reinforce the air pollution regulations. 480 S. 4358, § 6, 1970 Legis. Hist. at 554–55 purpose’’ of the CAA, however, the report makes 486 CAA section 111(a)(1) (1977). (emphasis added). clear that pollution prevention measures—which 487 H.R. Rep. No. 95–294 (May 12, 1977), 1977 481 S. Rep. No. 91–1196, at 15–16 (Sept. 17, 1970), the EPA understands to include such measures as CAA Legis. Hist. at 2659. 1970 CAA Legis. Hist. at 415–16 (emphasis added). building blocks 2 and 3—are appropriate under 488 H.R. Rep. No. 95–294 (May 12, 1977), 1977 482 S. Rep. No. 91–1196, at 15–16 (Sept. 17, 1970), CAA section 111. CAA Legis. Hist. at 2659. 1970 CAA Legis. Hist. at 415–16 (emphasis added). 484 CAA section 111(a)(1) under the 1970 CAA 489 New Stationary Sources Performance 483 Notably, the Senate report identifies pollution Amendments (emphasis added). Standards; Electric Utility Steam Generating Units, control and pollution prevention as objectives of 485 Sen. Muskie, S. Consideration of H.R. Conf. 44 FR 33580, 33581–33582 (June 11, 1979). the Senate provision. Pollution prevention is Rep. No. 91–1783 (Dec. 17, 1970), 1970 CAA Legis. 490 H.R. Rep. No. 95–294, at 189 (May 12, 1977), discussed more generally below as a ‘‘primary Hist. at 130. 1977 CAA Legis. Hist. at 2656.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00104 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64765

notion that with respect to existing legislative history indicates that performance for electric power plants sources, the BSER was never intended Congress intended to impose new could be based on measures to be narrowly applied. In 1977, constraints on the types of systems of implemented by other entities, for Congress changed CAA section emission reduction that could be example, entities that ‘‘wash,’’ or 111(d)(1) to require that states adopt considered under CAA section 111(d)(1) desulfurize, coal (or, for oil-fired EGUs, ‘‘standards of performance’’ and made and (a)(1). In contrast, Congress retained that desulfurize oil). This legislative clear that such standards were to be the definition of the term ‘‘technological history is consistent with the EPA’s based on the ‘‘best system of continuous system of continuous emission view that the ‘‘system of emission emission reduction . . . adequately reduction,’’ which means ‘‘a reduction’’ may include actions taken demonstrated,’’ 491 but generally technological process for production or by an entity with whom the owner/ maintained the breadth of that term. operation by any source which is operator of the affected source enters Although Congress inserted the word inherently low-polluting or into a contractual relationship as long as ‘‘continuous’’ into the phrase, Congress nonpolluting,’’ CAA section those actions allow the affected source explained that ‘‘standards in the Section 111(a)(7)(A), or ‘‘a technological system to meet its emission limitation. By the 111(d) state plan would be based on the for continuous reduction of the same token, this legislative history best available means (not necessarily pollution generated by a source before directly refutes commenters’ assertions technological) for categories of existing such pollution is emitted into the that the phrase ‘‘system of emission sources to reduce emissions.’’ 492 This ambient air, including precombustion reduction’’ must not include actions was intended to distinguish existing cleaning or treatment of fuels,’’ CAA taken by entities other than the affected source standards from new source section 111(a)(7)(B). sources.497 standards, for which ‘‘the requirement That term continues to be used in As noted above, in the 1977 CAA for [BSER] has been more narrowly reference to new sources in certain Amendments, Congress revised the redefined as best technological system circumstances, under CAA section basis for standards of performance for of continuous emission 111(b), (h), and (j).496 However, it is not new fossil fuel-fired stationary sources reduction.’’ 493 494 and never has been used to regulate to be a ‘‘technological system of In the 1990 CAA Amendments, existing sources. In this manner, the continuous emission reduction,’’ Congress restored the 1970s vintage 1990 CAA Amendments further including ‘‘precombustion cleaning or 498 definition of a standard of performance reinforce the breadth and flexibility of treatment of fuels.’’ Precombustion as applied to both new and existing the phrase ‘‘system of emission cleaning or treatment reduces the sources. With respect to existing reduction,’’ particularly as it applies to amount of sulfur in the fuel, which sources, this had the effect of no longer existing sources under CAA section means that the fuel can be combusted requiring that the BSER be 111(d). with fewer SO2 emissions, and that in ‘‘continuous.’’ 495 Further, nothing in For these reasons, the 1970, 1977, and turn means that the source can achieve the 1990 CAA Amendments or their 1990 legislative histories support the a lower emission limit. Congress EPA’s interpretation in this rule that the understood that these fuel cleaning 491 CAA section 111(a)(1)(C) under the 1977 CAA term is sufficiently broad to encompass techniques would not necessarily be Amendments. building blocks 2 and 3. accomplished at the affected source and, 492 H.R. Rep. No. 95–294 (May 12, 1977), 1977 (ii) Reliance on actions taken by other in revising CAA section 111(a)(1), CAA Legis. Hist. at 2662 (emphasis added). wanted to ensure that such techniques Congress also endorsed the EPA’s practice of entities. establishing ‘‘emission guidelines’’ under CAA The legislative history supports the would not be overlooked. For example, section 111(d). See H.R. Rep. No. 95–294 (May 12, EPA’s interpretation of ‘‘system of the 1977 House Committee report 1977), 1977 CAA Legis. Hist. at 2662 (‘‘The emission reduction’’ in another way as indicates that an assessment of the best Administrator would establish guidelines as to technological system of continuous what the best system for each such category of well: The legislative history makes clear existing sources is. However, the state would be that Congress intended that standards of emission reduction for fossil fuel-fired responsible for determining the applicability of power plants would include off-site or such guidelines to any particular source or 496 There are numerous reasons to find that third-party pre-combustion techniques sources.’’). particular CAA section 111(b) standards of for reducing emissions at the source 493 Sen. Muskie, S. Consideration of the H.R. performance should be based on controls installed (‘‘e.g., various coal-cleaning Conf. Rep. No. 95–564 (Aug. 4, 1977), 1977 CAA at the source at the time of new construction. This Legis. Hist. at 353. technologies such as solvent refining, is due in part to the recognition that new sources 499 494 In 1977, Congress added a new substantive have long operating lives over which initial capital oil desulfurization at the refinery’’). definition for ‘‘emission standard’’ generally costs can be amortized, as recognized in the applicable throughout the CAA. 1977 CAA legislative history for section 111. Thus, new 497 See, e.g., comments by UARG at 31 (the Amendments, Public Law 95–95, § 301, 91 Stat. construction is the preferred time to drive capital building blocks other than building block 1 take a 685, 770 (Aug. 7, 1977) (defining ‘‘emission investment in emission controls. See, e.g., S. Rep. ‘‘ ‘beyond-the-source’ approach’’ and limitation’’ and ‘‘emission standard’’ as ‘‘a No. 91–1196, at 15–16, 1970 CAA Legis. Hist. at 416 ‘‘impermissibly rely on measures that go beyond the requirement established by the State or the (‘‘[t]he overriding purpose of this section boundaries of individual affected EGUs and that are Administrator which limits the quantity, rate, or [concerning new source performance standards] not within the control of individual EGU owners concentration of emissions of air pollutants on a would be to prevent new air pollution problems, and operators’’); comments by American Chemistry continuous basis, including any requirement and toward that end, maximum feasible control of Council et al. (‘‘Associations’’) at 60–61 (EPA’s relating to the operation or maintenance of a source new sources at the time of their construction is seen proposed BSER analysis is unlawful because it to assure continuous emission reduction.’’). by the committee as the most effective and, in the ‘‘looks beyond the fence line of the fossil fuel-fired Congress also added a generally applicable long run, the least expensive approach.’’); see also EGUs that are the subject of this rulemaking;’’ ‘‘the definition of standard of performance, defined as ‘‘a 1977 CAA Amendments, § 109, 91 Stat. at 700, standard of performance must . . . be limited to the requirement of continuous emission reduction, (redefining, with respect to new sources, CAA types of actions that can be implemented directly including any requirement relating to the operation section 111(a)(1) to reflect the best ‘‘technological by an existing source within [the appropriate] class or maintenance of a source to assure continuous system of continuous emission reduction’’ and or category.’’). emission reduction.’’ Id. adding CAA section 111(a)(7) to define this new 498 1977 CAA Amendments, § 109, 91 Stat. at 700; 495 We note that the general definition of a term). However, as a result of the 1990 revisions to see also CAA section 111(a)(7). standard of performance at CAA section 302(l) still CAA section 111(a)(1), which replaced the phrase 499 H.R. Rep. No. 95–294 (May 12, 1977), 1977 uses ‘‘continuous.’’ Even if this provision applies to ‘‘technological system of continuous emission CAA Legis. Hist. at 2655 (emphasis added). section 111, it does not affect our analysis in this reduction’’ with ‘‘system of emission reduction,’’ Generally speaking, coal cleaning activities also are rule, including our interpretation that BSER new source standards would not be restricted to conducted by third parties. For instance, EPA includes building blocks 2 and 3. being based on technological control measures. Continued

VerDate Sep<11>2014 22:36 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00105 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64766 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

Thus, the standard of performance fashioning the types of measures to The CAA section 111(d) requirements reflecting the best technological system achieve those results. are broadly phrased, include procedural implementable by an affected source For example, under CAA section 109, requirements but no more than very could be based, in part, on technologies Congress authorized the EPA to general substantive requirements, and used at off-site facilities owned and promulgate national ambient air quality give broad discretion to the EPA to operated by third-parties. standards (NAAQS) for air pollutants, determine the basis for the required In the 1990 CAA Amendments, and Congress established general emission limits and to the states to set Congress eliminated many of the criteria and procedural requirements, the standards. It should be noted that restrictions and other provisions added but left to the EPA discretion to identify this drafting approach is not unique to in the 1977 CAA Amendments by the air pollutants and select the the CAA; on the contrary, Congress largely reinstating the 1970 CAA standards. Under CAA section 110, ‘‘usually does not legislate by specifying Amendments’ definition of ‘‘standard of Congress required the states to submit to examples, but by identifying broad and performance.’’ Nevertheless, there is no the EPA SIPs, required that the plans general principles that must be applied indication that in doing so, Congress attain the NAAQS by a date certain, and to particular factual instances.’’ 505 intended to preclude the EPA from established procedural requirements, In light of this statutory framework, it considering coal cleaning by third but allowed the states broad discretion is clear that Congress delegated to the parties (which had been considered in determining the substantive EPA the authority to administer CAA within the scope of the best system of requirements of the SIPs. section 111, including by authorizing emission reduction even under the 1970 Under CAA section 111(b), Congress the EPA to apply the ‘‘broad and general CAA Amendments),500 and in fact, the directed the EPA to list source principles’’ contained in CAA section EPA’s regulations promulgated after the categories that endanger public health 111(a)(1) to the particular circumstances 1990 CAA Amendments continue to or welfare and established procedural we face today. impose standards of performance that requirements, but did not include other (3) Comments and responses. are based on third-party coal substantive requirements, and instead While some commenters support the cleaning.501 gave the EPA broad discretion to EPA’s interpretation of section 111 to (c) Consistency of a broad determine the criteria for endangerment. authorize the inclusion of building interpretation of CAA section 111 with Under CAA section 112, Congress blocks 2 and 3 in the BSER, other the overall structure of the CAA. required the EPA to regulate certain air commenters assert that the emission Interpreting CAA section 111(d)(1) pollutants and to set ‘‘emission standards must be based on measures and (a)(1) to authorize the EPA’s standards’’ that meet general criteria, that the sources subject to CAA section consideration of the building block 2 and established procedural 111—in this rule, the affected EGUs— and 3 measures is consistent with the requirements, but did not include other apply to their own design or operations, overall structure of the CAA, substantive requirements and, instead, and, as a result, in this rule, cannot particularly as it was amended in 1970, gave the EPA broad discretion in include measures implemented at when Congress added CAA section 111 identifying the types of pollutants and entities other than the affected EGUs in much the same form that it reads in determining the standards.502 By and that have the effect of reducing today. large, Congress left these provisions generation, and therefore emissions, In the 1970 CAA Amendments, for the intact in the 1977 CAA from the affected EGUs. The most part, and particularly for stationary Amendments.503 504 commenters assert that various source provisions, Congress painted Congress drafted the CAA section provisions in CAA section 111 make with broad brush strokes, giving broad 111(d) requirements in the 1970 CAA this limitation clear. We do not find authority to the EPA or the states. That Amendments, and revised them in the those arguments persuasive. is, Congress established general 1977 CAA Amendments, in a manner First, some commenters state that requirements that were intended to that is similar to the other stationary under CAA section 111(d)(1) and (a)(1), produce stringent results, but gave the source requirements, just described, in the existing sources subject to the EPA or the states great discretion in CAA sections 109, 110, 111(b), and 112. standards of performance must be able to achieve their emission limit, but that recognized in a regulatory analysis of new source 502 By comparison, under the 1990 CAA they are able to do so only through performance standards for industrial-commercial- Amendments, Congress substantially transformed institutional steam generating units that the CAA section 112 to be significantly more measures integrated into the source’s technology ‘‘requires too much space and is too prescriptive in directing EPA rulemaking, which own design and operation. As a result, expensive to be employed at individual industrial- reflected Congress’s increased knowledge of according to these commenters, those commercial-institutional steam generating units.’’ hazardous air pollutants and impatience with the are the only types of measures that may U.S. EPA, Summary of Regulatory Analysis for New EPA’s progress in regulating. qualify as a ‘‘system of emission Source Performance Standards: Industrial- 503 In the 1977 CAA Amendments, Congress Commercial-Institutional Steam Generating Units of applied the same broad drafting approach to the reduction’’ that may form the basis of Greater than 100 Million Btu/hr Heat Input, EPA– stratospheric ozone provisions it adopted in CAA the emissions standards. We disagree. 450/3–86–005, p. 4–4 (June 1986). sections 150–159. There, Congress authorized the We see nothing in CAA section 500 See U.S. EPA, Background Information for EPA to determine whether, ‘‘in the Administrator’s 111(d)(1) or (a)(1) which by its terms Proposed New-Source Performance Standards: judgment, any substance, practice, process, or Steam Generators, Incinerators, Portland Cement activity may reasonably be anticipated to affect the limits CAA section 111 to measures that Plants, Nitric Acid Plants, Sulfuric Acid Plants, stratosphere, especially ozone in the stratosphere, must be integrated into the sources’ own Office of Air Programs Tech. Rep. No. APTD–0711, and such effect may reasonably be anticipated to design or operation. Rather, we p. 7 (Aug. 1971) (indicating the ‘‘desirability of endanger public health or welfare,’’ and then recognize that in order for an emission setting sulfur dioxide standards that would allow directed the EPA, if it made such a determination, the use of low-sulfur fuels as well as fuel cleaning, to ‘‘promulgate regulations respecting the control of limitation based on the BSER to be stack-gas cleaning, and equipment modifications’’ such process practice, process, or activity. . . .’’ ‘‘achievable,’’ the BSER must consist of (emphasis added)). CAA section 157(a). This provision does not further measures that can be undertaken by an 501 40 CFR 60.49b(n)(4); see also Amendments to specify requirements for the regulations. affected source—that is, its owner or New Source Performance Standards (NSPS) for 504 On the other hand, in those instances in which Electric Utility Steam Generating Units and Congress had a clear idea as to the emission operator. As noted elsewhere in the Industrial-Commercial-Institutional Steam limitations that it thought should be imposed, it Generating Units; Final Rule, 72 FR 32742 (June 13, mandated those emission limits, e.g., in Title II 505 Pub. Citizen v. U.S. Dept. of Justice, 491 U.S. 2007). concerning motor vehicles. 440, 475 (1989) (Kennedy, J., concurring).

VerDate Sep<11>2014 22:36 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00106 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64767

preamble, the affected sources subject to reasonably be anticipated to result from which commenters seem to ignore). The this rule are fully able to meet their the use of such technology.’’ 506 first sentence provides: ‘‘The term emission standards by undertaking the (Emphasis added.) These provisions ‘stationary source’ means any building, measures described in all three building make clear that Congress knew how to structure, facility, or installation which blocks. Moreover, as discussed, the constrain the basis for emission limits to emits or may emit any air pollutant.’’ measures in building blocks 2 and 3 are measures that are integrated into the The second sentence provides: ‘‘Nothing highly effective in achieving CO2 design or operation of the affected in subchapter II of this chapter relating emission reductions from these affected source, and that its choice to base CAA to nonroad engines shall be construed to EGUs, given the unique characteristics section 111(d)(1) and (a)(1) standards of apply to stationary internal combustion of the industry. This reinforces the performance on a ‘‘system of emission engines.’’ This second sentence explains conclusion that the term ‘‘system of reduction’’ indicates Congress’ intent to that stationary internal combustion emission reduction’’ is broad enough to authorize a broader basis for those engines are to be regulated under CAA include these measures. standards. section 111, and not Title II (relating to The broad nature of CAA section Some commenters also argue that mobile sources), which confirms that 111(d)(1) and (a)(1) is also confirmed by other provisions in CAA section 111 the purpose of the definition of comparing it to CAA provisions that indicate that Congress intended that stationary source is jurisdictional in explicitly require controls on the design CAA section 111(d)(1) and (a)(1) be nature—to identify the emissions that or operations of an affected source. The limited to measures that are integrated are to be regulated under section 111, as most notable comparison is at CAA into the source’s design or operations. opposed to other CAA provisions. section 111(a)(7). The term This argument is unpersuasive for These applicability and definitional ‘‘technological system of continuous several reasons. First, it would be provisions say nothing about the system emission reduction,’’ which was added unreasonable to presume that Congress of emission reduction—whether it is in 1977 and remains as a separately intended to limit the BSER, indirectly limited to measures integrated into the defined term means, in part, ‘‘a through these other provisions, to design or operation of the source itself technological process for production or measures that are integrated into the or may be broader—that may form the operation by any source which is affected source’s design or operations, basis of the standards for those inherently low-emitting or when Congress could have done so emissions that are to be promulgated nonpolluting.’’ (Emphasis added.) With expressly, as it did for the above- under CAA section 111. respect to this portion of the definition discussed CAA section 407(b)(2) NOX Third, this argument by commenters (and ignoring the additional text, which requirements. does not account for the commonsense includes ‘‘precombustion cleaning or Second, the interpretations that proposition that it is the owner/operator treatment of fuels’’ and clearly commenters offer for these various of the stationary source, not the source encompasses off-site activities), it could provisions misapply the text. For itself, who is responsible for taking be argued that between 1977 and 1990 example, commenters note that under actions to achieve the emission rate, so new source performance standards CAA section 111(d)(1), (a)(3), and (a)(6), that actions that the owner/operator is should be restricted to measures that the standards of performance apply to able to take should be considered in could be integrated into the design or ‘‘any existing source,’’ and an ‘‘existing determining the appropriate standards operation of a source. However, source’’ is defined to include ‘‘any for the source’s emissions. Again, it is commenters’ assertion that the BSER stationary source,’’ which, in turn, is common sense that buildings, must be limited in a similar fashion defined as ‘‘any building, structure, structures, facilities, and installations ignores the deliberate change in 1990 to facility, or installation which emits or can take no actions—only owners and restore the broader definition of a may emit any air pollutant.’’ operators can install and maintain standard of performance (i.e., that it be Commenters assert that these pollution control equipment; only based on the BSER and not the TSCER). applicability and definitional provisions owners and operators can solicit In any case, the narrower scope of CAA indicate that the BSER provisions in precombustion cleaning or treatment of section 111(a)(7) was never applicable CAA section 111(d)(1) and (a)(1) must fuel services; and only owners and to the regulation of existing sources be interpreted to require that the control operators can apply for a permit or trade under CAA section 111(d). measures must be integrated into the allowances.507 Other provisions in CAA Several other examples of standard design or operations of the source itself. section 111 make clear the role of the setting in the CAA shed light on ways We disagree. These applicability and owner/operator. CAA section 111(e) in which Congress has constrained the definitional provisions are jurisdictional provides that for new sources, the EPA’s review. CAA section 407(b)(2) in nature. Their purpose is simply to burden of compliance falls on the 508 provides that the EPA base NOX identify the types of sources whose ‘‘owner or operator.’’ The same is emission limits for certain types of emissions are to be addressed under necessarily true for existing sources. boilers ‘‘on the degree of reduction CAA section 111(d), i.e., stationary This supports the EPA’s view that the achievable through the retrofit sources, as opposed to other types of basis for whether a control measure application of the best system of sources, e.g., mobile sources, whose qualifies as a ‘‘system of emission continuous emission reduction.’’ emissions are addressed under other reduction’’ under CAA section 111(d)(1) (Emphasis added.) Likewise, in CAA provisions (such as CAA Title II). determining best available retrofit This purpose is made apparent by the 507 Industry commenters also acknowledged that technology under CAA section 169A, terms of CAA section 111(a)(3), which it is the owner or operator that implements the the state (or Administrator) must ‘‘take control requirements. See UARG comment at 19 contains two sentences (the second of (section 111(d) ‘‘provides for the regulation of into consideration the costs of individual emission sources through performance compliance, the energy and nonair 506 Even under BART, the EPA is authorized to standards that are based on what design or process quality environmental impacts, any allow emissions trading between sources. See, e.g., changes an individual source’s owner can integrate existing pollution control technology in 40 CFR 51.308(e)(1) & (2); Util. Air Reg. Group v. into its facility’’). EPA, 471 F.3d 1333 (D.C. Cir. 2006); Ctr. for Econ. 508 CAA section 111(e) provides: (‘‘[I]t shall be use at the source, the remaining useful Dev. v. EPA, 398 F.3d 653 (D.C. Cir. 2005); and unlawful for any owner or operator of any new life of the source, and the degree of Cent. Ariz. Water Dist. v. EPA, 990 F.2d 1531 (9th source to operate such source in violation of any improvement in visibility which may Cir. 1993). [applicable] standard of performance.’’)

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00107 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64768 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

and (a)(1) is whether it is something that Commenters also argue, more (a) Integration of the utility power the owner/operator can implement in generally, that Congress knew how to sector. order to achieve the emissions standard authorize control measures such as RE, Certain characteristics of the utility assigned to the source—if so, the control as indicated by Congress’s inclusion of power sector are of central importance measure should qualify as a ‘‘system of those measures in Title IV (relating to for understanding why the measures of emission reduction’’—and not whether acid rain), so the fact that Congress did building blocks 2 and 3 qualify as part the control measure is integrated into not explicitly include these measures in of the system of emission reduction. As the source’s own design or operation. the BSER provisions of CAA section discussed above, electricity is highly Commenters also argue that CAA 111(d)(1) and (a)(1) indicates that substitutable and the utility power section 111(h), which authorizes Congress did not intend that they be sector is highly integrated, so much so ‘‘design, equipment, work practice or included as part of the BSER, and that it has been likened to a ‘‘complex operational standard[s]’’ (together, instead intended that the BSER be machine.’’ 513 Specifically, the utility ‘‘design standards’’) only when a limited to measures integrated into the power sector is characterized by source’s emissions are not emitted sources’ design or operations. This physical, as well as operational, through a conveyance or cannot be argument misses the mark. The interconnections between electricity measured, makes clear that CAA section provisions of CAA section 111(d)(1) and generators themselves, and between 111 standards of performance must be (a)(1) do not explicitly include any those generators and electricity users. based on measures integrated into a specific emission reduction measures— Because of the physical properties of source’s own design or operations. We neither RE measures (like the ones electricity and the current low disagree. CAA section 111(h) concerns Congress wanted to incentivize under availability of large scale electricity the relatively rare situation in which an Title IV), nor measures that are storage, generation and load (or use) integrated into the sources’ design or emission standard, which entails a must be instantaneously balanced in operations (like the retrofit control numerical limit on emissions, is not real time. As a result, the utility power measures Congress required under CAA appropriate because emissions cannot sector is uniquely characterized by section 407(b)). But this contrast with be measured, due either to the nature of extensive planning and highly other CAA provisions does not mean the pollutant (i.e., the pollutant is not coordinated operation. These features that Congress did not intend the BSER emitted through a conveyance) or the have been present for decades, and in to include any of those types of nature of the source category (i.e., the fact, over time, the sector has become measures. Rather, this contrast supports source category is not able to conduct more highly integrated. Another viewing a ‘‘system of emission measurements). CAA section 111(h) important characteristics of the utility reduction’’ under CAA section 111 as power sector is that although the states provides that in such cases, the EPA sufficiently broad to encompass a wide have developed both regulated and de- may instead impose design standards range of measures for the purpose of regulated markets, the generation of rather than establish an emission emission reduction of a wide range of electricity reflects a least-cost dispatch standard (i.e., the EPA can require pollutants from a wide range of approach, under which electricity is sources to implement a particular stationary sources.510 design, equipment, work practice, or c. Deference to interpret the BSER to generated first by the generators with operational standard). When an include building blocks 2 and 3. the lowest variable cost. emissions standard is appropriate, as in To the extent that it is not clear These characteristics of the sector the present rule, CAA section 111(h) is whether the phrase ‘‘system of emission have facilitated the overall objective of silent as to what types of measures— reduction’’ may include the measures in providing reliable electric service at whether limited to a source’s own building blocks 2 and 3, the EPA’s least cost subject to a variety of design or operations—may be interpretation of CAA section 111(d) constraints, including environmental considered as the system of emission and (a) is reasonable 511 in light of our constraints. Moreover, in each type of reduction.509 In any event, CAA section discretion to determine ‘‘whether and market, the sector has developed 111(h) applies only to standards how to regulate carbon-dioxide mechanisms, including the participation promulgated by the Administrator, and emissions from power plants ....’’512 of institutional actors, to safeguard therefore appears by its terms to be Our interpretation that a ‘‘system of reliability and to assure least cost limited to CAA section 111(b) emission reduction’’ for the affected service. rulemakings for new, modified, or EGUs may include building blocks 2 Congress,514 the Courts,515 the EPA in reconstructed sources, not CAA section and 3 is a reasonable construction of the its regulatory actions,516 and states in 111(d) rulemakings for existing sources. statute for the reasons described above and in this section below. Some commenters identify other 513 S. Massoud Amin, ‘‘Securing the Electricity provisions of CAA section 111 that, in (1) Consistency of building blocks 2 Grid,’’ The Bridge, Spring 2010, at 13, 14; Phillip their view, prove that CAA section 111 and 3 with the structure of the utility F. Schewe, The Grid: A Journey Through the Heart is limited to control measures that are power sector. of Our Electrified World 1 (2007). 514 See CAA section 404(f)(2)(B)(iii)(I) integrated within the design or 510 It should also be noted that Title IV is limited (conditioning a utility’s eligibility for certain operations of the source. We do not find allowances on implementing an energy to particular pollutants (i.e., SO2 and NOX) and those arguments persuasive, for the particular sources—fossil fuel-fired EGUs—and as a conservation and electric power plan that evaluates reasons discussed in the supporting result, lends itself to greater specificity about the a range of resources to meet expected future demand at least cost); see also S. Rep. No. 101–228, documents for this rule. types of control measures. Section 111(d), in contrast, applies to a wide range of source types, at 319–20 (Dec. 20, 1989) (recognizing that ‘‘utilities which, as discussed above, supports reading it to already engage in power-pooling arrangements to 509 For this same reason, the fact that CAA section authorize a broad range of control measures. ensure maximum flexibility and efficiency in 111(h) authorizes the EPA to impose certain types 511 EPA v. EME Homer City Generation, L.P., 134 supplying power’’ to support the establishment of of standards—such as, among others, work practice S. Ct. 1584, 1603 (2014) (‘‘We routinely accord an allowance system under Title IV). or operational standards—only in limited dispositive effect to an agency’s reasonable 515 New York v. Federal Energy Regulatory circumstances not present in this rulemaking, does interpretation of ambiguous statutory language.’’). Commission, 535 U.S. 1, at 7 (2002) (citing Brief for not mean that the EPA cannot consider those same 512 American Electric Power Co. v. Connecticut, Respondent FERC 4–5). measures as the BSER in promulgating a standard 131 S. Ct. 2527, 2538 (2011) (‘‘AEP’’) (emphasis 516 ‘‘Stack Heights Emissions Balancing Policy,’’ of performance. added). 53 FR 480, 482 (Jan. 7, 1988).

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00108 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64769

their regulatory actions 517 have generation, which, given the overall primary function of EGUs—and in recognized the integrated nature of the emission limits this rule requires, will meeting current pollution control utility power sector. have the effect of stimulating lower- or requirements to the extent that EGUs (b) Significance of integrated utility zero-emitting generation. operate in dispatch systems that apply power sector for the BSER. It should also be noted that CO2 is variable costs in determining dispatch— The fungibility of electricity, coupled particularly well-suited for building and affected EGUs necessarily already with the integration of the utility power blocks 2 and 3 because it is a global, not plan and operate on a multi-unit basis. sector, means that, assuming that local, air pollutant, so that the location In doing so, they already make use of demand is held constant, adding where it is emitted does not affect its building blocks 2 and 3 to meet electricity to the grid from one generator environmental impact. The U.S. operational and environmental will result in the instantaneous Supreme Court in the UARG case objectives in a cost-effective manner, as reduction in generation from other highlighted the importance of taking further described below. CO2 is a global generators. Similarly, reductions in account of the unique characteristics of pollutant that is exceptionally well- 518 generation from one generator lead to CO2. suited to emission reduction efforts the instantaneous increase in generation In light of these characteristics of the optimized on a broad geographic scale from other generators. Thus, the utility power sector, as well as the rather than on a unit-by-unit basis. It is operation of individual EGUs is characteristics of CO2 pollution, it is also clear from both comments and integrated and coordinated with the reasonable for the EPA to reject an communications received through the operations of other EGUs and other interpretation of the term ‘‘system of Agency’s outreach efforts that affected sources of generation, as well as with emission reduction’’ that would exclude EGUs will seek to use building blocks 2 electricity users. This allows for building blocks 2 and 3 from and 3 to achieve compliance with the locational flexibility across the sector in consideration in this rule and instead emission standards set in the section meeting demand for electricity services. restrict consideration to measures 111(d) plans following promulgation of The institutions that coordinate integrated into each individual affected this rule. For these reasons—and the planning and operations routinely use source’s design or operation, especially additional reasons discussed below— this flexibility to meet demand for since the record and other publicly interpreting ‘‘system of emission electricity services economically while available information makes clear that reduction’’ so as to allow consideration satisfying constraints, including the measures in the two building blocks in this rule of only the individual pieces environmental constraints. Because of are effective in reducing emissions and of the ‘‘complex machine,’’ and to forbid these characteristics, EGU owner/ are already widely used. consideration of the ways in which the operators have long conducted their As discussed above, no such pieces actually fit and work together as business, including entering into restriction on the measures that can be parts of that machine, such as building commercial arrangements with third considered part of a ‘‘system of emission blocks 2 and 3, cannot be justified. This parties, based on the premise that the reduction’’ is required by the statutory is particularly so in light of the dilemma performance and operations of any of language, and the legislative history presented by the types of control their facilities is substantially demonstrates that Congress intended an options that commenters argue are the dependent on the performance and interpretation of the phrase broad only ones authorized under section operation of other facilities, including enough to encompass building blocks 2 111(a)(1), which are controls that apply ones they neither own nor operate. For and 3. The narrow interpretation to the design or operation of the affected example, when an EGU goes off-line to advocated by some commenters would EGUs themselves. On the one hand, the perform maintenance, its customer base permit consideration only of potential control measures in building block 1 is served by other EGUs that increase CO2 reduction measures that are either yield only a small amount of emission their generation. Similarly, if an EGU more expensive than building blocks 2 reductions. On the other hand, control needs to assure that it can meet its and 3 (such as the use of natural gas co- measures such as carbon capture and obligations to supply a certain amount firing at affected EGUs or the storage, or co-firing with natural gas, of generation, it may enter into application of CCS technology) or could yield much greater emission arrangements to purchase that measures capable of achieving far less reductions, but are substantially more generation, if it needs to, from other reduction in CO2 emissions (such as the expensive than building blocks 2 and 3. EGUs. heat rate improvement measures (2) Current implementation of Because of this structure, fossil fuel- included in building block 1). Imposing measures in building blocks 2 and 3. fired EGUs can reduce their emissions such a restrictive interpretation—one The requirement that the ‘‘system of by taking the actions in building blocks which is not called for by the statute— emission reduction’’ be ‘‘adequately 2 and 3. Specifically, fossil fuel-fired would be inconsistent with CAA section demonstrated’’ suggests that we begin EGUs may generate or cause the 111’s specific requirement that our review under CAA section 111(d)(1) generation of increased amounts of standards be based on the ‘‘best’’ system and (a)(1) with the systems that sources lower- or zero-emitting electricity— of emission reduction and, as discussed are already implementing to reduce through contractual arrangements, below, would be inconsistent with their emissions. As noted above, fossil investment, or purchase—which will Congressional design that the CAA be fuel-fired EGUs have long implemented, comprehensive and address the major and are continuing to implement, the back out higher-emitting generation, and 519 thereby lower emissions. In addition, environmental issues. measures in building blocks 2 and 3 for The unique characteristics of the fossil fuel-fired EGUs may reduce their various purposes, including for the sector described above require 520 purpose of reducing CO2 emissions — coordinated action in the fundamental, 517 See 79 FR 34830, 34880 (June 18, 2014) (discussing State of California Global Warming 520 A number of utilities have climate mitigation Solutions Act of 2006, Assembly Bill 32, http:// 518 See Util. Air. Reg. Group v. EPA, 134 S. Ct. plans. Examples include National Grid, http:// www.leginfo.ca.gov/pub/05-06/bill/asm/ab_0001- 2427, 2441 (2014). www2.nationalgrid.com/responsibility/how-were- 0050/ab_32_bill_20060927_chaptered.pdf, and 519 See King v. Burwell, No. 14–114 (2015) (slip doing/grid-data-centre/climate-change/; Exelon, quoting December 27, 2013 Letter from Mary D. op., at 21) (‘‘But in every case we must respect the http://www.exeloncorp.com/newsroom/pr_ Nichols, Chairman of California Air Resources role of the Legislature, and take care not to undo 20140423_EXC_Exelon2020.aspx; PG&E, http:// Board, to EPA Administrator Gina McCarthy). what it has done.’’). Continued

VerDate Sep<11>2014 22:36 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00109 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64770 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

and certainly always with the effect of Amendments at the same time that interpreting and implementing CAA reducing emissions. This is a strong Congress largely reinstated the 1970- section 111. indicator that these measures should be vintage reading of section 111(a)(1) to For present purposes, the essential considered part of a ‘‘system of emission adopt the currently applicable features of Title IV are that it regulates reduction’’ for CO2 emissions from these definition of a ‘‘standard of SO2 emissions from coal-fired EGUs by sources. The requirement that the performance,’’ which is based on the adopting a nationwide cap of 8.95 ‘‘system of emission reduction’’ be ‘‘best system of emission reduction . . . million tons to be achieved through a ‘‘adequately demonstrated’’ indicates adequately demonstrated.’’ Moreover, tradable allowance system. As we that the implementation of control Congress linked Title IV and CAA explain below, the provisions of Title IV mechanisms or other actions that the section 111 in certain respects. and its legislative history make clear sources are already taking to reduce Specifically, Congress conditioned the that Congress based the stringency of their emissions are of particular revisions to CAA section 111(a)(1), i.e., the emission limitation requirement relevance in establishing the emission eliminating the percentage reduction (8.95 million tons) and the overall reduction requirements of CAA section and most of the other limitations under structure of the approach (a cap-and- 111(d)(1) and (a)(1). As a result, such the 1977 CAA Amendments, on the trade system) on Congress’s recognition measures are a logical starting point for continued applicability of the Title IV that the affected EGUs had a set of tools consideration as a ‘‘system of emission SO2 cap, so that if the cap were available to them to reduce their reduction’’ under CAA section 111. eliminated, the changes would, by emissions, including through a shift to (3) Reliance in CAA Title IV on operation of law, also be eliminated, lower emitting generation and use of RE, building block measures. and the 1977 version of section 111(a)(1) along with add-on controls and other Some of the building block would be reinstated.522 Additionally, measures. Thus, Title IV provides a approaches to reducing emissions in the Congress authorized the EPA to close analogy to CAA section 111: utility power sector were first tested establish standards of performance for Generation shift and RE were part of around the time that Congress adopted new and existing industrial (non-EGU) Congress’s basis for the Title IV the 1970 CAA Amendments.521 Over emission requirements, and that is sources of SO2 emissions if emissions time, these techniques have become from these sources might exceed 1985 analogous to building blocks 2 and 3 more established within the industry, levels and failed to decline at the serving as part of the ‘‘system of and by the 1990 CAA Amendments, expected rate.523 While industrial emission reduction’’ that is the EPA’s Congress based the Title IV acid rain sources were not required to participate basis for the section 111(d) emission program for existing fossil fuel-fired under Title IV—they could elect to do guidelines. For this reason, the fact that EGUs in part on the same measures that so, under CAA section 410(a)—Congress in Title IV, Congress relied on are considered here. generation shift and RE as the basis for believed SO2 reductions from these (a) Overview. the SO2 emission limitations for affected It is logical that in determining sources were ‘‘an essential component of the reductions sought under [Title EGUs strongly supports interpreting whether the ‘‘system of emission CAA section 111(d)(1) and (a)(1) to reduction’’ that Congress established in IV]’’ and intended that Title IV would ‘‘assure[ ] that these projected include use of those same measures as CAA section 111(d)(1) and (a)(1) is part of the ‘‘system of emission broad enough to include the measures reductions occur and will not be overcome by future growth in reduction’’ as the basis for CO2 emission in building blocks 2 and 3 as the basis limitations for those same sources. emissions.’’ 524 As such, Congress for establishing emission guidelines for (b) Title IV provisions. fossil fuel-fired EGUs, an inquiry should viewed federal standards of Several provisions of Title IV make be made into the tools that Congress performance as the appropriate backstop explicit Congress’s reliance on some of relied on in other CAA provisions to to Title IV even for sources that could the same measures as are in building reduce emissions from those same not otherwise be regulated under CAA blocks 2 and 3. Title IV begins with a 525 sources. The most useful CAA provision section 111(d). Together, these statement of congressional ‘‘findings,’’ to examine for this purpose is Title IV, signals suggest that it is reasonable for including the finding that ‘‘strategies which includes a nationwide cap-and- the EPA to consider Title IV when and technologies for the control of trade program under which coal-fired precursors to acid deposition exist now power plants must have allowances for 522 1990 CAA Amendments, § 403, 104 Stat. at 2631 (requiring repeal of amendments to CAA that are economically feasible, and their SO2 emissions. section 111(a)(1) upon any cessation of improved methods are expected to Title IV includes several signals that effectiveness of CAA section 403(e), which requires become increasingly available over the it is especially relevant for interpreting new units to hold allowances for each ton of SO2 next decade.’’ CAA section 401(a)(4) and implementing CAA section 111(d) emitted). Congress believed that mandating a (emphasis added). Title IV then technological standard through the percentage for purposes of this rule. Title IV applies reduction requirement in section 111(a)(1) would identifies as its ‘‘purposes,’’ ‘‘to reduce to most of the same sources that this ensure the continued availability of low sulfur coal the adverse effects of acid deposition rule applies to—existing coal-fired for existing sources. In other words, the percentage through reductions in annual emissions EGUs and other utility boilers, as well reduction requirement discouraged compliance of sulfur dioxide . . . and nitrogen with new source performance standards based as NGCC units. In addition, Congress solely on fuel shifting because it was much more oxides,’’ as well as ‘‘to encourage energy added Title IV in the 1990 CAA costly to achieve the percentage reduction with conservation, use of renewable and lower sulfur coal. This belief was expressed during clean alternative technologies, and www.pge.com/about/environment/pge/climate/; the 1977 CAA Amendments and is discussed above pollution prevention as a long-range as part of the legislative history of section 111. and Austin Energy, http://austinenergy.com/wps/ strategy, consistent with the provisions portal/ae/about/environment/austin-climate- 523 1990 CAA Amendments, § 406, 104 Stat. at protection-plan/!ut/p/a0/04_Sj9CPykssy0xPLMn 2632–33; see also S. Rep. No. 101–228, at 282 of this subchapter, for reducing air Mz0vMAfGjzOINjCyMPJwNjDzdzY0sDBzdnZ28 (industrial source emissions totaled 5.6 million tons pollution and other adverse impacts of TcP8DAMMDPQLsh0VAU4fG7s!/. of SO2 in 1985). energy production and use.’’ CAA 521 See, e.g., Shepard, Donald S., A Load Shifting 524 S. Rep. No. 101–228, at 345 (Dec. 20, 1989). 525 section 401(b) (emphasis added). Model for Air Pollution Control in the Electric To reiterate, ordinarily, standards of By its terms, this statement of Title Power Industry, Journal of the Air Pollution Control performance cannot be used to regulate SO2 Association, Vol. 20:11, pp. 756–761 (November emissions from existing sources because of the IV’s purposes explicitly embraces the 1970). pollutant exclusions in CAA section 111(d). use of RE. Moreover, the legislative

VerDate Sep<11>2014 22:36 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00110 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64771

history makes clear that the reference in emissions reductions.’’ Similarly, for the 1977 CAA Amendments.535 A the ‘‘findings’’ section quoted above to statements supporting the RE reserve 1977 Report by the National Academy of ‘‘strategies and technologies’’ includes were included in the legislative history Sciences warned that average generation shift to lower-emitting on the House side. temperatures would rise due to the 536 generation. Specifically, the Senate We believe that this provision of the bill burning of fossil fuel. By the time of Report stated that an ‘‘allowance will establish a balanced and workable the 1990 CAA Amendments, the system’’ 526 would encourage such approach that will provide certainty for dangers had become more clearly ‘‘technologies and strategies’’ as utility companies that are considering evident. Senate hearings beginning in energy efficiency; enhanced emissions conservation and renewables, while at the 1988 had presented testimony from Dr. same time strengthening the environmental James E. Hansen of the National reduction or control technologies—like 531 sorbent injection, cofiring with natural gas, goals of this legislation. Aeronautics and Space Administration integrated gasification combined cycles; fuel- (4) Reliance on RE measures to reduce and other scientists that described the switching and least-emissions dispatching in CO2. dangers of climate change caused by order to maximize emissions reductions. 527 The Title IV legislative history also anthropogenic carbon dioxide and other Congress’s reliance on generation makes clear that Congress viewed RE GHG emissions and asserted that as a shifting and RE to reduce acid rain measures as a means to reduce CO2 for result of those emissions, the climate 537 precursors from affected EGUs in Title the purpose of mitigating climate was in fact already changing. IV strongly supports the EPA’s authority change. By the time of the 1990 CAA In enacting the 1990 CAA to identify those same measures as part Amendments, Congress had long been Amendments, Congress identified reductions in carbon dioxide emissions of the CAA section 111 ‘‘system of aware that emissions of CO2 and other emission reduction’’ to reduce CO GHGs put upward pressure on world as an important co-benefit of the 2 reductions in coal use and stressed that emissions from those same sources. temperatures and threatened to change In addition, Title IV includes other the climate in destructive ways. In 1967, the RE measures would achieve those provisions expressly concerning RE. In President Lyndon Johnson sent a letter reductions. Senator Fowler, the author of the provision that established a RE CAA section 404(f) and (g), Congress set to Congress recognizing that carbon technology reserve within the allowance aside a special pool of allowances to dioxide was changing the composition system, noted that RE technologies, encourage use of RE. In order to obtain of the atmosphere.532 The record for the ‘‘can greatly reduce emissions of . . . a special allowance (which would 1970 CAA Amendments include global warming gases. That makes them authorize emissions from a coal-fired hearings 533 and a report by the National a potent weapon against catastrophic utility), an electric utility needed to pay Academy of Sciences noting that carbon climate change ....’’538 dioxide emissions could heat the for qualifying RE sources ‘‘directly or In addition, the 1990 CAA through purchase from another atmosphere.534 A 1976 report noting the 528 Amendments required EGUs covered by person.’’ These measures confirm phenomenon was included in the record the monitoring requirements of the Title Congress’s recognition that RE was IV acid rain program to report their CO2 531 available to the industry, was desirable H.R. Rep. No. 101–490, at 368–69; 674–76 emissions.539 to encourage from a policy perspective, (May 17, 1990) (additional views of Reps. Markey and Moorhead) (‘‘We believe that H.R. 3030, as and was appropriate to consider in amended, will create a strong and effective 535 122 Cong. Rec. S25194 (daily ed. Aug. 3, 1976) determining the amount of pollution incentive for utilities to immediately pursue energy (statement of Sen. Bumpers) (inserting into the reduction the law should require. conservation and renewable energy sources as key record, ‘‘Summary of Statements Received from (c) Title IV legislative history. components of their acid rain control strategies.’’); Professional Societies for the Hearings on Effects of Numerous statements in the see also Rep. Collins, H. Debates on H.R. Conf. Rep. Chronic Pollution (in the Subcommittee on the No. 101–952 (Oct. 26, 1990), 1990 CAA Legis. Hist. Environment and the Atmosphere),’’ which stated, legislative history confirm that Congress at 1307 (‘‘The bottom line is that our Nation’s ‘‘there is near unanimity that carbon dioxide based the Title IV requirements on the utilities and production facilities must reach concentrations in the atmosphere are increasing fact that affected EGUs could reduce beyond coal, oil, and fossil fuels. The focus must rapidly. Though even the direction (warming or their SO emissions through a set of shift instead toward conservation and renewables cooling) of the climate change to be caused by this 2 such as hydropower, solar thermal, photovoltaics, is unknown, very profound changes in the balance measures, including shifting to lower- geothermal, and wind. These clean sources and of climate factors that determine temperature and emitting generation as well as reliance energy, available in virtually limitless supply, are rainfall on the earth are almost certain within 100 on RE. the way of the future.’’). years’’). For example, the Senate Committee 532 ‘‘Special Message to the Congress on 536 National Academy of Sciences, ‘‘Energy and Climate: Studies in Geophysics’’ viii (1977), 529 530 Conservation and Restoration of Natural Beauty Report and Senator Baucus, a (Feb. 8, 1965). http://www.presidency.ucsb.edu/ws/ http://www.nap.edu/openbook.php?record_ member of the Senate Committee on ?pid=27285 (‘‘This generation has altered the id=12024 (noting that a fourfold to eightfold Environment and Public Works and composition of the atmosphere on a global scale increase in carbon dioxide by the latter part of the Chairman of the House and Senate through radioactive materials and a steady increase twenty-second century would increase average world temperature by more than 6 degrees Celsius). Clean Air Conferees, both emphasized in carbon dioxide from the burning of fossil fuels.’’). 533 Testimony of Charles Johnson, Jr., 537 S. Rep. No. 101–228, at 322 (Dec. 20, 1989), that affected EGUs could rely on, among Administrator of the Consumer Protection and at 1990 Legis. Hist. at 8662 (‘‘In the last several other things, ‘‘least-emissions Environmental Health Service (Administration years, the Committee has received extensive dispatching in order to maximize Testimony), Hearing of the House Subcommittee on scientific testimony that increases in the human- Public Health and Welfare (Mar. 16, 1970), 1970 caused emissions of carbon dioxide and other GHGs CAA Legis. Hist. at 1381 (stating that ‘‘the carbon will lead to catastrophic shocks in the global 526 See S. Rep. No. 101–228, at 320 (Dec. 20, dioxide balance might result in the heating up of climate system.’’); History, Jurisdiction, and a 1989). the atmosphere whereas the reduction of the radiant Summary of Activities of the Committee on Energy 527 See S. Rep. No. 101–228, at 316 (Dec. 20, energy through particulate matter released to the and Natural Resources During the 100th Congress, 1989) (emphasis added). atmosphere might cause reduction in radiation that S. Rep. No. 101–138, at 5 (Sept. 1989); ‘‘Global 528 CAA section 404(f)(2)(B)(i). reaches the earth’’). Warming Has Begun, Expert Tells Senate,’’ New 529 S. Rep. No. 101–228 (Dec. 20, 1989), 1990 534 1970 CAA Legis. Hist. at 244, 257 S. Debate York Times, June 24, 1988, http:// CAA Legis. Hist. at 8656. on S. 4358 (Sept. 21, 1970) (statement of Sen. www.nytimes.com/1988/06/24/us/global-warming- 530 S. Debates on Conf. Rep. to accompany S. Boggs) (replicating Chapter IV of the Council on has-begun-expert-tells-senate.html. 1630, H.R. Rep. No. 101–952 (Oct. 27, 1990), 1990 Environmental Quality’s first annual report, which 538 Sen. Fowler, S. Debate on S. 1630 (Apr. 3, CAA Legis. Hist. at 1033–35 (statement of Senator states, ‘‘the addition of particulates and carbon 1990), 1990 CAA Legis. Hist. at 7106. Baucus, inserting ‘‘the Clean Air Conference dioxide in the atmosphere could have dramatic and 539 1990 CAA Amendments, § 821, 104 Stat. at Report’’ into the record). long-term effects on world climate.’’). 2699.

VerDate Sep<11>2014 22:36 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00111 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64772 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

(5) Other EPA actions that rely on the obligations by implementing a range of The EPA has promulgated numerous building block measures. emission control approaches, including actions that establish control Another indication that it is the operation of add-on controls, requirements for affected sources on the reasonable to interpret the CAA section switches to lower-emitting coal, and basis of actions by other entities or 111(d)(1) and (a)(1) provisions for the ‘‘changes in dispatch and generation actions other than measures integrated BSER to include the measures in shifting from higher emitting units to into the design or operations of the building blocks 2 and 3 is that the EPA lower emitting units.’’ 545 The U.S. affected sources. This section and states have relied on these measures Supreme Court upheld CSAPR in EPA summarizes some of those actions. First, to reduce emissions in a number of v. EME Homer City Generation, L.P.546 virtually all pollution control other CAA actions. With respect to RE, in 2004, the EPA requirements require the affected For example, in 2005, the EPA provided guidance to states for adopting sources to depend in one way or another promulgated a rule to control mercury attainment SIPs under CAA section 110 on other entities, such as control emissions from fossil fuel-fired power that include RE measures.547 Some technology manufacturers. Second, the plants under section 111(d): The Clean states have done so. For example, EPA has promulgated numerous Air Mercury Rule (CAMR).540 The EPA Connecticut included in its SIP regulatory actions that are based on established a nationwide cap-and-trade reductions from solar photovoltaic trading of mass-based emission program that took effect in two phases: installations.548 In 2012, the EPA allowances or rate-based emission In 2010, the cap was set at 38 tons per provided additional guidance on this credits, in which many sources meet year, and in 2018, the cap was lowered topic.549 In addition, the EPA has their emission limitation requirements to 15 tons per year. The EPA expected, partnered with the Northeast States for by purchasing allowances or credits on the basis of modeling, that sources Coordinated Air Use Management from other sources that reduce would achieve the second phase, 15-ton (NESCAUM) and three states (Maryland, emissions. per year cap cost-effectively by choosing Massachusetts, and New York) to (a) Third-party transactions. among a set of measures that included identify opportunities for including RE To reiterate, commenters argue that shifting generation to lower-emitting in a SIP and to provide real-world the ‘‘system of emission reduction’’ units.541 CAMR was vacated by the D.C. examples and lessons learned through must be limited to measures taken by Circuit on other grounds,542 but it those states’ case studies.550 the affected source itself because only shows that in the only other section (6) Other rules that relied on actions those measures are under the control of 111(d) rule that the EPA attempted for by other entities. the affected source, as opposed to third affected EGUs, the EPA relied on parties, and therefore only those shifting generation as part of the BSER 545 76 FR at 48279–80. The exact mix of controls measures can assure that the affected in a CAA section 111(d) rulemaking for varied for different air pollutants and different time source will achieve its emission limits. fossil fuel-fired EGUs. periods, but in all cases, shifting generation from But this argument is belied by the fact higher to lower emitting units was one of the that for a wide range of pollution In 2011, the EPA promulgated the expected control strategies for the fossil fuel-fired Cross State Air Pollution Rule power plants. Prior to CSAPR, the EPA promulgated control measures—including many that (CSAPR),543 in which it set statewide two other transport rules, the NOX SIP Call (1998) are indisputably part of a ‘‘system of and the Clean Air Interstate Rule (CAIR) (2005), emission budgets for NOX and SO2 emission reduction’’—affected sources which similarly established standards based on are in fact dependent on third parties. emitted by fossil fuel-fired EGUs, and analysis of the availability and cost of emission based those standards in part on shifts reductions achievable through the use of add-on For example, to implement any type of to lower-emitting generation. CSAPR controls and generation shifting, and also add-on pollution control equipment that established state-wide emissions authorized and encouraged the implementation of is available only from a third-party RE and demand-side EE measures. CAIR: 70 FR manufacturer, the affected source is budgets based on a range of cost- 25162, 25165, 25256, 25279 (May 12, 2005) effective actions that EGUs could take, (allowing use of allowance set-asides for renewables dependent upon that third party for and set the stringency of the deadlines and energy efficiency); NOX SIP Call: 63 FR 57356, developing and constructing the for some required reductions in part 57362, 57436, 57438, 57449 (Oct. 27, 1998) necessary controls, and for offering (authorizing and encouraging SIPs to rely on them for sale. Indeed, the affected because of the availability of ‘‘increased renewables and energy efficiency to meet the state dispatch of lower-emitting generation budgets). sources may be dependent upon third which can be achieved by 2012.’’ 544 546 134 S. Ct. 1584 (2014). parties to install (and in some cases to The EPA developed a federal 547 See, e.g., Guidance on SIP Credits for Emission operate) the controls as well, and in fact, implementation plan (FIP) that Reductions from Electric-Sector Energy Efficiency in the CAIR rule, the EPA established and Renewable Energy Measures (Aug. 2004), the compliance date based on the established a trading program to meet http://www.epa.gov/ttn/oarpg/t1/memoranda/ the state-wide emission budgets set by ereseerem_gd.pdf; Incorporating Emerging and limited availability of the specialized CSAPR. The EPA projected that sources Voluntary Measures in a State Implementation Plan workforce needed to install the controls (SIP) (Sept. 2004), http://www.epa.gov/ttn/oarpg/t1/ needed by the affected EGUs.551 In would meet their emission reduction _ _ memoranda/evm ievm g.pdf. addition, EGU owners and operators 548 CT 1997 8-hour ozone SIP Web site, http:// 540 70 FR 28606 (May 18, 2005). www.ct.gov/deep/cwp/ may be dependent on the actions of 541 70 FR 28606, 28619 (May 18, 2005) (‘‘Under view.asp?a=2684&q=385886&depNav_GID=1619 third parties to finance the controls and the CAMR scenario modeled by EPA, units [were] (see Attainment Demonstration TSD, Chapter 8 at third-party regulators to assure the projected to meet their SO2 and NOX requirements 31, http://www.ct.gov/deep/lib/deep/air/ mechanism for repaying that financing. and take additional steps to address the remaining _ _ _ regulations/proposed and reports/section 8.pdf). However, this dependence does not [mercury] reduction requirements under CAA 549 ‘‘Roadmap for Incorporating EE/RE Policies section 111, including adding [mercury]-specific and Programs into SIPs/TIPs’’ (July 2012), http:// mean that the emission limit based on control technologies (model applies [activated epa.gov/airquality/eere/manual.html. that equipment is not achievable. carbon injection]), additional scrubbers and 550 States’ Perspectives on EPA’s Roadmap to Rather, the fact that the owner or [selective catalytic reduction], dispatch changes, Incorporate Energy Efficiency/Renewable Energy in operator of the affected source can and coal switching.’’). NAAQS State Implementation Plans: Three Case 542 New Jersey v. EPA, 517 F.3d 574, 583–84 (D.C. Studies, Final Report to the U.S. Environmental arrange with the various third parties to Cir. 2008), cert. denied sub nom. Util. Air Reg. Protection Agency (Dec. 2013), http:// Group v. New Jersey, 555 U.S. 1169 (2009). www.nescaum.org/documents/nescaum-final-rept- 551 70 FR 25162, 25216–25225 (May 12, 2005). 543 76 FR 48208 (Aug. 8, 2011). to-epa-ee-in-naaqs-sip-roadmap-case-studies- The EPA noted that its view was ‘‘based on the NOX 544 76 FR at 48452. 20140522.pdf. SIP Call experience.’’ Id. at 25217.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00112 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64773

acquire, install, and pay for the purchasing a credit or an allowance is commercial relationships that rely on equipment means that emission limit is acquiring an equity in the technology or those features.553 achievable. action applied to the credit-selling Additionally, in 1982, the EPA In this rule, as noted, the affected source for purposes of achieving a recognized that utility turbines could EGUs may, in many cases, implement reduction in emissions occurring at the meet a NOX emission limit without the measures in building blocks 2 and selling source. Trading programs have unacceptable economic consequences 3 directly, and, in other cases, been commonplace under the CAA, because ‘‘other electric generators on the implement those measures by engaging particularly for EGUs, for decades. They grid can restore lost capacity caused by in market transactions with third parties 554 include the acid rain trading program in turbine down time.’’ We describe the that are as much within the affected Title IV of the CAA, the trading relevant parts of these rules in greater EGUs’ control as engaging in market detail in the Legal Memorandum. transactions with the range of third programs in the transport rules promulgated by the EPA under the (7) Consistency with the purposes of parties involved in pollution control the Clean Air Act. ‘‘good neighbor provision’’ of CAA equipment. By the same token, the Interpreting the term ‘‘system of section 110(a)(2)(D)(i)(I), the Clean Air market transactions that the affected emission reduction’’ broadly to include EGUs engage in with third parties to Mercury Rule, and the regional haze building blocks 2 and 3 (so that the implement the measures in building rules. In each of these actions, the ‘‘best system of emission reduction . . . blocks 2 and 3 are comparable to the Congress or the EPA recognized that adequately demonstrated’’ may include market transactions that affected EGUs some of the affected EGUs would those measures as long as they meet all engage in as part of their normal course implement controls or take other actions of the applicable requirements) is also of business, which include, among that would lower their emissions and consistent with the purposes of the many examples, transactions with thereby allow them to sell allowances to CAA. Most importantly, these purposes RTOs/ISOs or balancing authorities, other EGUs, which were dependent on include protecting public health and entities in organized markets. the purchase of those allowances to welfare by comprehensively addressing (b) Emissions trading. meet their obligations.552 For the air pollution, and, particularly, Additional precedent that the ‘‘system reasons just described, these trading protecting against urgent and severe of emission reduction’’ may include the rules refute commenters’ arguments for threats. In addition, these purposes measures in building blocks 2 and 3 and limiting the scope of the ‘‘system of include promoting pollution prevention is not limited to measures that a source measures, as well as the advancement of can integrate into its own design or emission reduction.’’ technology that reduces air pollution. operations, without being dependent on (c) NSPS rules for EGUs that depend (a) Purpose of protecting public health other entities, is found in the many on the integrated grid. and welfare. rules that Congress has enacted or that The EPA has promulgated NSPS for The first provisions in the Clean Air the EPA has promulgated that allow EGUs that include requirements based Act set out the ‘‘Congressional findings EGUs and other sources to meet their on the fact that an EGU may reduce its and declaration of purpose.’’ CAA emission limits by trading with other generation, and therefore its emissions, sources. In a trading rule, the EPA section 101. CAA section 101(a)(2) because the integration of the grid authorizes a source to meet its emission states the finding that ‘‘the growth in the limit by purchasing mass-based allows another EGU to increase amount and complexity of air pollution emission allowances or rate-based generation and thereby avoid brought about by urbanization, emission credits generated from other jeopardizing the supply of electricity. industrial development, and the sources, typically ones that implement For example, in 1979, the EPA finalized increasing use of motor vehicles, has controls that reduce their emissions to new standards of performance to limit resulted in mounting dangers to the the point where they are able to sell emissions of SO2 from new, modified, public health and welfare.’’ CAA section allowances or credits. As a result, the and reconstructed EGUs. In evaluating 101(a)(3) states the finding that ‘‘air availability of trading reduces overall the best system against concerns of pollution prevention (that is, the costs to the industry by focusing the electric service reliability, the EPA took reduction or elimination, through any controls on the particular sources that into account the unique features of measures, of the amount of pollutants have the least cost to implement power transmission along the produced or created at the source) and controls. For present purposes, what is interconnected grid and the unique air pollution control at its source is the relevant is that in a trading program, primary responsibility of States and some affected sources choose to meet 552 For example, in the enacting the acid rain local governments.’’ CAA section 101(a) their emission limits not by program under CAA Title IV, Congress explicitly states the finding that ‘‘Federal financial implementing emission controls recognized that some sources would comply by assistance and leadership is essential for integrated into their own design or purchasing allowances instead of implementing the development of cooperative Federal, controls. S. Rep. No. 101–228, at 303 (Dec. 20, State, regional, and local programs to operations, but rather by purchasing 1989). Similarly, in promulgating the NOX SIP Call allowances or credits. These affected in 1998, the EPA stated, ‘‘Since EPA’s prevent and control air pollution.’’ sources, therefore, are dependent on the determination for the core group of sources is based CAA section 101(b) next states ‘‘[t]he on the adoption of a broad-based trading program, purposes’’ of the Clean Air Act. The first actions of other entities, which are the average cost-effectiveness serves as an adequate ones that choose to meet their emission measure across sources because sources with high purpose is ‘‘to protect and enhance the limits by implementing emission marginal costs will be able to take advantage of this controls, which permits them to sell program to lower their costs.’’ 63 FR at 57399 553 See 44 FR 33580, 33597–33600 (taking into (emphasis added). By the same token, in account ‘‘the amount of power that could be allowances or credits. They are promulgating the Cross State Air Pollution Rule, the purchased from neighboring interconnected utility dependent, however, in the same way EPA stated, ‘‘the preferred trading remedy will companies’’ and noting that ‘‘[a]lmost all electric that a source acquiring pollution control allow source owners to choose among several utility generating units in the United States are technology for the purposes of meeting compliance options to achieve required emission electrically interconnected through power reductions in the most cost effective manner, such transmission lines and switching stations’’ and that a NSPS is dependent on a vendor of that as installing controls, changing fuels, reducing ‘‘load can usually be shifted to other electric technology to fulfill its contractual utilization, buying allowances, or any combination generating units’’). obligations. That is, the source operator of these actions.’’ 76 FR at 48272 (emphasis added). 554 47 FR 3767, 3768 (Jan. 27, 1982).

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00113 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64774 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

quality of the Nation’s air resources so dramatically increased after World War controls on automobiles, overriding as to promote the public health and II,557 as nothing short of a national industry objections that the standards welfare and the productive capacity of crisis.558 With the 1970 CAA were not achievable. In addition, its population.’’ CAA section 101(b)(1). Amendments, Congress enacted a Congress added CAA section 111(b), The second is ‘‘to initiate and accelerate stringent response, designed to match which required the EPA to list a national research and development the severity of the problem. At the same categories based on harm to public program to achieve the prevention and time, Congress did not foreclose the health and regulate new sources in control of air pollution.’’ CAA section EPA’s ability to address new those categories. Congress then designed 101(b)(2). The third is ‘‘to provide environmental concerns; in fact, CAA section 111(d) to assure, as the technical and financial assistance to Congress largely deferred to the EPA’s Senate Committee Report for the 1970 State and local governments in expertise in identifying pollutants and CAA Amendments noted, that ‘‘there connection with the development and sources that adversely affect public should be no gaps in control activities execution of their air pollution health or welfare. In doing so, Congress pertaining to stationary source prevention and control programs.’’ CAA authorized the EPA to establish national emissions that pose any significant section 101(b)(3). The fourth is ‘‘to ambient air quality standards for the danger to public health or welfare.’’ 561 encourage and assist the development most pervasive air pollutants— Similarly, the 1977 and 1990 CAA and operation of regional air pollution including the precursors for the choking Amendments were also designed to prevention and control programs.’’ CAA smog that blanketed urban areas 559—to respond to new and/or pressing section 101(c) adds that ‘‘[a] primary protect public health with an ample environmental issues. For example, in goal of this Act is to encourage or margin of safety. Disappointed that the 1977 then-EPA Administrator Costle otherwise promote reasonable Federal, states had not taken effective action to testified before Congress that the State, and local governmental actions, that point to curb air pollution, expected increase in coal use (in consistent with the provisions of this ‘‘Congress reacted by taking a stick to response to various energy crises, Act, for pollution prevention.’’ the States’’ 560 and including within the including the 1973–74 Arab Oil As just quoted, these provisions are 1970 CAA Amendments both the Embargo) ‘‘will make vigorous and explicit that the purpose of the CAA is requirement that the states develop effective control even more urgent.’’ 562 ‘‘to protect and enhance the quality of plans to assure that their air quality Similarly, by 1990, Congress recognized the Nation’s air resources so as to areas would meet those standards by no that ‘‘many of the Nation’s most promote the public health and welfare later than five years, and the threat of important air pollution problems [had] and the productive capacity of its imposition of federal requirements if the failed to improve or [had] grown more population.’’ Moreover, Congress states did not timely adopt the requisite serious.’’ 563 Indeed, President George H. designed the CAA to be ‘‘the plans. Congress also required the EPA to W. Bush said that ‘‘ ‘progress has not comprehensive vehicle for protection of establish standards for hazardous air come quickly enough and much remains the Nation’s health from air pollutants that could result in shutting to be done.’ ’’ 564 pollution’’ 555 and, in fact, designed sources down. Congress added stringent Climate change has become the CAA section 111(d) to address air nation’s most important environmental pollutants not covered under other 557 See Dewey, Scott Hamilton, Don’t Breathe the problem. We are now at a critical Air: Air Pollution and U.S. Environmental Politics, provisions, specifically so that ‘‘there 1945–1970 (Texas A&M University Press 2000). juncture to take meaningful action to should be no gaps in control activities 558 1970 was a significant year in environmental curb the growth in CO2 emissions and pertaining to stationary source legislation, but it was also marked as ‘‘a year of forestall the impending consequences of emissions that pose any significant environmental concern.’’ Sen. Muskie, S. Debate on prior inaction. CO2 emissions from 556 S. 4358 (Sept. 21, 1970), 1970 CAA Legis. Hist. at danger to public health or welfare.’’ 223. By mid-1970, Congress recognized that ‘‘[o]ver existing fossil fuel-fired power plants Furthermore, in these purpose 200 million tons of contaminants [were] spilled into provisions, Congress recognized that the air each year in America .... And each year 561 S. Rep. No. 91–1196, at 20 (Sept. 17, 1970), while pollution prevention and control these 200 million tons of pollutants endanger the 1970 CAA Legis. Hist. at 420 (discussing section health of [the American] people.’’ Id. at 224. ‘‘Cities 114 of the Senate Committee bill, which was the are the primary responsibility of the up and down the east coast were living under basis for CAA section 111(d)). Note that in the 1977 States, ‘‘federal leadership’’ would be clouds of smog and daily air pollution alerts.’’ Sen. CAA Amendments, the House Committee Report essential. Muskie, S. Consideration of the Conference Rep. made a similar statement. H.R. Rep. No. 95–294, at At its core, Congress designed the (Dec. 18, 1970), 1970 CAA Legis. Hist. at 124. Put 42 (May 12, 1977), 1977 CAA Legis. Hist. at 2509 simply, America faced an ‘‘environmental crisis.’’ (discussing a provision in the House Committee bill CAA to address urgent and severe Sen. Muskie, S. Debate on S. 4358 (Sept. 21, 1970), that became CAA section 122, requiring EPA to threats to public health and welfare. 1970 CAA Legis. Hist. at 224. The conference study and then take action to regulate radioactive This purpose is evident throughout agreement, it was reported, ‘‘faces the air pollution air pollutants and three other air pollutants). 1970 CAA Amendments, which crisis with urgency and in candor. It makes hard 562 Statement of Administrator Costle, Hearings choices, provides just remedies, requires stiff before the Subcommittee on Energy Production and authorized stringent remedies that were penalties.’’ Sen. Muskie, S. Consideration of the Supply of the Senate Committee on Energy and necessary to address those problems. By Conference Rep. (Dec. 18, 1970), 1970 CAA Legis. Natural Resources (Apr. 5, 7, May 25, June 24 and 1970, Congress viewed the air pollution Hist. at 123. ‘‘[I]t represents [Congress’] best efforts 30, 1977), 1977 CAA Legis. Hist. at 3532 (discussing problem, which had been worsening to act with the knowledge available . . . in an the relationship between the National Energy Plan steadily as the nation continued to affirmative but constructive manner.’’ Id. at 150. and the Administration’s proposed CAA 559 See Dewey, Scott Hamilton, Don’t Breathe the amendments). Some of the specific changes to the industrialize and as automobile travel Air: Air Pollution and U.S. Environmental Politics, CAA include the addition of the PSD program, 1945–1970 (Texas A&M University Press 2000) at visibility protections, requirements for 555 H.R. Rep. No. 95–294, at 42 (May 12, 1977), 230 (‘‘By the mid-1960s, top federal officials nonattainment areas, and stratospheric ozone 1977 CAA Legis. Hist. at 2509 (discussing a showed an increasing sense of alarm regarding the provisions. provision in the House Committee bill that became health effects of polluted air. In June, 1966, 563 H.R. Rep. No. 101–490, at 144 (May 17, 1990). CAA section 122, requiring the EPA to study and Secretary of Health, Education, and Welfare John 564 H.R. Rep. No. 101–490, at 144 (May 17, 1990). regulate radioactive air pollutants and three other W. Gardner testified before the Muskie Some of the changes adopted in 1990 include air pollutants). subcommittee: ‘‘We believe that air pollution at revisions to the NAAQS nonattainment program, a 556 S. Rep. No. 91–1196, at 20 (Sept. 17, 1970), concentrations which are routinely sustained in more aggressive and substantially revised CAA 1970 CAA Legis. Hist. at 420 (discussing section urban areas of the United States is a health hazard section 112, the new acid rain program, an 114 of the Senate Committee bill, which was the to many, if not all, people.’’). operating permits program, and a program for basis for CAA section 111(d)). 560 Train v. NRDC, 421 U.S. 60, 64 (1975). phasing out of certain ozone depleting substances.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00114 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64775

are by far the largest source of stationary (b) Purpose of encouraging pollution develop innovative solutions to the source emissions. They emit almost prevention. environmental problems. three times as much CO2 as do the next Interpreting ‘‘system of emission The legislative history and case law of nine stationary source categories reduction’’ to include building blocks 2 CAA section 111 identify three different combined, and approximately the same and 3 is also consistent with the CAA’s ways that Congress designed CAA amount of CO emissions as all of the 2 purpose to encourage pollution section 111 to authorize standards of nation’s mobile sources. The only prevention. CAA section 101(c) states performance that promote technological controls available that can reduce CO2 that ‘‘[a] primary goal of [the CAA] is to improvement: (i) The development of emissions from existing power plants in encourage or otherwise promote technology that may be treated as the amounts commensurate with the reasonable federal, state, and local problems they pose are the measures in governmental actions, consistent with ‘‘best system of emission reduction . . . building blocks 2 and 3, or far more the provisions of this chapter, for adequately demonstrated;’’ under CAA 569 expensive measures such as CCS. pollution prevention.’’ Indeed, in the section 111(a)(1); (ii) the expanded Thus, interpreting the ‘‘system of U.S. Code, in which the CAA is codified use of the best demonstrated 570 emission reduction’’ provisions in CAA as chapter 85, the CAA is entitled, ‘‘Air technology; and (iii) the section 111(d)(1) and (a)(1) to allow the Pollution Prevention and Control.’’ 567 development of emerging technology.571 nation to meaningfully address the CAA section 101(a)(3) describes ‘‘air This rule is consistent with the second urgent and severe public health and pollution prevention’’ as ‘‘the reduction of those ways—it expands the use of the welfare threats that climate change pose or elimination, through any measures, of measures in building blocks 2 and 3, is consistent with what the CAA was the amount of pollutants produced or which are already established and designed to do.565 This interpretation is created at the source’’. (Emphasis provide substantial reductions at also consistent with the cooperative added.) The reference to ‘‘any reasonable cost. As discussed below, the purpose of section 111(d) to assure that measures’’ highlights the breadth of use of the measures in these building the CAA comprehensively address those what Congress considered to be blocks will be most fully expanded threats through the mechanism of state pollution prevention, that is, any and all when organized markets develop, and plans, where the states assume primary measures that reduce or eliminate our expectation that those markets will responsibility under federal leadership. pollutants at the source.568 develop is consistent with the See King v. Burwell, 576 U.S. (2015), No. The measures in building blocks 2 Congress’s view, just described, that 14–114 (2015), slip op. at 15 (‘‘We and 3 qualify as ‘‘pollution prevention’’ CAA section 111 should promote cannot interpret federal statutes to measures because they are ‘‘any technological innovation. negate their own stated purposes’’ measures’’ that ‘‘reduc[e] or eliminate[e] This final rule is also consistent with (quoting New York State Dept. of Social . . . the amount of pollutants produced Congress’s overall view that the CAA Servs. v. Dublino, 413 U.S. 405, 419–20 or created at the [fossil fuel-fired Amendments as a whole were designed (1973)); id. at 21 (‘‘A fair reading of affected] source[s].’’ Thus, consistent to promote technological innovation. In legislation demands a fair with the CAA’s primary goals, it is understanding of the legislative enacting the CAA, Congress articulated 566 therefore reasonable to interpret a plan.’’). ‘‘system of emission reduction,’’ as its expectation that American industry would be creative and come up with 565 including the pollution prevention In addition, as we have noted, in designing the measures in building blocks 2 and 3. innovative solutions to the urgent and 1970 CAA Amendments, Congress was aware that severe problem of air pollution. This is carbon dioxide increased atmospheric (c) Purpose of advancing technology temperatures. In 1970, when Congress learned that to control air pollution. manifest in the well-recognized ‘‘the carbon dioxide balance might result in the This final rule is also consistent with technology-forcing nature of the CAA, heating up of the atmosphere’’ and that particulate and was expressed in numerous, matter ‘‘might cause reduction in radiation,’’ the CAA section 111’s purpose of promoting Nixon Administration assured Congress that the advancement of pollution control sometimes ringing, statements in the ‘‘[w]hat we are trying to do, however, in terms of technology based on the expectation legislative history about the belief that our air pollution effort should have a very salutary that American industry will be able to American industry will be able to effect on either of these.’’ Testimony of Charles develop the needed technology. For Johnson, Jr., Administrator of the Consumer Protection and Environmental Health Service controls that are technically capable of reducing example, in the 1970 floor debates, (Administration Testimony), Hearing of the House CO2 emissions at the scale necessitated by the Congress recalled that the nation had Subcommittee on Public Health and Welfare (Mar. severity of the environmental risk—for example, put a man on the moon a year before 16, 1970), 1970 CAA Legis. Hist. at 1381. Many CCS technology—are not as cost-effective as years later, scientific consensus has formed around building blocks 2 and 3 on an industry-wide basis, and had won World War II a quarter the particular causes and effects of climate change; and while the costs of the add-on controls can be century earlier, and attributed much of and the tools put in place in 1970 can be read fairly expected to be reduced over time, it is not the credit for those singular to address these concerns. consonant with the protective spirit of the CAA to achievements to American industry and 566 This final rule is also consistent with the wait. CAA’s purpose of protecting health and welfare. For 567 See Air Quality Act of 1967, Pub. L. 90–148, its ability to be productive and example, the CAA authorizes the EPA to regulate § 2, 81 Stat. 485 (Nov. 21, 1967) (adding ‘‘Title I— innovative. Congress expressed air pollutants as soon as the EPA can determine that Air Pollution Prevention and Control’’ to the CAA, confidence that American industry those pollutants pose a risk of harm, and not to wait along with Congress’ initial findings and purposes until the EPA can prove that those pollutants under CAA section 101). actually cause harm. See H.R. Rep. No. 95–294, at 568 Section 101 emphasizes the importance of air 569 See Portland Cement Ass’n v. Ruckelshaus, 49 (May 12, 1977), 1977 CAA Legis. Hist. at 2516 pollution prevention in two other provisions: CAA 486 F.2d 375, 391 (D.C. Cir. 1973) (the best system (describing the CAA as being designed . . . to section 101(b)(4) states that one of ‘‘the purposes of of emission reduction must ‘‘look[] toward what assure that regulatory action can effectively prevent [title I of the CAA, which includes section 111] are may fairly be projected for the regulated future, harm before it occurs; to emphasize the . . . (b) to encourage and assist the development rather than the state of the art at present’’). predominant value of protection of public health’’). and operation of regional air pollution prevention 570 See S. Rep. No. 91–1196, at 15 (‘‘The The protective spirit of the CAA extends to the and control programs.’’ CAA section 101(a)(3) adds: maximum use of available means of preventing and present rule, in which the EPA regulates on the ‘‘The Congress finds—. . . (3) that air pollution controlling air pollution is essential to the basis of building blocks 2 and 3 because the range prevention . . . and air pollution control at its elimination of new pollution problems’’). of available and cost-effective measures in those source is the primary responsibility of states and 571 See Sierra Club v. Costle, 657 F.2d at 351 building blocks achieves more pollution reduction local governments.’’ In fact, section 101 mentions (upholding a standard of performance designed to than building block 1 alone. Indeed, add-on pollution prevention no less than 6 times. promote the use of an emerging technology).

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00115 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64776 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

could meet the challenges of developing the same measures (generation shifts demonstrated. Because the emission air pollution controls as well.572 and RE), and that explicitly standards must apply to the affected (d) Response to commenters acknowledged that those measures (RE) sources, actions taken by affected concerning purpose. would also reduce CO2 and thereby sources that do not result in emission Commenters have stated that the address the dangers of climate change. reductions from the affected sources— proposed rule ‘‘would transform CAA To reiterate, for the reasons explained in for example, offsets (e.g., the planting of section 111 into something untethered this preamble, this rule is grounded in forests to sequester CO2)—do not qualify to its statutory language and our reasonable interpretation of CAA for inclusion in the BSER. Building unrecognizable to the Congress that section 111(d) and (a)(1). blocks 2 and 3 achieve emission created it.’’ 573 Commenters with this (8) Constraints on the BSER— reductions from the affected EGUs, and line of comments focused on the treatment of building block 4 and thus are not precluded under this ramifications of building block 4, which response to comments concerning constraint. the EPA has decided does not belong in precedents. (b) Controls or measures that affected BSER using EPA’s historical Although the BSER provisions are EGUs can implement. interpretation of BSER. Regardless of sufficiently broad to include, for The second constraint is that because whether the comments are accurate with affected EGUs, the measures in building the affected EGUs must be able to respect to building block 4 measures, blocks 2 and 3, they also incorporate achieve their emission performance they are certainly not accurate with significant constraints on the types of rates through the application of the respect to the three building blocks that measures that may be included in the BSER, the BSER must be controls or the EPA is defining as the BSER. This BSER. We discuss those constraints in measures that the EGUs themselves can rule would be recognizable to the this section. These constaints explain implement. Moreover, as noted, the D.C. Congresses that created and amended why we are not including building Circuit has established criteria for CAA section 111 and is carefully block 4 in the BSER. In addition, these achievability in the section 111(b) case fashioned to the statutory text in CAA constraints explain why our reliance on law; e.g., sources must be able to section 111(d) and (a)(1). This final rule building blocks 2 and 3 will have achieve their standards under a range of would be recognizable to the Congress limited precedential effect for other circumstances. If those criteria are that adopted CAA section 111 in 1970 rulemakings, and serve as our basis for applicable in a section 111(d) rule, the as part of a bold, far-reaching law responding to commenters who BSER must be of a type that allows designed to address comprehensively an expressed concern that reliance on sources to meet those achievability air pollution crisis that threatened the building blocks 2 and 3 would set a criteria. As noted, under this rule, health of millions of Americans; to have precedent for the EPA to rely on similar affected EGUs can achieve their EPA and the States work cooperatively measures in promulgating future air emission performance rates in the to develop state-specific approaches to pollution controls for other sectors.574 various circumstances under which they address a national problem; to challenge As discussed above, the emission operate, through the application of the industry to meet that crisis with creative limits in the CAA section 111(d) energy; and to give the EPA broad building blocks. emission guidelines that this rule (c) ‘‘Adequately demonstrated.’’ authority—under section 111 and other promulgates are based on the EPA’s provisions—to craft the needed The third constraint is that the system determination, for the affected EGUs, of of emission reduction that the EPA emission limitations. This final rule the ‘‘system of emission reduction’’ that would be recognizable to the Congress determines to be the best must be is the ‘‘best,’’ taking into account ‘‘cost’’ ‘‘adequately demonstrated.’’ To qualify that revised CAA section 111 in 1977 to and other factors, and that is explicitly authorize that standards be as the BSER, controls and measures ‘‘adequately demonstrated.’’ Those based on actions taken by third parties must align with the nature of the components include certain (fuel cleaners). And this final rule regulated industry and the nature of the interpretations and applications and would be recognizable to the Congress pollutant so that implementation of provide constraints on the types of that revised CAA section 111 in 1990 to those controls or measures will result in measures or controls that the EPA may be linked to the Acid Rain Program that emission reductions from the industry determine to include in the BSER. Congress adopted at the same time, and allow the sources to achieve their (a) Emission reductions from affected which regulated the same industry emission performance standards. The sources. (fossil fuel-fired EGUs) through some of history of the effectiveness of the The first constraint is that the BSER controls or other measures, or other must assure emission reductions from 572 Sen. Muskie, S. Debates on S. 4358 (Sept. 21, indications of their effectiveness, are 1970), 1970 CAA Legis. Hist. at 227 (‘‘At the the affected sources. Under section important in determining whether they beginning of World War II industry told President 111(d)(1), the states must submit state are adequately demonstrated. Roosevelt that his goal of 100,000 planes each year plans that ‘‘establish[] standards of More specifically, the application of could not be met. The goal was met, and the war performance for any existing source,’’ was won. And in 1960, President Kennedy said that building blocks 2 and 3 to affected EGUs America would land a man on the moon by 1970. and, under section 111(a)(1) and the has a number of unique characteristics. And American industry did what had to be done. EPA’s implementing regulations, those Building blocks 2 and 3 entail the Our responsibility in Congress is to say that the standards are informed by the EPA’s production of the same amount of the requirements of this bill are what the health of the determination of the best system of Nation requires, and to challenge polluters to meet same product—electricity, a fungible them.’’). See Blaime, A.J., The Arsenal of emission reduction adequately product that can be produced using a Democracy: FDR, Detroit, and an Epic Quest to Arm variety of highly substitutable an America at War (Houghton Mifflin Harcourt 574 Commenters offered hypothetical examples to 2014); Carew, Michael G., Becoming the Arsenal: illustrate their concerns over precedential effects, generation processes—through the The American Industrial Mobilization for World discussed below. Some commenters objected that cleaner (that is, less CO2-intensive) War II, 1938–1942 (University Press of America, our proposed interpretation of the BSER failed to processes of shifting dispatch from Inc. 2010). include limiting principles. In the Legal steam generators to existing NGCC 573 UARG comment at 31. See id. at 18, 29, 49. Memorandum, we note that the statutory This comment appears to be a reference to the constraints discussed in this section of the units, and from both steam generators Supreme Court’s statement in UARG. See Util. Air preamble constitute limits on the type of the BSER and NGCC units to renewable Reg. Group v. EPA, 134 S. Ct. 2427, 2444 (2014). that the EPA is authorized to determine. generators.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00116 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64777

The physical properties of electricity commenters offered hypothetical determining what is ‘‘best,’’ the EPA has and the highly integrated nature of the examples for building blocks 2 and 3 as broad discretion to balance the electricity system allow the use of these well. For example, some commenters enumerated factors.577 In interpreting cleaner processes to generate the same asserted that the EPA could ‘‘develop and applying these provisions in this amount of electricity. In addition, the standards of performance for tailpipe rulemaking to regulate CO2 emissions electricity sector is primarily emissions from motor vehicles’’ by from affected EGUs under section domestic—little electricity is exported ‘‘requiring car owners to shift some of 111(d), we are acting consistently with outside the U.S.—and there is low their travel to buses,’’ which the our past practice for applying these capacity for storage. In addition, the commenters considered analogous to provisions in previous section 111 electricity sector is highly regulated, building block 2; or by ‘‘requiring there rulemakings and for regulating air planned, and coordinated. As a result, to be more electric vehicle purchases,’’ pollutants from the electricity sector holding demand constant, an increase in which the commenters considered under other provisions of the CAA, as one type of generation will result in a analogous to building block 3.575 well as current policy. decrease in another type of generation. Commenters’ concerns over The great majority of our regulations Moreover, the higher-emitting precedential impact cannot be taken to under section 111 have been 111(b) generators, which are fossil fuel-fired, mean that the building blocks should regulations for new sources. As have higher variable costs than not be considered to meet the discussed in the Legal Memorandum renewable generators, so that increased requirements of the BSER or that the and briefly below, the BSER identified renewable generation will generally affected EGUs cannot be considered to under section 111(b) is designed to back out fossil fuel-fired generation. meet the emission limits by assure that affected sources are well Because of these characteristics, the implementing those measures. controlled at the time of construction, electricity sector has a long and well- Moreover, because many of these and that approach is consistent with the established history of substituting one individual characteristics, and their design expressed in the legislative type of generation for another. This has inherent complexity, are unique to the history for the 1970 CAA Amendments occurred for a wide variety of reasons, utility power sector, building blocks 2 that enacted the provision. many of which are directly related to and 3 as applied to fossil fuel-fired Traditionally, CAA section 111 the system’s primary purposes and EGUs will have a limited precedent for standards have been rate-based, functions, as well as for environmental other industries and other types of allowing as much overall production of reasons. As a result, at present, there is rulemakings. For example, the a particular good as is desired, provided a well-established network of business commenter’s hypothetical examples that it is produced through an and operational relationships and past noted above are inapposite for several appropriately clean (or low-emitting) practices that supports building blocks reasons. The hypotheticals appear to be process. CAA section 111 performance standards have primarily targeted the 2 and 3. As noted elsewhere, a large premised on government action means of production in an industry and segment of steam generators already mandating actions not implementable not consumers’ demand for the product. have business relationships with by emitting sources (e.g., that a Thus, the focus for the BSER has been existing NGCC units, and a large government would ‘‘require[e] car on how to most cleanly produce a good, segment of all fossil fuel-fired EGUs owners to shift some of their travel to not on limiting how much of the good already own, co-own, or have invested buses, or . . . require[e] there to be can be produced. in RE. more electric vehicle purchases’’), Many of these characteristics are One example of the focus under whereas the measures in building blocks unique to the utility power sector. section 111 on clean production, not 2 and 3 can be implemented by the Moreover, this complex of limitation of product is provided by the characteristics, ranging from the affected EGUs. Nor have commenters revised new source performance physical properties of electricity and the attempted to address how car owners standards for electric utility steam integrated nature of the grid to the shifting travel to buses or purchasing generating units that we promulgated in institutional mechanisms that assure more electric vehicles could be 1979 following the 1977 CAA translated into lower tailpipe standards reliability and the existing practices and 576 Amendments to limit emissions of SO2, business relationships in the industry, for motor vehicles. PM, and NO . In relevant part, the (d) ‘‘Best’’ in light of ‘‘cost . . . nonair X combine to facilitate the revised standards limited SO2 emissions implementation of building blocks 2 quality health and environmental to 1.20 lb/million BTU heat input and and 3 in a uniquely efficient manner. impact and energy requirements’’ and imposed a 90 percent reduction in EPA’s past practice and current policy. This supports basing the emission limits potential SO2 emissions. This was based on the ability of owners and operators The fourth constraint, or set of on the application of flue gas of fossil fuel-fired EGUs to replace their constraints, is that the system of desulfurization (FGD) together with coal generation with cleaner generation in emission reduction must be the ‘‘best,’’ preparation techniques. In the preamble, other locations, sometimes owned by ‘‘taking into account the cost of we explain that ‘‘[t]he intent of the final other entities. achieving such reduction and any standards is to encourage power plant As noted above, commenters offered nonair quality health and environmental owners and operators to install the best hypothetical examples to illustrate their impact and energy requirements.’’ As available FGD systems and to concerns over precedential effects. Most noted, in light of the D.C. Circuit case implement effective operation and of their concerns focused on building law, the EPA has considered cost and maintenance procedures but not to block 4, and most of their hypothetical energy factors on both an individual create power supply disruptions.’’ 578 579 examples concerned reductions in source basis and on the basis of the demand for various types of products. nationwide electricity sector. In 577 See Lignite Energy Council v. EPA, 198 F.3d We address these concerns in the 930, 933 (D.C. Cir. 1999). response to comments document, but 575 UARG comment at 2–3. 578 See, e.g., 44 FR 33580, at 33599 (June 11, 576 In any event, it is questionable whether 1979). In this rulemaking, the EPA recognized the we note here that, in any event, these measures such as those hypothesized by the ability of the integrated grid to minimize power concerns are mooted because we are not commenters would be consistent with the disruptions: ‘‘When electric load is shifted from a finalizing building block 4. Some provisions of Title II. Continued

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00117 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64778 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

EPA has taken the same overall replacement power of any type, weighing of cost, environmental, and approach in its section 111(d) rules,580 including NGCC units or RE, for energy considerations.’’ 582 This exercise including the CAMR rule noted below. compliance purposes. of policy discretion is consistent with Similarly, in a series of rulemakings While these and other rulemakings for Congress’s expectation that the regulating air pollutants from EGUs fossil fuel-fired EGUs took different Administrator ‘‘should determine the under several provisions of the CAA, we approaches towards lower-emitting achievable limits’’ 583 and ‘‘would have focused our efforts on assuring that generation and renewable generation, establish guidelines as to what the best electricity is generated through cleaner they all were based on control measures system for each such category of or lower-emitting processes, and we that reduced emissions without existing sources is.’’ 584 As the D.C. have not sought to limit the aggregate reducing aggregate levels of electricity Circuit explained, ‘‘[i]t seems likely that amount of electricity that is generated. generation. It should be noted that even if Congress meant . . . to curtail EPA’s We describe those rules in section II, though some of those rules established discretion to weigh various policy elsewhere in this section V.B.3., and in overall emission limits in the form of considerations it would have explicitly the Legal Memorandum. budgets implemented through a cap- said so in section 111, as it did in other For example, as discussed in the Legal and-trade program, the EPA recognized parts of the statute.’’ 585 Memorandum, in the three transport that the fossil fuel-fired EGUs that were Our interpretation that CAA section rules promulgated under CAA section subject to the rules could comply by 111 targets supply-side activities that 110(a)(2)(D)(i)(I)—the NOX SIP Call, shifting generation to lower-emitting allow continued production of a CAIR, and CSAPR—which regulated EGUs, including relying on RE. In this product through use of a cleaner precursors to ozone-smog and manner, the rules limited emissions but process, rather than targeting consumer- particulate matter, the EPA based on the basis that the industry could oriented behavior, also furthers certain aspects of the regulatory implement lower-emitting processes, Congress’ intent of promoting cleaner requirements on the fact that fossil fuel- and not based on reductions in overall production measures ‘‘to protect and fired EGUs could shift generation to generation. enhance the quality of the Nation’s air lower-emitting sources. In CAMR, the We are applying the same approach to resources so as to promote the public 2005 rulemaking under section 111(d) this rulemaking. Our basis for this health and welfare and the productive regulating mercury emissions from coal- rulemaking is that affected EGUs can capacity of its population.’’ 586 This fired EGUs, the EPA based the first implement a system of emission principle is also consistent with phase of control requirements on the reduction that will reduce the amount of promoting ‘‘reasonable . . . actions the affected EGUs were required their emissions without reducing overall governmental actions . . . for pollution to take under CAIR, including shifting electricity generation. This approach prevention.’’ 587 generation to lower-emitting sources. In takes into account costs by minimizing In this rule, we are applying that same addition, as also discussed in the Legal economic disruption as well as the approach in interpreting the BSER Memorandum, in the EPA’s 2012 MATS nation’s energy requirements by provisions of section 111. That is, we rule regulating mercury from coal-fired avoiding the need for environmental- are basing the regulatory requirements EGUs under section 112, at industry’s based reductions in the aggregate on measures the affected EGUs can urging, the EPA allowed compliance amount of electricity available to the implement to assure that electricity is deadlines to be extended for coal-fired consumer, commercial, and industrial generated with lower emissions, taking EGUs that desired to substitute sectors. into account the integrated nature of the This approach is a reasonable exercise industry and current industry practices. new steam-electric generating unit to another of the EPA’s discretion under section Building blocks 1, 2 and 3 fall squarely electric generating unit, there would be no net 111, consistent with the U.S. Supreme within this paradigm; they do not change in reserves within the power system. Thus, the emergency condition provisions prevent a failed Court’s statements in its 2011 decision, require reductions in the total amount of FGD system from impacting upon the utility American Electric Power Co. v. electricity produced. company’s ability to generate electric power and Connecticut, that the CAA and the EPA We recognize that commenters have prevents an impact upon reserves needed by the raised extensive legal concerns about power system to maintain reliable electric service.’’ actions it authorizes displace any Id. federal common law right to seek building block 4. We recognize that 579 The EPA’s 1982 revised new source abatement of CO2 emissions from fossil- building block 4 is different from performance standards for certain stationary gas fuel fired power plants. There, the Court building blocks 1, 2, and 3 and the turbines provide another example of a rulemaking emphasized that CAA section 111 pollution control measures that we have that focused controls on reducing emissions, as well considered under CAA section 111. as reliance on the integrated grid to avoid power authorizes the EPA—which the Court disruptions. 44 FR 33580 (June 11, 1979). In identified as the ‘‘expert agency’’—to Accordingly, under our interpretation of response to comments that requested a NO X regulate CO2 emissions from fossil fuel- section 111, informed by our past emission limit exemption for base load utility gas fired power plants based an ‘‘informed practice and current policy, today’s final turbines, the EPA explained that ‘‘for utility action excludes building block 4 from turbines . . . since other electric generators on the assessment of competing interests .... grid can restore lost capacity caused by turbine Along with the environmental benefit the BSER. Building block 4 is outside down time’’ the NOX emission limit of 1150 ppm potentially achievable, our Nation’s our paradigm for section 111 as it targets for such turbines would not be rescinded. 44 FR 33580, at 33597–98. energy needs and the possibility of 582 Sierra Club v. EPA, 657 F.2d 298, 406 (D.C. 580 economic disruption must weigh in the See ‘‘Phosphate Fertilizer Plants; Final Cir. 1981). Id. at 406 n. 526. Guideline Document Availability,’’ 42 FR 12022 581 balance.’’ 583 S. Rep. No. 91–1196, at 15–16 (Sept. 17, 1970), (Mar. 1, 1977); ‘‘Standards of Performance for New Similarly, the D.C. Circuit, in a 1981 1970 CAA Legis. Hist. at 415–16 (explaining that Stationary Sources; Emission Guideline for Sulfuric decision upholding the EPA’s section the ‘‘[Administrator] should determine the Acid Mist,’’ 42 FR 55796 (Oct. 18, 1977); ‘‘Kraft 111(b) standards for air pollutants from achievable limits and let the owner or operator Pulp Mills, Notice of Availability of Final Guideline determine the most economic, acceptable technique Document,’’ 44 FR 29828 (May 22, 1979); ‘‘Primary fossil fuel-fired EGUs, stated that to apply.’’). Aluminum Plants; Availability of Final Guideline section 111 regulations concerning the 584 Document,’’ 45 FR 26294 (Apr. 17, 1980); H.R. Rep. No. 95–294, at 195 (May 12, 1977). 585 ‘‘Standards of Performance for New Stationary electric power sector ‘‘demand a careful Sierra Club v. Costle, 657 F.2d 298, 330 (D.C. Sources and Guidelines for Control of Existing Cir. 1981). Sources: Municipal Solid Waste Landfills, Final 581 American Electric Power Co. v. Connecticut, 586 CAA section 101(b)(1). Rule,’’ 61 FR 9905 (Mar. 12, 1996). 131 S. Ct. 2527, 2539–40 (2011). 587 CAA section 101(c).

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00118 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64779

consumer-oriented behavior and 111(d) state plan that imposes an the BSER. In determining the BSER, the demand for the good, which would emission rate-based standard may EPA must consider the amount of reduce the amount of electricity to be achieve that standard in part by emission reduction that the system may produced. implementing the measures in building achieve, and must consider the ability of Although numerous commenters block 2 (for a steam generator) and the affected EGUs to achieve the urged us to include demand-side EE building block 3 (for a steam generator emission limits that result from the measures as part of the BSER, as we had or combustion turbine). That is, an application of the BSER. The EPA is proposed to do, we conclude that we affected EGU may invest in low- or zero- authorized to include in the BSER, for cannot do so under our historical emitting generation and may apply this source category, the measures in practice, current policy, and current credits from that generation against its building blocks 2 and 3 because, when approach to interpreting section 111 as emission rate. Those credits reduce the applied to the source category, these well as our historical practice in affected EGU’s emission rate and measures result in emission standards regulating the electricity sector under thereby help it to achieve its emission that may be structured to ensure overall other CAA provisions. While building limit. emission reductions from the source blocks 2 and 3 are rooted in our past In addition, the additional low- or category and remain achievable by the practice and policy, building block 4 is zero-emitting generation that results affected EGUs. This remains so not and would require a change (which from the affected EGU’s investment will regardless of whether the ‘‘degree of we are not making) in our interpretation generally displace higher-emitting emission limitation achievable through and implementation and application of generation. This is because, as described the application of the [BSER]’’ by any CAA section 111. above, higher-emitting generation particular source results in actual Excluding demand-side EE measures generally has higher variable costs, emission reductions from that source. from the BSER has the benefit of reflecting its fuel costs, than, at least, The application of the building blocks allaying legal and other concerns raised zero-emitting generation. Displacement has an impact that is similar to that of by commenters, including concerns that of higher-emitting generation will lower an emissions trading program, under individuals could be ‘‘swept into’’ the overall CO2 emissions from the source which, overall, the affected sources regulatory process by imposing category of affected EGUs. reduce emissions, but any particular requirements on ‘‘every household in If an affected EGU implements source does not need to reduce its the land.’’ 588 While building block 4 building block 2 or 3 by reducing its emissions and, in fact, may increase its could have been implemented without own generation, it will reduce its own emissions, as long as it purchases imposing requirements on individual emissions. However, the affected EGU sufficient credits or allowances from households, this final rule resolves any may also or alternatively choose to other sources. In fact, we expect that doubt on this matter and is not based on implement building block 2 or 3 by many states will carry out their the inclusion of demand-side EE as part investing in lower- or zero-emitting obligations under this rule by imposing of the BSER. generation that does not, in and of itself, standards of performance that By the same token, we are not reduce the amount of its own generation incorporate trading or other multi-entity finalizing reduced generation of or emissions. Even so, implementation generation-replacement strategies. electricity overall as the BSER. Instead, of building blocks 2 and 3 will reduce Indeed, any emission rate-based components of the BSER focus on CO2 from some affected EGUs, and standard may not necessarily result in shifting generation to lower- or zero- therefore reduce CO2 on a source emission reductions from any particular emitting processes for producing category-wide basis. affected source (or even all of the electricity.589 This outcome is, however, consistent affected sources in the category) as a (e) Constraints for new sources. with the requirements of CAA section result of the ability of the particular For new sources, practical and policy 111(d)(1) and (a)(1). To reiterate, CAA source (or even all of them) to increase concerns support the interpretation of section 111(d)(1) requires that ‘‘any its production and, therefore, its basing the BSER on controls that new existing source’’ have a ‘‘standard of emissions, even while maintaining the sources can install at the time of performance,’’ defined under CAA required emission rate. construction, so that they will be well- section 111(a)(1) as ‘‘a standard for controlled throughout their long useful emissions of air pollutants which 5. Reduced Generation and lives. This approach is consistent with reflects the degree of emission Implementation of the BSER the legislative history. We discuss this limitation achievable through the In the proposed rulemaking, we at greater length in the Legal application of the best system of described the BSER as the measures Memorandum. emission reduction . . . adequately included in building block 1 as well the demonstrated [BSER] . . . .’’ These set of measures included in building 4. Relationship Between a Source’s provisions require by their terms that blocks 2, 3 and 4 or, in the alternative, Implementation of Building Blocks 2 ‘‘any existing source’’ must have a reduced generation or utilization by the and 3 and Its Emissions ‘‘standard of performance,’’ but nothing affected EGUs in the amount of building In this section, we discuss the in these provisions requires a particular blocks 2, 3 and 4. In this final rule, relationship between an affected EGU’s amount—or, for that matter, any based on the comments and further implementation of the measures in amount—of emission reductions from evaluation, we are refining our approach building blocks 2 and 3 and that each and every existing source. That the to the BSER. Specifically, we are affected EGU’s own generation and ‘‘standard of performance’’ is defined on determining the BSER as the emissions. As discussed above, an the basis of the ‘‘degree of emission combination of measures included in affected EGU subject to a CAA section limitation achievable through the building blocks 1, 2, and 3.Building application of the [BSER]’’ does not blocks 2 and 3 entail substitution of 588 See Util. Air Reg. Group v. EPA, 134 S. Ct. mean that each affected EGU must lower-emitting generation for higher- 2427, 2436 (2014). achieve some amount of emission emitting generation, which ensures that 589 As discussed below, however, reduced generation remains important to this rule in that it reduction, for the following reasons. aggregate production levels can is one of the methods for implementing the building The cornerstone of the definition of continue to meet demand even where an blocks. the term ‘‘standard of performance’’ is individual affected EGU decreases its

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00119 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64780 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

own output to reduce emissions. The achieve either of these emission limits number of resources potentially amount of generation from the increased is to reduce its generation. Further, available to meet electricity demand, utilization of existing NGCC units reduced generation by individual including electricity generated by determines a portion of the amount of sources offers a pathway to compliance electric generation units of various types reduced generation that affected fossil in and of itself. That is, a state may as well as demand-side resources. fuel-fired steam EGUs could undertake adopt a mass-based goal, assign mass- Importantly, if generation is reduced to achieve building block 2, and the based standards to its sources, and those from one generator, safeguards are in amount of generation from the use of sources may comply with their mass- place to ensure that adequate supply is expanded lower- or zero-emitting based limits by, in addition to still available to meet demand. We generating capacity that could be implementing building block 1 describe these safeguards in the provided, determines a portion of the measures, reducing their generation in background section of this preamble. amount of reduced generation that the appropriate amounts, and without Both Congress and the EPA have affected fossil fuel-fired steam EGUs, as taking any other actions. recognized reduced generation as one of well as the entire amount of reduced b. Well-established use of reduced the measures that fossil fuel-fired EGUs generation that affected NGCC units generation to comply with may implement to reduce their could undertake to implement building environmental requirements. Reduced emissions of air pollutants and thereby blocks 2 and 3. This section discusses generation is a well-established method achieve emission limits. Congress, in the reasons that reduced generation is for individual fossil fuel-fired power enacting the allowance requirements in one of the set of reasonable and well- plants to comply with their emission CAA Title IV, under which fossil fuel- established actions that an affected EGU limits. fired EGUs must hold an allowance for can implement to achieve its emission Reduced generation in the amounts each ton of SO2 emitted, explicitly limits. We are not finalizing our contemplated in this rule, as undertaken recognized that fossil fuel-fired EGUs proposal that reduced overall generation by individual sources to achieve their could meet this requirement by of electricity may by itself be considered emission limits, reduces emissions from reducing their generation. In fact, the BSER, for the reason that reduced the affected sources, but because of the Congress anticipated that fossil fuel- generation by itself does not fit within integrated and interconnected nature of fired EGUs may choose to comply with our historical and current interpretation the power sector, can be accommodated the SO2 emission limits by reducing of the BSER. Specifically, reduced without significant cost or disruption. utilization, and included provisions that generation by itself is about changing The electric transmission grid specifically addressed reduced the amount of product produced rather interconnects the nation’s generation utilization. For example, CAA section than producing the same product with resources over large regions. Electric 408(c)(1)(B) includes requirements for a process that has fewer emissions. system operators coordinate, control, an owner or operator of an EGU that a. Background. As noted, for both and monitor the electric transmission meets the Phase 1 SO2 reduction rate-based and mass-based state plans, grid to ensure cost-effective and reliable obligations and the NOX reduction affected EGUs may take a set of actions delivery of power. These system obligations ‘‘by reducing utilization of to comply with their emission operators continuously balance the unit as compared with its baseline standards. An affected EGU may comply electricity supply and demand, ensuring or by shutting down the unit.’’ with an emission rate-based standard that needed generation and/or demand The EPA has also recognized in (e.g., a limit on the amount of CO2 per resources are available to meet several rulemakings limiting emissions MWh) by acquiring, through one means electricity demand. Diverse resources from fossil fuel-fired EGUs that reduced or another, credits from lower- or zero- generate electricity that is transmitted generation is one of the methods of emitting generation (building blocks 2 and distributed through a complex emission reduction that an EGU was or 3) to reduce its emission rate for system of interconnected components to expected to rely on to achieve its compliance purposes. In addition, the end-use consumers. emission limitations. Examples include affected EGU may reduce its generation, The electricity system was designed rulemakings to impose requirements and if it does so, it then needs to acquire to meet these core functions. The three that sources implement BART to reduce fewer of those credits to meet its components of the electricity supply their emissions of air pollutants that emission rate.590 Under these system—generation, transmission and cause or contribute to visibility circumstances, the affected EGU would distribution—coordinate to deliver impairment. As explained earlier, for in effect replace part of its higher- electricity from the point of generation certain older stationary sources that emitting generation with lower- or zero- to the point of consumption. This cause or contribute to visibility emitting generation. On the other hand, interconnectedness is a fundamental impairment, including fossil fuel-fired an affected EGU that is subject to a aspect of the nation’s electricity system, EGUs, states must determine BART on mass-based standard—for example, a requiring a complicated integration of the basis of five statutory factors, such requirement to hold enough allowances all components of the system to balance as costs and energy and non-air quality 591 to cover its emissions (e.g., one supply and demand and a federal, state impacts. In 1980, the EPA allowance for each ton of emissions in and local regulatory network to oversee promulgated a regulatory definition of any year)—may comply at least in part the physically interconnected network. BART: ‘‘an emission limitation based on by reducing its generation and, thus, its Electricity from a diverse set of the degree of reduction achievable generation resources such as natural gas, emissions. Therefore, one type of action through the best system of continuous nuclear, coal and renewables is that an affected EGU may take to emission reduction for each pollutant distributed over high-voltage which is emitted by an existing 592 590 An affected EGU that is subject to an emission transmission lines. The system is stationary facility.’’ Both the rate, e.g., pounds of CO2 per MWh generated, planned and operated to ensure that statutory factors and the regulatory cannot achieve that rate simply by reducing its there are adequate resources to meet definition resemble the definition of the generation (unless it shuts down, in which case it electricity demand plus additional BSER under CAA section 111(a)(1) would achieve a zero emission rate). This is because although reducing generation results in fewer available capacity over and above the emissions, it does not, by itself, result in fewer capacity needed to meet normal peak 591 CAA section 169A(g)(2). emissions per MWh generated. demand levels. System operators have a 592 40 CFR 51.301.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00120 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64781

(although, as noted, the statutory pollution control equipment. ‘‘Potential another example, Sunbury Generation definition of BART is more technology to emit’’ is defined, for instance, in the LP in Pennsylvania obtained a minor focused than the definition of BSER). In regulations for the PSD program for new source preconstruction permit, its regional haze SIP, the State of New permits issued under federal authority called a plan approval, for a repowering York determined that BART for the NOX as: ‘‘the maximum capacity of a project from the Pennsylvania emissions from two coal-fired boilers stationary source to emit a pollutant Department of Environmental Protection that served as peaking units was caps on under its physical and operational in 2013 that limited the hours of baseline emissions rates and annual design. Any physical or operational operation of three combined cycle capacity factors of 5 percent and 10 limitation on the capacity of the source combustion turbines that were planned percent, respectively.593 to emit a pollutant, including air for construction in order to remain There have been numerous other pollution control equipment and below the significance threshold for instances in which fossil fuel-fired restrictions on hours of operation ... GHGs.601 The Legal Memorandum EGUs have reduced their individual shall be treated as part of its design if includes numerous other examples of generation, or placed limits on their the limitation or the effect it would have power plants accepting permit limits generation, in order to achieve, or on emissions is federally that reduce generation to meet, or avoid obviate, emission standards. In fact, enforceable,’’ 596 or ‘‘legally and the need to meet, emission limits. there are numerous examples of EGUs practicably enforceable by a state or There are several ways that an that take restrictions on hours of local air pollution control agency.’’ 597 affected EGU may implement reduced operation in their permits for the The regulations for other air programs generation. For example, an EGU may purpose of avoiding CAA obligations, similarly recognize that potential to accept a permit requirement that including avoiding triggering the emit may be limited through restrictions specifically limits its operating hours. In requirements of the Prevention of on hours of operations in their addition, an EGU may treat the cost of Significant Deterioration (PSD), corresponding definitions of ‘‘potential its generation as including an additional Nonattainment New Source Review to emit.’’ 598 These regulatory provisions amount associated with environmental (NNSR), or Title V programs (including make clear that restrictions on potential impacts, which requires it to raise its Title V fees), and avoiding triggering to emit include both ‘‘air pollution bid price, so that the EGU is dispatched HAP requirements. Such restrictions control equipment’’ and ‘‘restrictions on less. may also be taken to limit emissions of hours of operation,’’ and indicate that c. Other aspects of reduced pollutants, such as limiting emissions of these are equally cognizable means of generation. criteria pollutants for attainment restricting emissions to comply with, or purposes. The amounts of increased existing avoid, CAA requirements.599 NGCC generation and new renewables, More specifically, EPA’s regulations As one of many examples of a fossil- for a number of air programs expressly in the amounts reflected in building fuel fired EGU taking restrictions on blocks 2 and 3, can be substituted for recognize that certain sources may take hours of operation for the purpose of enforceable limits on hours of operation generation at affected EGUs at avoiding CAA obligations, Manitowoc reasonable cost. The NGCC capacity in order to avoid triggering CAA Public Utilities in Wisconsin obtained a obligations that would otherwise apply necessary to accomplish the levels of Title V renewal permit that limited the generation reduction proposed for to the source. Stationary sources that operating hours of the single simple- emit or have the potential to emit a building block 2 is already in operation cycle combustion turbine to not more or under construction. Moreover, it is pollutant at a level that is equal to or than 194 hours per month, averaged greater than specified thresholds are reasonable to expect that the 594 over any consecutive 12 month period, incremental resources reflected in subject to major source requirements. as part of limiting its potential to emit A source may voluntarily obtain a building block 3 will develop at the for volatile organic compounds below levels requisite to ensure an adequate synthetic minor limitation—that is, a the Title V threshold of 100 tpy, and legally and practicably enforceable and reliable supply of electricity at the carbon monoxide, NO and SO below restriction that has the effect of limiting X 2 same time that affected EGUs may the PSD threshold of 250 tpy.600 As emissions below the relevant level—to Res., 5/21/2013) at p. 5 (noting that the ‘‘existing avoid triggering a major stationary 596 40 CFR 52.21(b)(4) (emphasis added). 595 facility is a major source under Part 70 because source requirement. Such synthetic 597 John Seitz, Director, Office of Air Quality potential emissions of sulfur dioxide, nitrogen minor limits may be based on Planning and Standards, and Robert Van Heuvelen, oxides and carbon monoxide exceed 100 tons per restrictions on the hours of operation, as Director, Office of Regulatory Enforcement, Release year. The existing facility is a minor source under provided in EPA’s regulations defining of Interim Policy on Federal Enforceability of PSD and an area source of federal HAP’’ and further Limitations on Potential to Emit, at 3 (Jan. 22, 1996), ‘‘potential to emit,’’ as well as on air noting that after renewal, ‘‘the facility will continue available at http://www.epa.gov/region07/air/nsr/ to be a major source under Part 70 because potential nsrmemos/pottoemi.pdf. emissions of sulfur dioxide, nitrogen oxides and 593 77 FR 24794, 24810 (Apr. 25, 2012). 598 See 40 CFR 51.166(b)(4) (addressing SIP carbon monoxide exceed 100 tons per year. The 594 See, e.g., CAA sections 112(a)(1), 112(d)(1), approved PSD programs), 51.165(a)(1)(iii) facility will also continue to be a minor source 165(a), 169(1), 172(c)(5), 173(a) & (c), 501(2), 502(a), (addressing SIP approved NNSR programs), 70.2 under PSD and an area source of federal HAP.’’). 302(j). (addressing Title V operating permit programs), and 601 See Plan Approval No. 55–00001E for Sunbury 595 See, e.g., Memorandum from Terrell Hunt, 63.2 (addressing hazardous air pollutants). Generation LP (Pa. Dept. Env. Protection, 4/1/2013), Assoc. Enforcement Counsel, U.S. EPA, & John 599 See, e.g., 40 CFR 52.21(b)(4). Conditions #016 on pp. 24, 32 and 40 (limiting Seitz, Director, Stationary Source Compliance Div., 600 See Final Operation Permit No. 436123380– turbine units to operating no more than 7955, 6920, U.S. EPA, Guidance on Limiting Potential to Emit P10 for Manitowoc Public Utilities—Custer Street or 8275 hours in any 12 consecutive month period in New Source Permitting, at 1–2, 6 (June 13, 1989), (Wis. Dept. Nat. Res., 8/19/2013), Condition depending on which of three turbine options was available at http://www.epa.gov/region07/air/nsr/ ZZZ.1.a(1) at p. 9 (Limiting potential to emit) and selected); Memorandum from J. Piktel to M. Zaman, nsrmemos/lmitpotl.pdf (‘‘Restrictions on n. 11 (‘‘These conditions are established so that the Addendum to Application Review Memo for the production or operation that will limit potential to potential emissions for volatile organic compounds Repowering Project (Pa. Dept. Env. Protection, emit include limitations on quantities of raw will not exceed 99 tons per year and potential 4/1/2013) at p. 2 of 10 (noting that source had materials consumed, fuel combusted, hours of emissions for carbon monoxide, nitrogen oxides ‘‘calculated a maximum hours per year (12 operation, or conditions which specify that the and sulfur dioxide emissions from the facility will consecutive month period) of operation for the source must install and maintain controls that not exceed 249 tons per year.’’). See also Analysis sources proposed for each of the turbine options in reduce emissions to a specified emission rate or to and Preliminary Determination for the Renewal of order to remain below the significance threshold for a specified efficiency level.’’) (emphasis added). Operation Permit 436123380–P01 (Wis. Dept. Nat. GHGs.’’).

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00121 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64782 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

choose to reduce their CO2 emissions by this rule provides an extended state mean that reduced generation by higher- means of reducing their generation. plan and source compliance horizon. emitting EGUs cannot be considered to Reduced generation by affected EGUs, d. Comments concerning limiting be a method for affected EGUs to in the amounts that affected EGUs may principles. achieve their emission limits. rely on to implement the selected A commenter stated that ‘‘an Moreover, reduced generation, as building blocks, will not have adverse interpretation of [‘system of emission applied to affected EGUs in this rule, is effects on the utility power sector and reduction’] that relies primarily on limited in a number of respects. The will not reduce overall electricity reduced utilization has no clear limiting amount of reduced generation is the generation. In light of the emission principle.’’ 603 We disagree with this amount of replacement generation that limits of this rule, because of the concern, for the following reasons. is lower- or zero-emitting, that is of availability of the measures in building As discussed, in this final rule, we are reasonable cost, that can be generated blocks 2 and 3, and because the grid is identifying the BSER as the combination without jeopardizing reliability, and interconnected and the electricity of the three building blocks. Building that meets the other requirements for system is highly planned, reductions in blocks 2 and 3 entail substitution of the BSER. As discussed, that amount is generation by fossil fuel-fired EGUs in lower- or zero-emitting generation for the amount of generation in building the amount contemplated if they were to higher-emitting generation, and one blocks 2 and 3.605 implement the building blocks, and component of that substitution is Finally, as discussed, the integrated occurring over the lengthy time frames reduced generation, which is limited in nature of the electricity system, coupled provided under this rule, will result in several respects discussed below. with the high substitutability of replacement generation that generally is Accordingly, our identification of the electricity, allows EGUs to reduce their lower- or zero-emitting. Mechanisms are BSER in this final rule does not ‘‘rel[y] generation without adversely affecting in place in both regulated and primarily’’ on reduced utilization in and the availability of their product. Those deregulated electricity markets to assure of itself (and therefore reduced characteristics facilitate replacement of that substitute generation will become generation of the product overall, generation that has been reduced, and available and/or steps to reduce demand electricity) as the BSER. Rather, the for that reason, EGUs have a long will be taken to compensate for reduced BSER is, in addition to building block history of reducing their generation and generation by affected EGUs. As a result, 1, the substitution of lower- or zero- either replacing it directly or having it reduced generation will not give rise to emitting generation for higher emitting replaced through the operation of the reliability concerns or have other generation, and reduced utilization may interconnected electricity system adverse effects on the utility power be a way to implement that substitution through measures similar to those in sector and are of reasonable cost for the and is one of numerous methods that building blocks 2 and 3. Thus, an EGU affected source category and the affected EGUs may employ to achieve or can either directly replace its 602 nationwide electricity system. All help achieve the emission limits generation, or simply reduce its these results come about because the established by these emission 604 generation, and in the latter case, the operation of the electrical grid through guidelines. The commenter’s integrated grid, combined with the high integrated generation, transmission, and concerns over a perceived lack of a degree of planning and various distribution networks creates limiting principle cannot be taken to reliability safeguards, will result in substitutability for electricity and entities providing replacement 603 EEI comment, at 284. electricity services, which allows generation. This means that consumers decreases in generation at affected fossil 604 Indeed, load shifting—as substitute generation receive exactly the same amount of the fuel-fired steam EGUs to be replaced by is sometimes called—is an ‘‘easy and fairly inexpensive strategy’’ that ‘‘may be used in same product, electricity, after the increases in generation at affected NGCC conjunction with other control measures’’ for reduced generation that they received units (building block 2) and allows ‘‘emission reduction.’’ Donald S. Shepard, ‘‘A Load before it. No other industry is both decreases in generation at all affected Shifting Model for Air Pollution Control in the physically interconnected in this EGUs to be replaced by increased Electric Power Industry,’’ Journal of the Air Pollution Control Association, Vol. 20, No. 11, p. manner and manufactures such a highly generation at new lower- and zero- 760 (Nov. 1970). In fact, load shifting has been substitutable product; as a result, the emitting EGUs (building block 3). recognized as a pollution control technique as early use of reduced generation is not easily Further, this substitutability increases as 1968, when it was included in the ‘‘Chicago Air transferrable to another industry. over longer timeframes with the Pollution System Model’’ for controlling incidents of extremely high pollution. E.J. Croke, et al., opportunity to invest in infrastructure ‘‘Chicago Air Pollution System Model, Third 6. Reasons That This Rule Is Within the improvements, and as noted elsewhere, Quarterly Progress Report,’’ Chicago Department of EPA’s Statutory Authority and Does Not Air Pollution Control, p. 186 (1968) (discussing the Represent Over-Reaching 602 Although, as discussed in the text in this feasibility of ‘‘Control by Load Reduction’’ in section of the preamble, we are not treating reduced combination with load shifting as applied to the In this section, we respond to adverse overall generation of electricity as the BSER Commonwealth Edison Company), available at comments that the EPA is overreaching (because it does not meet our historical and current http://www.osti.gov/scitech/servlets/purl/4827809. in this rulemaking by attempting to The report also considered ‘‘combining fuel approach of defining the BSER to include methods direct the energy sector. These that allow the same amount of production but with switching and load reduction’’ as a possible air a lower-emitting process) we note that reduced pollution abatement technique. See id. at 188. The commenters construed the proposed generation by individual higher-emitting EGUs to report recognized, as an initial matter, that the rulemaking as the EPA proposing to implement building blocks 2 and 3 meets the Commonwealth Edison Company (CECO) was mandate the implementation of the following criteria for the BSER: As the examples in ‘‘constrained to meet the total load demand’’ but the text and in the Legal Memorandum make clear, that ‘‘load reduction at one plant or even a number measures in the building blocks, reduced generation is ‘‘adequately demonstrated’’ of plants is usually feasible by shifting the power as a method of reducing emissions (because demand to other plants in the system.’’ Id. As a 605 The EPA notes that affected EGUs are not Congress and the EPA have recognized it and on result, the report noted, ‘‘load shifting within the actually required to collectively reduce generation numerous occasions, power plants have relied on physical limits of the CECO system . . . may be a by the amount represented in the BSER, and may it); it is of reasonable cost; it does not have adverse highly desirable control mechanism.’’ Id. The report collectively reduce generation by more or less than effects on energy requirements at the level of the also predicted that ‘‘[i]n the future, it may be that amount. Individual affected EGUs are free to individual affected source (because it does not possible to form reciprocal agreements to obtain choose reduced generation or other means of require additional energy usage by the source) or ‘pollution abatement’ power from neighbor reducing emissions, as permitted by their state the source category or the U.S.; and it does not companies during a pollution incident and return plans, in order to achieve the standards of create adverse environmental problems. this borrowed power at some later date.’’ Id. at 187. performance established for them by their states.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00122 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64783

including investment in RE and significant flexibility either to Maryland, Massachusetts, New implementation of a broad range of state promulgate rate-based emission Hampshire, New York, Rhode Island and utility demand-side EE programs. standards that mirror the emission and Vermont—have indicated that they Commenters added that in some performance rates in the guidelines, intend to maintain their current state instances, the affected EGUs and states promulgate rate-based emission programs, which this rule would allow, would have no choice but to take the standards that are equivalent to the and there are reports that other states actions in the building blocks because emission performance rates in the may seek to join RGGI.610 Similarly, they would not otherwise be able to guidelines, or promulgate equivalent California has indicated that it intends achieve their emission standards. mass-based emission standards. The to maintain its current state program, Commenters also emphasized that with sources, in turn, are required to comply which this rule would allow. Other the proposed portfolio approach, the with their emission standards, and may states could employ the types of rule would impose federally enforceable do so through any means they choose. methods used in Oregon, Washington, requirements on a wide range of entities Alternatively, the state may adopt the Colorado, or Minnesota, described in that do not emit CO2 and have not state-measures approach, which the background section of this preamble. previously been subject to CAA provides additional flexibility. As a practical matter, we expect that regulation. Commenters cite the U.S. Thus, the EPA is not requiring that for some affected EGUs, implementation Supreme Court’s statements in Utility the affected EGUs take any particular of the building blocks will be the most Air Regulatory Group v. EPA (UARG) 606 action, such as implementation of the attractive option for compliance. This that caution an agency against building blocks. Rather, as just does not mean, contrary to the adverse interpreting its statutory authority in a explained, the EPA is regulating the comments noted above, that this rule way that ‘‘would bring about an affected EGUs’ emissions by requiring constitutes a redesign of the energy enormous and transformative expansion that the state submit state plans that sector. As discussed above, the building in [its] regulatory authority without achieve specified emission performance blocks meet the criteria to be part of the clear congressional authorization,’’ and levels. The states may choose from a best system of emission reduction . . . that add, ‘‘When an agency claims to wide range of emission limits to impose adequately demonstrated. The fact that discover in a long-extant statute an on their sources, and the sources may some sources will implement the unheralded power to regulate ‘a choose from a wide range of compliance building blocks and that this may result significant portion of the American options to achieve their emission limits. in changes in the electricity sector does economy,’ . . . we typically greet its Those options include various means of not mean that the building blocks announcement with a measure of implementing the building blocks as cannot be considered the BSER under skepticism.’’ 607 Commenters assert that well as numerous other compliance CAA section 111(d). in this rule, the EPA is taking the options, ranging from—depending in In this rule, as with all CAA section actions that the UARG opinion part on whether the state imposes a rate- 111(d) rules, the EPA is not directly cautioned against. For the reasons based or mass-based emission limit— regulating any entities. Moreover, the discussed below, these comments are implementation of demand-side EE EPA is not finalizing the proposed incorrect and misunderstand measures to natural gas co-firing.608 portfolio approach. Accordingly, the fundamental aspects of this rule. In As some indication of the diverse set EPA is neither requiring nor authorizing addition, to the extent these comments of actions we expect to comply with the the states to regulate non-affected EGUs address either building block 4 or the requirements of this rule, we note that in their CAA section 111(d) plans.611 portfolio approach they are moot, demand-side EE programs, in particular, Moreover, contrary to adverse because the EPA is not finalizing those are expected to be a significant comments, this rule does not require the elements of the proposal. compliance method, in light of their low states to adopt a particular type of In this rule, the EPA is following the costs. In addition, the National energy policy or implement particulate same approach that it uses in any Association of Clean Air Agencies types of energy measures. Under this rulemaking under CAA section 111(d), (NACAA) has issued a report that rule, a state may comply with its which is designed to regulate the air provides a detailed discussion of 25 obligations by adopting the emission pollutants from the source category at approaches to CO2 reduction in the standards approach to its state plan and issue. First, the EPA identifies the BSER electricity sector.609 In addition, we imposing rate-based or mass-based to reduce harmful air pollution. Second, note that the nine RGGI states— emission standards on its affected EGUs. based on the BSER, the EPA Connecticut, Delaware, Maine, In this manner, this rule is consistent promulgates emission guidelines, which with prior section 111(d) rulemaking generally take the form of emission rates 608 In fact, the EPA is expressly precluded from actions, in which the states have mandating specific controls except in certain complied by promulgating one or both applicable to the affected sources. In limited circumstances. See 42 U.S.C. 7411(b)(5). For this case, the EPA is promulgating a instance, the EPA is authorized to mandate a of those types of standards of uniform CO2 emission performance rate particular ‘‘design, equipment, work practice, or performance. In this rulemaking, as an for steam-generating EGUs and a operational standard, or combination thereof,’’ alternative, the state may adopt the state when it is ‘‘not feasible to prescribe or enforce a measures approach, under which the uniform CO2 emission performance rate standard of performance’’ for new sources. 42 for combustion turbines, and the EPA is U.S.C. 7411(h)(1). CAA section 111(h) also state could, if it wishes, adopt particular translating those rates into a combined highlights for us that while ‘‘design, equipment, types of energy measures that would emission rate and equivalent mass limit work practice, or operational standards’’ may be lead to reductions in emissions from its directly mandated by the EPA, CAA section EGUs. But again, this rule does not for each state. These emission 111(a)(1) encompasses a broader suite of measures guidelines serve as the guideposts for for consideration as the BSER. require the state to implement a state plan requirements. The states, in 609 NACAA, ‘‘Implementing EPA’s Clean Power turn, promulgate standards of Plan: A Menu of Options (May 2015), http:// 610 Martinson, Erica, ‘‘Cap and trade lives on _ _ _ performance and, in doing so, retain www.4cleanair.org/NACAA Menu of Options. through the states,’’ Politico (May 27, 2014), NACAA describes itself as ‘‘the national, non- http://www.politico.com/story/2014/05/cap-and- partisan, non-profit association of air pollution trade-states-107135.html. 606 134 S. Ct. 2427 (2014). control agencies in 41 states, the District of 611 A state may regulate non-EGUs as part of a 607 Utility Air Regulatory Group v. EPA, 134 S. Ct. Columbia, four territories and 116 metropolitan state measures approach, but those measures would 2427, 2444 (2014) (citations omitted). areas.’’ Id. not be federally enforceable.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00123 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64784 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

particular type of energy policy or adopt achievable, our Nation’s energy needs and ‘‘economic, environmental, and energy’’ particular types of energy measures. the possibility of economic disruption must impacts, as Congress and the Courts It is certainly reasonable to expect weigh in the balance. expect in a CAA section 111 rule, but that compliance with these air pollution The [CAA] entrusts such complex balancing to EPA in the first instance, in those impacts do not mean that the EPA controls will have costs, and those costs combination with state regulators. Each is precluded from promulgating the will affect the electricity sector by ‘‘standard of performance’’ EPA sets must rule. discouraging generation of fossil fuel- ‘‘tak[e] into account the cost of achieving As noted above, in this rule, to control fired electricity and encouraging less [emissions] reduction and any nonair quality costly alternative means of generating health and environmental impact and energy CO2 emissions from affected EGUs, the electricity or reducing demand. But for requirements.’’ § 7411(a)(1), (b)(1)(B), (d)(1); EPA first considered more traditional air affected EGUs, air pollution controls see also 40 CFR 60.24(f) (EPA may permit pollution control measures, including necessarily entail costs that affect the state plans to deviate from generally supply-side efficiency improvements, applicable emissions standards upon electricity sector and, in fact, the entire fuel-switching (for CO2 emissions, that demonstration that costs are ‘‘[u]n- entails co-firing with natural gas), and nation, regardless of what BSER the EPA reasonable’’). EPA may ‘‘distinguish among identifies as the basis for the controls. classes, types, and sizes’’ of stationary add-on controls (for CO2 emissions, that For example, had some type of add-on sources in apportioning responsibility for entails CCS). However, it became control such as CCS been identified as emissions reductions. § 7411(b)(2), (d); see apparent that even if the EPA could the BSER for coal-fired EGUs, sources also 40 CFR 60.22(b)(5). And the agency may have finalized those controls as the that complied by installing that control waive compliance with emission limits to BSER 616 and established the same permit a facility to test drive an ‘‘innovative would incur higher costs. As a result, uniform CO2 emission performance technological system’’ that has ‘‘not [yet] rates, the affected EGUs would rely on generation from coal-fired EGUs would been adequately demonstrated.’’ be expected to decrease and be replaced § 7411(j)(1)(A). The Act envisions extensive less expensive ways to achieve their at least in part by generation from cooperation between federal and state emission limits. Specifically, instead of existing NGCC units and new authorities, see § 7401(a), (b), generally relying on co-firing and CCS, the renewables because those forms of permitting each state to take the first cut at affected EGUs generally would replace generation would see their competitive determining how best to achieve EPA their generation with lower- or zero- positions improved. emissions standards within its domain, see emitting generation—the measures in § 7411(c)(1), (d)(1)–(2). This basic fact that EPA regulation of It is altogether fitting that Congress building blocks 2 and 3—because those air pollutants from affected EGUs designated an expert agency, here, EPA, as measures are significantly less invariably affects the utility sector is best suited to serve as primary regulator of expensive and already well-established well-recognized and in no way indicates greenhouse gas emissions. The expert agency as pollution control measures. Indeed, that such regulation exceed the EPA’s is surely better equipped to do the job than some affected EGUs have stated that authority. In revising CAA section 111 individual district judges issuing ad hoc, while they oppose including in the case-by-case injunctions.613 in the 1977 CAA Amendments, BSER generation shifts to lower- or zero- Congress explicitly acknowledged that Similarly, the D.C. Circuit, in its 1981 emitting sources (or, as proposed, the EPA’s rules under CAA section 111 decision upholding the EPA’s rules to demand-side EE), they request that for EGUs would significantly impact the reduce SO2 emissions from new coal- those measures be available for energy sector.612 The Courts have fired EGUs under the version of CAA compliance, which indicates their recognized that, too. The U.S. Supreme section 111(b) adopted in the 1977 CAA Court, in its 2011 decision that the CAA Amendments, stated: utilities. Petroleum imports can be conserved by and the EPA actions it authorizes [S]ection 111 most reasonably seems to switching from oil-fired to coal-fired generation. displace any federal common law right require that EPA identify the emission levels But barring other measures, burning high-sulfur Eastern coal substantially increases pollution. to seek abatement of CO2 emissions that are ‘‘achievable’’ with ‘‘adequately demonstrated technology.’’ After EPA makes Sulfur can be ‘‘scrubbed’’ from coal smoke in the from fossil fuel-fired power plants, stack, but at a heavy cost, with devices that turn out emphasized that CAA section 111 this determination, it must exercise its huge volumes of sulfur wastes that must be authorizes the EPA—which the Court discretion to choose an achievable emission disposed of and about whose reliability there is identified as the ‘‘expert agency’’—to level which represents the best balance of some question. Intermittent control techniques economic, environmental, and energy (installing high smokestacks and switching off regulate CO2 emissions from these considerations. It follows that to exercise this burners when meteorological conditions are sources in a manner that balances ‘‘our discretion EPA must examine the effects of adverse) can, at lower cost, reduce local Nation’s energy needs and the technology on the grand scale in order to concentrations of sulfur oxides in the air, but possibility of economic disruption:’’ decide which level of control is best. . . . cannot cope with the growing problem of sulfates The standard is, after all, a national standard and widespread acid rainfall. Use of low-sulfur The appropriate amount of regulation in Western coal would avoid many of these problems, with long-term effects.614 any particular greenhouse gas-producing but this coal is obtained by strip mining. Strip- sector cannot be prescribed in a vacuum: As The D.C. Circuit added: ‘‘Regulations mining reclamation is possible, but substantially with other questions of national or such as those involved here demand a hindered in large areas of the West by lack of rainfall. Moreover, in some coal-rich areas the coal international policy, informed assessment of careful weighing of cost, environmental, competing interests is required. Along with beds form the underground aquifer and their and energy considerations. They also removal could wreck adjacent farming or ranching the environmental benefit potentially have broad implications for national economies. Large coal-burning plants might be economic policy.’’ 615 This rule has located in remote areas far from highly populated 612 The D.C. Circuit acknowledged this legislative urban centers in order to minimize the human history in Sierra Club v. EPA, 657 F.2d 298, 331 effects of pollution. But such areas are among the (D.C. Cir. 1981). There, the Court stated: 613 American Electric Power Co. v. Connecticut, few left that are unspoiled by pollution and both [T]he Reports from both Houses on the Senate 131 S. Ct. 2527, 2539–40 (2011). environmentalists and the residents (relatively few and House bills illustrate very clearly that Congress 614 Sierra Club v. EPA, 657 F.2d 298, 330 (D.C. in number compared with those in metropolitan itself was using a long-term lens with a broad focus Cir. 1981). localities but large among the voting population in on future costs, environmental and energy effects of 615 Sierra Club v. EPA, 657 F.2d 298, 406 (D.C. the particular states) strongly object to this policy. different technological systems when it discussed Cir. 1981). The Court supported this statement with Id. at 406 n. 526. section 111. [Citing S. Rep. No. 95–127, 95th Cong., a lengthy quotation from a scholarly article, which 616 For the reasons explained, we did not finalize 1st Sess. (1977), 3 Legis. Hist. 1371; H.R. Rep. No. stated, in part: those measures because significantly less expensive 95–294, 95th Cong., 1st Sess. 188 (1977), 4 Legis. Consider for a moment the chain of collective control measures—building blocks 2 and 3—are Hist. 2465.] decisions and their effects just in the case of electric available for these affected EGUs.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00124 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64785

interest in implementing those intend that such sources be subject to and (a)(2), new, modified, or measures.617 the PSD requirements.618 Commenters reconstructed sources that commenced We expect that many sources will appear to interpret this decision to construction prior to the effective date choose to comply with their emission preclude the EPA from including at of the CAA section 111(b) rule must also limits through the measures in building least building block 3 in the BSER be in compliance upon the effective date blocks 2 and 3, but contrary to the because it includes measures that of the rule. In contrast, the requirements assertions of some commenters, this will involve entities (such as RE developers) under the CAA section 111(d) rule do not result in unprecedented and that do not emit CO2 and have not not become applicable to existing fundamental alterations to the energy previously been subject to the CAA. affected EGUs until seven years after sector. As discussed above, Congress However, in this rule, the EPA is not promulgation of the rule, when the relied on the same measures as those the attempting to subject any entity other interim compliance period begins in EPA is including in building blocks 2 than the affected EGUs in the source 2022, and the final compliance period and 3 as essential parts of the basis for category to CAA section 111 does not begin until 2030. Moreover, the the Title IV emission limits for fossil requirements. As discussed below, the compliance period for the interim fuel-fired EGUs, and the EPA did the EPA is not finalizing the proposed requirements is eight years. This later same for the emission limits in various portfolio approach, under which states applicability date and longer rules for those same sources. were authorized to include, in their compliance period for existing sources In addition, reliance on the measures CAA section 111(d) state plans, accommodates a requirement that, on in building blocks 2 and 3 is fully federally enforceable requirements on average, those sources have a lower consistent with the recent changes and entities other than affected EGUs. Thus, nominal emission limit than the current trends in electricity generation, as noted above, this final rule does not standards for new or modified sources, and as a result, would by no means require or authorize the states to include which those latter sources must comply entail fundamental redirection of the entities other than affected EGUs in with immediately. energy sector. As indicated in the RIA their CAA section 111(d) state plans, In addition, the timetables for for this rule, we expect that the main and as a result, those entities will not compliance with the CAA section 111(b) impact of this rule on the nation’s mix come under CAA jurisdiction 619 and and 111(d) rules should be considered of generation will be to reduce coal-fired the parts of the economy that they in light of the 8-year review schedule generation, but in an amount and by a represent will not be regulated by the required for CAA section 111(b) rules rate that is consistent with recent EPA. under CAA section 111(b)(1)(B). Under historical declines in coal-fired CAA section 111(b)(1)(B), the EPA is 7. Relative Stringency of Requirements generation. Specifically, from required to ‘‘review and, if appropriate, for Existing Sources and New, Modified, approximately 2005 to 2014, coal-fired revise’’ the CAA section 111(b) and Reconstructed Sources generation declined at a rate that was standards ‘‘at least every 8 years.’’ This greater than the rate of reduced coal- Commenters also objected that the provision obligates the EPA to review fired generation that we expect to result proposed CAA section 111(d) standards the CAA section 111(b) rule for CO2 from this rulemaking from 2015 to 2030. are more stringent than the standards for emissions from new, modified, and In addition, under this rule, the trends new, modified or reconstructed sources, reconstructed power plants by the year for all other types of generation, and they assert that setting CAA section 2023. That mandatory review will including natural gas-fired generation, 111(d) standards that are more stringent reassess the BSER to determine the nuclear generation, and renewable than CAA section 111(b) standards appropriate stringency for emission generation, will remain generally would be illogical, contrary to standards for new, modified, and consistent with what their trends would precedent, contrary to the intent of the reconstructed sources into the future. be in the absence of this rule. In remaining useful life exception, and Therefore, for present purposes of 620 addition, this rule is expected to result arbitrary and capricious. We disagree comparing the stringency of the CAA in increases in demand-side EE. with these comments. Comparing the section 111(b) and 111(d) rules, the year In addition, contrary to claims of control requirements of the two sets of 2023 presents an important point of some commenters, in this rule, the EPA rules, CAA section 111(d) and 111(b), is comparison. is not attempting to expand its an ‘‘apples-to-oranges’’ comparison and, Specifically, as noted above, the CAA authorities by attempting to expand the as a result, it is not possible—and it is section 111(b) standards apply to new, jurisdiction of the CAA to previously overly simplistic—to conclude that the modified and reconstructed sources unregulated sectors of the economy, in CAA section 111(d) requirements are beginning in 2015, while the CAA contravention of the UARG decision. In more stringent than the CAA section section 111(d) rule does not take effect UARG, the U.S. Supreme Court struck 111(b) requirements. until 2022, which happens to fall on the down the EPA’s interpretation of the Most importantly, the two sets of cusp of the 8-year review for the CAA PSD provisions of the CAA because the rules become applicable at different section 111(b) standards. interpretation had the effect of applying points in time and have significantly Even after the section 111(d) rule the PSD requirements to large numbers different compliance periods. The CAA takes effect in 2022, the flexibility that of small sources that previously had not section 111(b) rule becomes applicable this rule offers the states has important been subject to PSD, and because, for new, modified and reconstructed implications for its stringency and for according to the Court, the EPA sources immediately upon construction, any comparison to the CAA section acknowledged that Congress did not modification, or reconstruction and, in 111(b) rule. Although the requirements fact, by operation of CAA section 111(e) for the CAA section 111(d) rule begin in 617 See the proposal for this rule, 79 FR at 34888 2022, they are phased in, in a flexible (‘‘during the public outreach sessions, stakeholders 618 Util. Air Reg. Group v. EPA, 134 S. Ct. 2427, manner, over the 2022–2030 period. generally recommended that state plans be 2443 (2014). That is, states are required to meet authorized to rely on, and that affected sources be 619 States may regulate non-affected EGUs interim goals for the 2022–2029 period authorized to implement, re-dispatch, renewable through a state measures approach, but those energy measures, and demand-side energy regulations would not be federally enforceable. by 2029, and the final goals by 2030, but efficiency measures in order to meet states’ and 620 ACC et al. (Associations) comments at 40, states are not required to impose sources’ emission reduction obligations.’’). Luminant comments at 89. requirements on their sources that take

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00125 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64786 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

effect in 2022. In fact, states may, if they more flexible means of compliance. For and as a result, their PSD permits are prefer, impose business-as-usual an emission standards approach, expected to include emission limits at emission standards on their sources that depending on the form of the state approximately the 800 lb. CO2/MWh do not require emission reductions in requirements (mass-based or rate-based), gross level. A very small amount of the 2022 and apply emission standards on the state may be expected to authorize new NGCC generation is expected to be their sources that do require emission trading of mass-based emission small units (with a capacity of reductions and that take effect no earlier allowances or rate-based emission approximately 25 MW) or rapid-start than 2023. Moreover, because emission credits, and in addition, the purchase of units. Their initial emissions are standards may have an annual ERCs. These flexibilities are not expected to be approximately 950 lb. compliance period, the states may allow included in the CAA section 111(b) rule, CO2/MWh gross, their emissions over their sources to delay having to comply rather, as noted, each new, modified, time are expected to be somewhat with any emission reduction and reconstructed EGU must higher due to equipment deterioration, requirements until the end of 2023.621 individually meet its emission standard and it these units that the standard of Therefore, while the CAA section on a 12-month (rolling) basis. The EPA 1,000 lb. CO2/MWh gross is designed to 111(b) standards apply to new, has frequently required that sources constrain.624 As a result, the 1,000 lb. modified, and reconstructed sources meet a more stringent nominal limit CO2/MWh gross limit applies to all new beginning in 2015, the CAA section when they are allowed compliance NGCC units, including the great 111(d) standards may not apply to flexibility, particularly, the opportunity majority of the expected new capacity existing sources until 2023. As a result, to trade.623 In addition, states have the consisting of larger, non-rapid start by 2023—the year that the CAA section discretion to allow their sources to meet units, even though, as just noted, the 111(b) standards are required to be emission standards over a longer time great majority of the units are expected reviewed for possible revision—affected period. This distinction between the to emit at significantly lower emission EGUs subject to the CAA section 111(d) two rules is another reason why the rates. The CAA section 111(d) standard standards may remain uncontrolled. CAA section 111(d) rule cannot be said for existing sources, in contrast, is Under those circumstances, the CAA to be more stringent in fact than the generally expected to constrain existing section 111(d) rule cannot be said to be CAA section 111(b) rule. NGCC units on average. Moreover, very more stringent than the CAA section There are other reasons why the CAA little of the existing NGCC generation 111(b) rule.622 section 111(d) rule cannot be said to be includes small units or, in particular, Another reason why the section more stringent. With respect to the CAA rapid-start units because the latter are a 111(d) rule cannot be said to be more section 111(d) and 111(b) rules for recently developed technology. To some stringent than the section 111(b) rule is existing and new NGCC units, we note extent, the same is true for the 111(b) that for any individual source, the the following: As explained in the CAA standard for reconstructed NGCC units. section 111(d) rule is applied more section 111(b) preamble, the standard The average NGCC rate was flexibly and includes more flexible for new NGCC units is designed to approximately 850 lb CO2/MWh gross in means of compliance. Whereas the CAA accommodate a wide range of unit 2014 and, as a result, most sources are section 111(b) rule entails an emission types, including small units and rapid- emitting below the CAA section 111(b) rate that each affected EGU must meet start units, which are a small part of the standard for reconstructed sources. For on a 12-month (rolling) basis, the CAA expected new NGCC generation these reasons, too, the CAA section section 111(d) is more flexible. For capacity. As such, the CAA section 111(b) standards for new and example, states may adopt the state 111(b) standard (1,000 lb CO2/MWh reconstructed NGCC units cannot be measures approach and refrain from gross, which equates to 1,030 lb CO2/ compared to the 111(d) standards for imposing any requirements on their MWh net) will not constrain the existing NGCC units.625 affected EGUs. In addition, under the emissions of the great majority of Moreover, even if commenters were CAA section 111(d) rule, sources have expected new NGCC generation correct that the CAA section 111(d) capacity, which is expected to consist of requirements for existing sources are 621 A state that chooses to allow its sources to larger base load units (with a capacity more stringent than the CAA section remain uncontrolled through 2023 would still be of 100 MW or greater) that are not 111(b) requirements for new sources, able to meet its interim goal by 2029, although it intended to cycle frequently. Their that would not, by itself, call into would need to impose more stringent requirements initial emissions are expected to be question the reasonableness of either on its sources over the 2024–2029 period than it would if it had imposed requirements beginning in below 800 lb. CO2/MWh gross, their standard. The stringency of the 2022. It should also be noted that in fact, most states emissions over time may be somewhat requirements for each source could allow their sources to remain uncontrolled higher due to equipment deterioration, subcategory is, of course, a direct for 2022 and 2023, and require controls beginning function of the BSER identified for that in 2024, and still be able to meet their interim goal. 623 See, e.g., EPA, ‘‘Improving Air Quality with 622 In addition, because the section 111(d) source subcategory. In this rulemaking, Economic Incentive Programs,’’ EPA–452/R–01– we explain the basis for the BSER for requirements are phased in, states may choose to 001, at 82 (2001) (requiring that Economic Incentive apply a gradual phase-in of the reductions. This Programs show an environmental benefit, such as existing sources, and why we do not means that the nominal emission rates for section ‘‘reducing emission reductions generated by include certain measures, such as CCS; 111(d) sources would be significantly less stringent program participants by at least 10 percent’’), and in the CAA section 111(b) for the first several years of the compliance period. available athttp://www.epa.gov/airquality/advance/ rulemaking, we explain the basis for the We estimate that if states choose to impose the pdfs/eipfin.pdf; ‘‘Economic Incentive Program section 111(d) requirements in a proportional Rules: Final Rule,’’ 59 FR 16690 (April 7, 1994) amount each year, beginning in 2022, the (same); ‘‘Certification Programs for Banking and 624 As explained in the 111(b) preamble, any requirements for steam generators by 2022 would Trading of NOX and PM Credits for Heavy-Duty attempt to subcategorize and assign a lower result in an average emission performance rate of Engines: Final Rule,’’ 55 FR 30584 (July 26, 1990) emission limit to larger, non-rapid start NGCC units 1,741 lb. CO2/MWh net and by 2023, an average (requiring that for programs for banking and trading could cause market distortions. 625 emission rate of 1,681 lb. CO2/MWh net (In 2030, of NOX and PM credits for gasoline, diesel and The section 111(b) standards for modified and the rate falls to 1,305 lb. CO2/MWh net.) For methanol powered engines, all trading and banking reconstructed steam generation units are generally existing NGCC units, if states choose to implement of credits must be subject to a 20 percent discount lower than the emission rates of existing stream the section 111(d) requirements proportionally, in ‘‘as an added assurance that the incentives created generation units, but for the reasons explained 2022, the average rate would be 898 lb. CO2/MWh by the program will not only have no adverse earlier, those standards cannot be compared to the net, and in 2023 it would be 877 lb. CO2/MWh net. environmental impact but also provide an section 111(d) standards for existing steam (In 2030, this rate falls to 771 lb. CO2/MWh net.) environmental benefit.’’). generation units.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00126 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64787

BSER for new sources, and why we do reductions otherwise achieved by heat each EGU’s hourly data by similar not include certain measures, such as rate improvements. As already noted, ambient temperature and capacity factor the building blocks. As long as the BSER the building block 1 measures described (i.e., hourly operating level as a determination is reasonable and the below cannot by themselves constitute percentage of nameplate capacity) resulting emission limits meet other the BSER because the quantity of conditions. The second approach applicable requirements, those emission emission reductions achieved—which is analyzed the difference between an limits are valid, even if the one for new a factor that the courts have required EGU’s average gross heat rate and its sources is less stringent than the one for EPA to consider in determining the best historical gross heat rate existing sources. No provision in section BSER—would be of insufficient performance. We proposed that, on a 111, nor any statement in its legislative magnitude in the context of this nationwide basis, affected coal-fired history, nor any of its case law, pollutant and this industry. The EGUs should be able to achieve 6- indicates that the standards for new potential rebound effect, if it occurred, percent heat rate improvement: 4- sources must be more stringent than the would exacerbate the insufficiency of percent improvement from best standards for existing sources. the emission reductions. However, practices, and an additional 2-percent applying building block 1 in improvement from equipment upgrades. C. Building Block 1—Efficiency combination with other building blocks We received many comments Improvements at Affected Coal-Fired can address this concern for the reasons asserting that the 11-year dataset we had Steam EGUs stated in section V.A.4. used to determine the 4-percent best The first category of approaches to We conducted several analyses to practices figure likely reflected some reducing CO2 emissions at affected assess the potential for heat rate portion of the 2-percent equipment fossil fuel-fired EGUs consists of improvements from the coal-fired EGU upgrades figure we had separately measures that improve heat rate at coal- fleet. As in the proposal, we employed identified. Accordingly, these fired steam EGUs. Heat rate a unit-specific approach that compared commenters claim that the EPA double- improvements are changes implemented each EGU’s performance against its own counted equipment upgrades in arriving at an EGU that increase the efficiency historical performance in lieu of directly at the full estimate of 6-percent heat rate with which the EGU converts fuel comparing an EGU’s performance improvement. Commenters also noted energy to electric energy, thereby against other EGUs with similar the difficulty, in some cases, of reducing the amount of fuel needed to characteristics. Accordingly, as determining whether a heat rate produce the same amount of electricity described below, our method effectively improvement measure is an ‘‘equipment and consequently lowering the amount controls for the characteristics and upgrade’’ or ‘‘best practice,’’ such as of CO2 produced as a byproduct of fuel factors of an EGU that typically remain optimizing soot blowing with intelligent combustion. Heat rate improvements constant over time (e.g., a unit is systems, using CO monitors for yield important economic benefits to unlikely to dramatically increase or optimizing combustion, or applying air affected EGUs by reducing their fuel decrease in size). Our methodology for heater and duct leakage controls. costs. determining the amount of heat rate As noted below in sections V.C.1.b An EGU’s heat rate is the amount of improvement appropriately included in and V.C.3, the EPA acknowledges that fuel energy input needed (Btu, higher the BSER as building block 1 is some equipment upgrades implemented heating value basis) to produce 1 kWh discussed in the next section, below. by EGUs during the 11-year study of net electrical energy output.626 In period are reflected in the hourly heat 1. Summary of Measures Comprising the 2012, the generation-weighted average rate data. Therefore, we made two BSER in Building Block 1 annual heat rate of the 884 coal-fired refinements to our analyses of heat rate EGUs included in EPA’s building block a. Measures under building block 1— improvement potential. First, we refined 1 analysis was approximately 9,732 Btu heat rate improvements. our statistical approaches to use each per gross kWh.627 Because an EGU’s In finalizing the building block 1 EGU’s gross heat rate from 2012—the CO2 emissions are driven primarily by portion of this rule, we considered over final year of the 11-year study period— the amount of fuel consumed, a thousand individual comments from as the baseline for calculating heat rate improving (i.e., decreasing) heat rate at the public, including individual EGUs improvement potential. By comparing a coal-fired EGU inherently reduces the and state agencies, on heat rate each EGU’s best historical gross heat carbon-intensity of generation. improvement, which are discussed rate with its 2012 gross heat rate, our As discussed above in section V.A below and also in the responses to analyses account for the enduring and in the June 2014 proposal,628 it is comments document and the GHG effects on heat rate of any equipment critical to recognize that affected coal- Mitigation Measures TSD for the CPP upgrades or best practices that an EGU fired EGUs operate in the context of the Final Rule. Based on these public implemented during the study period. integrated electricity system. Because of comments, we have refined the Heat rate improvement measures that an this reality, applying building block 1 in statistical analyses used in the proposal EGU maintains in 2012 are reflected in isolation can result in a ‘‘rebound to identify the potential heat rate that baseline, and thus are not treated as effect’’ that undermines the emissions improvement that can be achieved on evidence that the EGU can further average by affected coal-fired EGUs. improve heat rate. Additionally, in part 626 Typically, the units of measure used for heat In the proposal, we used two because of limitations on the rate (e.g., Btu/kWh-net) indicate whether a given approaches to analyze the variability of information available to us regarding value is based on the gross output or net output. an EGU’s gross heat rate using a robust which equipment upgrades have been or Net heat rate is always higher than gross heat rate; in coal-steam units, net heat rate can be 5–10% dataset comprised of 11 years of hourly could be implemented at individual higher than gross heat rate. gross heat rate data for 884 coal-fired EGUs, as well concerns about double- 627 Similarly, within each interconnection, the EGUs—over 11 million hours of data counting, we have conservatively generation-weighted average annual heat rates for collected between 2002 and 2012. The decided not to add a separate equipment those coal-fired EGUs in our study population were foundation of our first approach was an upgrade component to our estimate of 9,700 Btu per gross kWh (Eastern); 9,888 Btu per gross kWh (Western); and 9,789 Btu per gross kWh analysis of the variability of each EGU’s heat rate improvement potential. (Texas). gross heat rate, which was Nonetheless, we remain confident that 628 See, e.g., 79 FR 34830, 34859 (June 18, 2014). accomplished in large part by grouping additional equipment upgrades

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00127 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64788 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

(including measures that are approach provides an independently year period.632 We compared the hourly unambiguously equipment upgrades, reasonable way to estimate the potential gross heat rate data within each bin to such as turbine overhauls) are possible for heat rate improvements by EGUs in the EGU’s benchmark value. Similar to at many coal-fired EGUs, as supported each region. However, rather than select the proposal, within each bin we by numerous commenters, the Sargent & a potential heat rate improvement value assessed the effect on heat rate of Lundy study 629 (S&L) and other supported by one or only some of these improving the consistency of that EGU industry reports and studies. Many of independently reasonable analytical by reducing hourly gross heat rate these reports and studies are referenced approaches, we conservatively based values that were greater than the in the TSD developed for the proposed our final determination for each region benchmark by a percentage of the rule, as well as in the GHG Mitigation on the value for that region supported distance between each of those higher Measures TSD supporting the final CPP. by all three approaches. hourly values and the benchmark.633 Several commenters criticized the fact The ‘‘efficiency and consistency We refer to this percentage that the proposal assessed potential heat improvements under similar improvement value as the ‘‘consistency rate improvement on a nationwide conditions’’ approach is a slight factor,’’ because applying it results in basis. These commenters suggested refinement of an approach discussed at values for heat rate that are more instead that we narrow the geographic length in the proposal. As in the consistent with the EGU’s benchmark scope of our analysis, generally for that bin. In our proposal we proposal, we distributed each hour of identifying a state-by-state approach as evaluated the heat rate improvement gross heat rate data for each EGU into a preferred alternative. In light of that would result from applying a matrix comprised of 168 bins, based commenters’ concerns about using a consistency factors of 10, 20, 30, 40 and on the ambient temperature and hourly single nationwide approach, as well as 50 percent of the distance between those capacity factor of the EGU at the time for reasons described in Section V.A less-efficient hourly gross heat rate that hour of gross heat rate data was and elsewhere in this preamble, the values and the benchmark; using generated. Each bin represented a 10- final rule assesses potential heat rate engineering judgment, we selected a degree Fahrenheit (°F) range in ambient improvement regionally, within the consistency factor of 30 percent, which temperature (from ¥20 °F to greater Eastern, Western and Texas ° produced results comparable to those Interconnections.630 than 110 F), and a 10-percent range in obtained using other approaches for For the final rule, we performed capacity factor (from 0 percent to greater 631 analyzing heat rate. For our final several analyses to determine what heat than 110 percent ). Thus, for example, analysis under this approach, we rate improvement was achievable in one bin would contain all of an EGU’s refined the consistency factor based on each interconnection from best practices hourly gross heat rate data generated a statistical assessment of the overall and equipment upgrades. As in the during the 11-year study period while variability of heat rate in that EGU’s proposal, these analyses used the 11- that EGU was operating at 80- to 89- region, as described in the GHG year dataset of EGU hourly gross heat percent capacity while ambient Mitigation Measures TSD.634 As in the rate data from 2002 to 2012. As temperatures were between 70 °F and ° proposal, we applied the consistency discussed further in the GHG Mitigation 79 F. factor to each bin of each EGU’s hourly Measures TSD, our reliance on these As we explained at proposal and as gross heat rate data, and averaged the gross heat rate data was reasonable discussed further in the GHG Mitigation result across all bins in that EGU’s given that (1) these data are the only Measures TSD, ambient temperature matrix. The net result was an improved comprehensive data available to the and hourly capacity factor are important gross heat rate reflecting what that EGU EPA, and (2) heat rate is proportional to conditions that influence heat rate at would have achieved between 2002 and CO2 emission rate. individual EGUs. By separating the 2012 if, under certain ambient As in the proposal, we used more EGU-specific data into bins based on temperature and capacity factor than one analytical method to evaluate these variables, and only directly conditions, the EGU had improved its the opportunity for EGUs to reduce their comparing data within a bin, we were gross heat rate during less-efficient CO2 emissions through heat rate largely able to control for the influence hours to be slightly more consistent improvements. Our final methodology of those variables on an EGU’s heat rate. with the relevant benchmark value. We uses three different analytical Accordingly, having controlled for these then compared the improved gross heat approaches based on refinements of the two external factors, and having already rate for each EGU to its actual 2012 two approaches described at the controlled for unit-specific factors historical average gross heat rate. We proposal stage. We call these final affecting heat rate by analyzing the data approaches: (1) The ‘‘efficiency and for each EGU in isolation, we are 632 As described below, we also conducted this consistency improvements under confident that the remaining variation regionalized approach using a benchmark based on similar conditions’’ approach; (2) the the best hourly gross heat rate accounting for in each bin’s data was primarily driven outliers during any one-year period. See the GHG ‘‘best historical performance’’ approach; by factors under the EGU operator’s Mitigation Measures TSD supporting the final CPP and (3) the ‘‘best historical performance control. for more details. under similar conditions’’ approach. As 633 In the proposal, we used heat input values described below and in the GHG After allocating an individual EGU’s rather than gross heat rate values. See the GHG Mitigation Measures TSD, each data across the bins, we next established Mitigation Measures TSD supporting the final CPP a benchmark for each bin based on the for more details. 634 For the Eastern Interconnection, the 629 Sargent and Lundy 2009, Coal-Fired Power best hourly gross heat rate accounting consistency factor is 38.1 percent. For the Western Plant Heat Rate Reductions, SL–009597, Final for outliers (i.e., we set the benchmark Interconnection, the consistency factor is 38.4 Report, January 2009, available at: http:// at the 10th percentile hourly gross heat percent. For the Texas Interconnection, the www.epa.gov/airmarkets/documents/ipm/ rate value) during any consecutive two- consistency factor is 37.1 percent. Conducting this coalfired.pdf. analysis on a nationwide basis would have resulted 630 The geographic area within the Texas in application of a consistency factor of 38.2 Interconnection generally corresponds to the 631 Because an EGU’s rated nameplate capacity is percent. As described below, we also conducted portion of the state of Texas covered by ERCOT (the based on a maximum continuous rating, EGUs may this regionalized approach using consistency factors Electric Reliability Council of Texas). Additional operate for periods of time ‘‘over’’ 100 percent of determined based on one-year figures. See the GHG portions of the state of Texas are located within the their capacity factor. The EPA’s dataset of hourly Mitigation Measures TSD supporting the final CPP Eastern and Western Interconnections. operating data reflected some such instances. for more details.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00128 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64789

chose 2012 as the year of comparison that the average heat rate improvement As in the proposal, we additionally because 2012 was the latest year for potential from best practices and analyzed the data with our analytical which the EPA had data at the time of equipment upgrades is at least 4.9 approaches using one-year averaging the proposal, and because using the percent in the Eastern Interconnection, periods in place of the two-year most recent data reflects the EGU’s 2.6 percent in the Western averaging periods described above.640 current operating level and accounts for Interconnection and 3.1 percent in the However, because our conservative improvements the EGU may have Texas Interconnection.637 overall methodology adopts the lowest undertaken over the 11-year study Finally, we employed the ‘‘best value that is identified for a region by period. any of our reasonable analytical Applying this procedure to all units historical performance under similar approaches, the inherently less in our database and averaging the conditions’’ approach, which combines generation-weighted results, we aspects of the other two approaches. conservative results obtained with one- determined that it would be reasonable First, as with the ‘‘efficiency and year averaging periods (reproduced to conclude that, through application of consistency improvements under below) could not influence the outcome best practices and equipment upgrades, similar conditions approach,’’ we of our methodology as a whole. Overall, EGUs on average are at least capable of grouped hourly data for each EGU by applying these three analytical ambient temperature conditions and reducing their CO2 emissions by approaches resulted in six heat rate improving heat rate 4.3 percent in the hourly capacity factor. Next, we improvement values generated for each Eastern Interconnection, 2.1 percent in calculated each EGU’s best two-year region, each of which represents a the Western Interconnection, and 2.3 gross heat rate for each of the 168 reasonable estimate of the potential for percent in the Texas Interconnection.635 ambient temperature-capacity factor heat rate improvements by EGUs in that 638 In addition to the statistical approach bins. Similar to the ‘‘best historical region. Those values ranged from 4.3 to described above, we employed a ‘‘best performance’’ approach, to calculate the 6.9 percent in the Eastern historical performance’’ approach potential heat rate improvement, the Interconnection, from 2.1 to 4.7 percent refined from the proposal, which EPA then compared each EGU’s 2012 in the Western Interconnection, and compared each EGU’s best two-year gross heat rate for each of the ambient from 2.3 to 4.9 percent in the Texas temperature-capacity factor bins to the rolling average gross heat rate to that Interconnection. In all three regions, the EGU’s 2012 average annual gross heat EGU’s best two-year gross heat rate for most conservative values were rate.636 We then calculated the the corresponding bin. Accounting for generated using the ‘‘efficiency and differences across all EGUs in a region differences in ambient temperature and to determine the potential heat rate capacity factor, we determined that consistency improvements under improvement that would result if, in under this analytical approach the similar conditions’’ approach with two- 2012, each EGU had performed at the average heat rate improvement potential year averaging periods and consistency best two-year rolling average gross heat from best practices and equipment factors. As shown in Table 6, the values rate that the EGU achieved between upgrades was at least 5.3 percent in the produced by that approach were the 2002 and 2012. Under this analysis of Eastern Interconnection, 3.1 percent in minimum values for each region historical gross heat rate, we determined the Western Interconnection and 3.5 produced by any of the three that it would be reasonable to conclude percent in the Texas Interconnection.639 approaches: TABLE 6—HEAT RATE IMPROVEMENT POTENTIAL BY REGION AND AVERAGING PERIOD

Heat rate improvement potential (percent) by region and averaging period Analytical approach Western Texas Eastern 1 year 2 year 1 year 2 year 1 year 2 year

Efficiency and consistency improvements under similar conditions ...... 3.5 2.1 3.7 2.3 5.6 4.3 Best historical performance...... 4.1 2.6 4.2 3.1 6.3 4.9 Best historical performance under similar conditions ...... 4.7 3.1 4.9 3.5 6.9 5.3

Accordingly, we have concluded that is a 4.3-percent improvement in the potential in each region is based on the a well-supported and conservative Eastern Interconnection, a 2.1-percent weight of evidence that these are estimate of the potential heat rate improvement in the Western conservative values; for each region, improvements (and accompanying Interconnection and a 2.3-percent each of the three analytical approaches reductions in CO2 emission rates) that improvement in the Texas in our methodology supports our EGUs can achieve on average through Interconnection. The decision to use determination that the heat rate best practices and equipment upgrades these values as the building block 1 improvement value we selected is

635 Conducting this analysis on a nationwide Measures TSD supporting the final CPP for more instead of two-year averages. See the GHG basis would have resulted in a finding that EGUs details. Mitigation Measures TSD supporting the final CPP nationwide are capable on average of reducing their 637 Conducting this approach on a nationwide for more details. basis would have resulted in a finding that EGUs CO2 emissions by improving heat rate 4.0 percent. 639 Conducting this approach on a nationwide nationwide are capable on average of reducing their See the table in this section and the GHG Mitigation basis would have resulted in a finding that EGUs CO emissions by improving heat rate 4.6 percent. Measures TSD for the results of this approach using 2 As described below, we also conducted this nationwide are capable on average of reducing their benchmarks and consistency factors based on one- regionalized approach using one-year averages. See CO2 emissions by improving heat rate 5.0 percent. year averages. the GHG Mitigation Measures TSD supporting the 640 The GHG Mitigation Measures TSD describes 636 As described below, we also conducted this final CPP for more details. in more detail our rationale for using one- and two- regionalized approach using each EGU’s best one- 638 As described below, we also conducted this year averaging periods in our analytical approaches year rolling average. See the GHG Mitigation approach using one-year averages for each EGU and methodology as a whole.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00129 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64790 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

achievable. Taken individually, each expected from equipment upgrades state considers appropriate to its approach provides an independently versus best practices; 642 only that these affected coal-fired EGUs. Similarly, reasonable estimate of the potential for heat rate improvements are achievable depending on the content of the heat rate improvement. Furthermore, as in the regions through a combination of applicable plan, affected EGUs may described in the GHG Mitigation these methods. As discussed in section achieve their emission standards Measures TSD, these approaches are V.C.3 below, we believe that a single through use of any of the building block conservative on even an individual heat rate improvement goal for each measures described in this rule or any basis because they do not account for region incorporating both best practices other measures permitted under the the full extent of heat rate and upgrades, based on the 11 years of plan. improvements available through hourly heat rate data for 884 coal-fired b. Changes from the proposal. additional equipment upgrades and best EGUs available to the EPA, is a In the proposed rule, we determined practices. Some EGUs may have faced reasonable approach that is supported that building block 1 measures could on difficulties achieving significant heat by our analysis, and is particularly average achieve a 6-percent heat rate rate improvement in the past and EGU conservative given that it does not improvement from coal-fired EGUs in owners may feel they face challenges in account for the full range of heat rate the U.S. based on a 4-percent heat rate the future. Nevertheless, our improvements achievable through improvement from implementation of methodology as a whole indicates that, additional equipment upgrades and best best practices and a 2-percent heat rate on average, coal-fired EGUs can at least practices. improvement from equipment upgrades. achieve the percentage heat rate The performance rates quantified in Based on comments received and improvement selected for their region section VI, below, reflect the region- refinements made to our methodology through application of best practices specific values for heat rate for determining potential heat rate and some of the available equipment improvement. Although the improvement from the hourly gross heat upgrades. A more detailed discussion of performance rates are based on the least rate dataset of 884 coal-fired EGUs, we the EPA’s analysis in determining the stringent overall performance rate have applied this methodology on a heat rate improvement potential for determined to be reasonable for any regional basis and reduced the overall existing coal-fired EGUs may be found region, and are thus based in part on the expected percentage heat rate in the GHG Mitigation Measures TSD percentage heat rate improvement improvement for coal-fired EGUs to 4.3 supporting the final CPP. identified for the region, this rule does percent in the Eastern Interconnection, No affected coal-fired EGU is not itself require any specific EGU to 2.1 percent in the Western specifically required to improve heat implement measures resulting in a Interconnection, and 2.3 percent in the rate by any amount as a result of this specific percentage heat rate Texas Interconnection.643 These values rule. Rather, as described in section VI, improvement. Rather, the percentage reflect improvements achievable the potential for heat rate improvement heat rate improvement value is merely through both best practices and is used to determine a CO2 emission reflected in the CO2 emission equipment upgrades because, as performance rate. Those affected EGUs performance rates and corresponding described above, we also no longer that have done the most to reduce their mass-based and rate-based state goals. include a separate estimation of the heat rate will tend to be closer to that Each state has the flexibility to develop potential heat rate improvement CO emission rate. In this sense, our 2 a plan that achieves those CO2 achievable solely through equipment approach to determining potential CO2 performance rates or emission goals by upgrades. reductions through heat rate assigning the emission standards the We received comments on our improvements is similar to the way EPA proposed statistical methodology for ordinarily approaches standards of 642 Examples of the many types of best practices determining the CO2 emission 641 performance. and equipment upgrades available to coal-fired reductions opportunities achievable by In this final analysis, we do not EGUs include adopting sliding pressure operation to reduce turbine throttling losses; installing coal-fired EGUs through heat rate delineate what proportion of the improvements. We have closely potential heat rate improvement can be intelligent sootblowing system software; upgrading the combustion control/optimization system; reviewed those comments and, for the installing heat rate optimization software; installing final rule, have made refinements to our 641 To give an illustrative example, imagine a a production cost optimization program that population of sources that emit Pollutant X. Half of benchmarks plant thermal performance using methodology, as described above and the sources emit Pollutant X at 2500 lbs/hour, while historical plant data; establishing centralized explained in more detail in the GHG the other half of the sources have scrubbers remote monitoring centers with thermal Mitigation Measures TSD supporting the installed that reduce their emission rates to 1500 performance software for monitoring heat rates final CPP. lbs/hour. Because the sources are evenly divided systemwide; repairing steam and water leaks; between those with and without scrubbers, the automating steam system drains; performing an on- In the final rule, the EPA extends the average emission rate for the population as a whole site performance appraisal to identify potential implementation deadline from 2020 to is 2000 lbs/hour. In this hypothetical, EPA decides areas for improved performance; developing heat 2022. This additional time will be to base requirements on the emission rate rate improvement procedures and training O&M helpful to the states seeking to conduct achievable through use of a scrubber, meaning that staff on their use; aligning the cycle to isolate or all sources will have to meet an emission rate of capture high-energy fluid leakage from the steam more targeted analyses of the nature and 1500 lbs/hour. Because the fleet as a whole has an cycle; repairing utility boiler air in-leakage; extent of heat rate improvements that average emission rate of 2000 lbs/hour, it would be performing utility boiler chemical cleaning; specific coal-fired EGUs can make, accurate for EPA to say that the fleet as a whole can installing condenser tube cleaning system; retubing considering specific recent reduce its emission rate by 25 percent—from 2000 condenser; repairing/upgrading flue gas lbs/hour on average (only half the sources with desulfurization systems; cleaning air preheater improvements or upgrades, planned scrubbers), to 1500 lbs/hour on average (all the coils; adjusting/replacing worn air heater seals; retirements of older coal-fired EGUs, sources with scrubbers). This description of what is replacing corroded air heater baskets; replacing feed and other relevant considerations. The possible for the fleet as a whole—a 25-percent pump turbine steam seals; overhauling high extended deadline will also provide reduction in emission rate—should not be pressure feedwater pumps; installing fan and pump misinterpreted as a statement that every individual variable speed/frequency drives; upgrading turbine additional time to accommodate source is capable of further reducing its emissions steam seals; upgrading all turbine internals; and by 25 percent. The sources that have already installing coal drying systems. These and additional 643 Had the EPA maintained a nationwide installed scrubbers, and which are thus already heat rate improvement measures are discussed approach to analyzing the potential reductions operating at 1500 lbs/hour, would not be required further in the GHG Mitigation Measures TSD for the under building block 1, the result would have been to further improve their emission rate. CPP Final Rule. 4.0 percent.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00130 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64791

changes to heat rate monitoring methods Based on the analyses of technical heat rate improvements, then in at EGUs and for the installation of new potential and cost summarized above instances where the EGU’s state plan pollution controls that comply with and in Chapter 2 of the GHG Mitigation allows emissions trading, the EGU can other rules, as discussed below in the Measures TSD, we find that heat rate acquire credits or allowances from summary of key comments. improvements of 4.3, 2.1 and 2.3 affected EGUs that have above-average percent are reasonable and conservative potential. For a further discussion of our 2. Costs of Heat Rate Improvements estimates of what coal-fired EGUs in the reasonable decision not to subcategorize By definition, any heat rate Eastern, Western and Texas among coal-fired EGUs for purposes of improvement made by EGUs for the Interconnections, respectively, can determining building block 1, see the achieve at a reasonable cost. GHG Mitigation Measures TSD purpose of reducing CO2 emissions will also reduce the amount of fuel that supporting the final CPP. 3. Response to Key Comments Many commenters told the EPA that EGUs consume to produce the same Many commenters said that the EPA EGUs already have undertaken electricity output. The cost attributable should have subcategorized by EGU significant efforts to operate efficiently to CO emission reductions, therefore, is 2 design or operating characteristics for to provide reliable electric service at the the net cost of achieving heat rate purposes of evaluating potential heat lowest reasonable cost; that they believe improvements after any savings from rate improvements under building block they cannot significantly improve heat reduced fuel expenses. As summarized 1. rate; that best practice maintenance below, we estimate that, on average, the Several studies categorize EGUs activities are performed on a daily basis, savings in fuel cost associated with the broadly by capacity, thermodynamic including during maintenance outages percentage heat rate improvements we cycle, fuel rank or other characteristics. that allow for the inspection, cleaning identified for each region would be We considered subcategorizing the and repair of all equipment; that sufficient to cover much of the EGUs by their design and fuel extensive capital investments have been associated costs. Accordingly, the net characteristics under building block 1. made to install state-of-the art costs of heat rate improvements Although grouping by categories does equipment and replace equipment that associated with reducing CO2 emissions not account for all of the factors that is beyond repair; and that their from affected EGUs are relatively low. may affect heat rate, it can provide a employees continuously monitor and We recognize that this cost analysis will useful way of understanding the control operating levels in the represent the costs for some EGUs better operating profile of classes of coal-fired combustion process to maintain than others because of differences in EGUs and the fleet as a whole. However, maximum combustion of fuel and to individual circumstances. We further we have declined to subcategorize avoid wasting available heat energy. In recognize that reduced generation from among affected coal-fired EGUs for both summary, these commenters say they coal-fired EGUs due to the technical and practical reasons. First, as have expended considerable effort and implementation of other building block discussed above, our assessment of heat resources to maintain peak boiler measures would tend to reduce the fuel rate improvement potential uses a unit- efficiency at all times and, therefore, the savings associated with heat rate specific data methodology that 6-percent heat rate improvement improvements, thereby raising the compares each EGU’s performance proposed for building block 1 is effective cost of achieving the CO2 against its own historical performance. unreasonable to apply to EGUs across emission reductions from the heat rate By substantially basing our analysis on the board; the EPA should develop a improvements. Nevertheless, we still these unit-specific assessments, we rule that allows treatment of affected expect that a significant fraction of the inherently factor in the effect of EGUs on a case-by-case basis. investment required to capture the numerous design conditions. We also We commend the efforts of those who technical potential for CO2 emission conducted a regression analysis that strive to operate and maintain EGUs in reductions from heat rate improvements evaluated the effect of numerous factors the best possible manner to minimize would be offset by fuel savings, and that on heat rate, and found that heat loss and CO2 emissions. This rule the net costs of implementing heat rate subcategorizing would generally make does allow for treatment of EGUs on a improvements as an approach to little difference in our analysis. case-by-case basis. States may believe reducing CO2 emissions from affected Additionally, subdividing the EGUs into that individual considerations are EGUs are reasonable. Even if we subcategories would reduce the quantity appropriate in some cases and, conservatively estimate that EGUs will of EGUs used to calculate each average, accordingly, we have purposely allowed largely rely on equipment upgrades which would increase the influence of states to make decisions about how to rather than cheaper best practices to random and atypical variations in the implement specific CO2 reductions. Our reduce heat rate, those reductions can data on the overall averages, and would determinations of 4.3-, 2.1- and 2.3- generally be achieved at $100 or less per thus decrease our confidence in the percent heat rate improvement for EGUs kW, or approximately $23 per ton of results. Furthermore, as a practical in the Eastern, Western and Texas CO2 removed, as described in detail in matter, states are free to apportion Interconnection, respectively, are the GHG Mitigation Measures TSD reductions in a way that reflects any conservatively based on the lowest supporting the final CPP.644 Depending subcategories of their choosing when value identified by any of our on the balance between equipment determining the emission standards for reasonable statistical analyses. If states upgrades and best practices, improving individual affected EGUs. Additionally, choose to set limits on individual heat rate would even result in a net commenters assert that because building affected EGUs based in part on the savings for some EGUs. block 1 is calculated on an average availability of heat rate improvements, basis, some affected EGUs will have the states are free to assess heat rate 644 The $100/kW cost figure from the proposal is greater potential than others to reduce improvements on a more targeted, case- now particularly conservative because it included CO2 emissions through heat rate by-case basis that takes into account an the cost of significant equipment upgrades that improvements. If an affected EGU EGU’s previous heat rate improvement improve heat rate, whereas building block 1 is now largely quantified based on low- or no-cost best cannot meet its particular emission efforts, or lack thereof. The fact that practices, with a smaller portion of the remainder standard because it has below-average states (or EGUs complying with state comprised of equipment upgrades. potential to reduce emissions through requirements) can make case-by-case

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00131 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64792 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

decisions about how to achieve goals equipment upgrades. However, we methodology. Because of the strong does not contradict our conservative recognized that the possibility existed correlation between ambient air estimates—which are based on millions that some limited portion of that 2 temperature and surface water of hours of operating data reported to percent was also reflected in our temperature, the availability of a the EPA by EGUs—of how much EGUs statistical analyses of historical gross comprehensive dataset of nationwide are capable of improving their heat rate heat rate data. In order to ensure that hourly ambient air temperature, and the in each region overall. Opportunities to our methodology did not double-count similar explanatory power of surface improve heat rate abound for affected an indeterminate amount of heat rate water temperature and ambient air EGUs as a whole, as evidenced by the improvement available through temperature, it is unlikely that fact that the approaches in our statistical equipment upgrades, we conservatively separately addressing cooling water methodology each included a set aside the entire additional 2 percent temperature would significantly change comparison of an EGU’s historical heat attributable solely to equipment the results. Rather, we are confident that rate to its 2012 heat rate. Our estimates upgrades. Accordingly, we determined our use of hourly ambient air of the potential heat rate improvement the amount of potential heat rate temperature in our analyses adequately are additionally conservative because improvement in the BSER solely from addressed any significant impact of they are based purely on comparisons the heat rate analyses described above, cooling water temperature. See the GHG among historical gross heat rate data, which account for improvements Mitigation Measures TSD supporting the and thus do not reflect available, cost- through best practices and equipment final CPP for further details about this effective opportunities to improve heat upgrades that were at some point analysis. As described further in that rate that affected EGUs never achieved by an EGU, but not for the full TSD, the other potentially relevant implemented during the study period. range of best practices and equipment variables for which we did not directly Finally, to the extent that an affected upgrades that are actually available. control are unlikely to significantly EGU was in 2012 fully implementing Commenters also said that the EPA affect the average heat rate. every possible best practice for did not look at important factors that Commenters said that the heat rate improving heat rate, it may still be affect heat rate such as coal type, boiler improvement attributable to upgrades capable of improving heat rate through type, cooling water temperature, age, will degrade over time or require equipment upgrades. nameplate capacity or the use of post- repeated and costly further upgrades. Other commenters said that a 6- combustion pollution controls. We are aware that some heat rate percent heat rate improvement overall is Our statistical methodology compared improvement measures can degrade too high; that the heat rate improvement each unit to its own historical over time. Like most power plant from upgrades are double-counted performance and, therefore, largely components, some heat rate within the data used to determine heat accounts for the effects that a unit’s improvement technologies require rate improvements from best practices; design or fuel characteristics would maintenance in order to sustain their and that the 2-percent heat rate have on heat rate. As discussed above, efficacy over time. Therefore, to avoid improvement specifically for upgrades our methodology used hourly data from degradation, personnel at EGUs will was inappropriately based on 884 units over an 11-year period (2002– need to diligently apply ‘‘best practices’’ ‘‘conceptual’’ improvements from only 2012) and compared the variability in on a regular basis, a practice that one study. the heat rate of each individual unit to numerous commenters say is standard We have reduced the 6-percent heat that unit’s own performance. By operating procedure. The S&L study rate improvement from the proposed assessing potential heat rate includes estimates of associated rule to three regionalized figures of 4.3 improvement by first looking at unit- operations and maintenance (O&M) percent (Eastern), 2.1 percent (Western) specific data, our methodology costs for each heat rate improvement and 2.3 percent (Texas), as discussed inherently factors in the possible effects method that is discussed. As we above and described in detail in the of design and fuel characteristics (e.g., explained in the proposal, the related GHG Mitigation Measures TSD coal type, boiler type, nameplate O&M costs of diligently applying best supporting the final CPP. We expect capacity, age, cooling water system, air practices are relatively small compared that, on average, affected coal-fired pollution controls) on heat rate and heat to the associated capital costs and EGUs can at a minimum improve heat rate variability. would, therefore, have little effect on rate in these amounts by implementing Although cooling water temperature the economics of heat rate best practices and equipment upgrades likely plays an important role in a coal- improvements. identified in the GHG Mitigation fired EGU’s heat rate, as stated by Commenters stated that heat rate Measures TSD. These overall heat rate commenters, there are no consistent improvement should be set on a basis improvement figures do not include an quality-assured hourly cooling water that is narrower than nationwide—for estimated percentage heat rate temperature data available to the EPA. example, state-by-state or unit-by-unit. improvement attributable specifically to However, in an effort to determine the The EPA did not propose and is not upgrades. Although we are no longer potential effect of cooling water finalizing a rule that sets heat rate including in our calculation of building temperature on heat rate, we looked at improvement goals for individual states block 1 a separate 2-percent heat rate a sample of 45 coal-fired EGUs at 19 or for individual coal-fired EGUs. improvement attributable solely to facilities for which we had hourly Instead, in the approved state plans equipment upgrades, this decision is not surface water temperature data (used as developed under this rule, each state because we believe that our initial 2- a surrogate for cooling water) from will set the emission standards for its percent assessment of equipment monitors located nearby and upstream various coal-fired EGUs. In doing so, the upgrades was incorrect. To the contrary, of cooling water intake points. Our state may take into account its own view the information presented in the S&L analysis found that surface water of the amount of heat rate improvement study was similar to that in other temperature did explain some of the needed (if any) at specific EGUs, and industry reports and studies—many of variation in heat rate, but that surface may look to the EPA’s analysis of heat which were referenced in the proposal water temperature is strongly correlated rate improvement potential in the TSD—describing potential heat rate with ambient air temperature—a applicable region as a guide, while improvements at EGUs from all types of variable we did control for in our keeping in mind the CO2 emission

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00132 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64793

performance rate. This broad-based Interconnection. Our methodology We expect that most states will approach is consistent with the identifies a 4.3 percent potential develop plans that optimize the traditional rules evaluating the potential improvement in the Eastern operation of existing coal-fired EGUs for emission reductions on a source- Interconnection, compared to a 4.0 while utilizing the other building blocks category basis, and is consistent with percent figure across all three and other measures to reduce emissions the broader goal-setting purpose of this interconnections. from carbon-intensive generation. From rule. Furthermore, the final rule We further note, along with some our IPM projections, the average annual establishes a uniform national commenters, that site-specific capacity factor of existing coal-fired performance rate based on the least engineering studies or unit-by-unit EGUs that are expected to remain in stringent regional performance rate analyses of heat rate improvement operation in 2030 will actually increase calculated with the building blocks. potential for coal-fired EGUs are not compared to 2012. This projection— Accordingly, affected EGUs in regions available to the EPA; only a small which is further described in the GHG not setting the national level have number of site-specific case studies are Mitigation Measures TSD—incorporates emission reduction opportunities available in the public literature. We expected retirements of inefficient units beyond those reflected in the applicable considered that for the EPA to develop and generation shifts away from using performance rate. a comprehensive, unit-by-unit heat rate coal-fired EGUs as peaking units. The heat rate improvement measures improvement study of nearly 900 coal- Commenters also noted that the EPA comprising building block 1 would fired EGUs from scratch, it would likely used net heat rate in state goals, but ordinarily be evaluated on a nationwide cost the Agency $50,000 to $100,000 to used gross heat rate in its heat rate basis. However, in this instance there study each EGU (almost $50 to $100 improvement analysis—potentially are two good reasons to calculate million total) and require three to four ignoring the detrimental effect that building block 1 on a regionalized basis. years to complete. Such a granular parasitic load from air pollution control First, a regionalized approach is analysis would not serve the broader devices (APCD) and other equipment consistent with the EPA’s approach to goal-setting purpose of this rulemaking. can have on net heat rate. determining the other building blocks. We agree with commenters who have The EPA’s variability analysis For building block 1, this means that the pointed out that a heat rate necessarily and reasonably used gross heat rate improvement should reflect improvement-estimating effort of that output data for each of the 884 EGUs in only as much potential for emission magnitude and duration would be the EPA’s database because they are the reduction from building block 1 as our unnecessarily lengthy and expensive. only publicly available, unit-specific, analyses indicate can be achieved on Nor would such a granular analysis be hourly performance data. By definition, average by the affected coal-fired EGUs a necessary predicate for states to improvement in gross heat rate would in that region. This ensures that the develop emission standards, or for EGUs be reflected in the net heat rate. Gross BSER for each region is representative of to comply with those emission heat rate is the total heat output from the characteristics and opportunities standards. Rather, our methodology the EGU, in units of Btu/gross kWh, and available within that region, rather than relies on individualized, unit-by-unit includes the power used by auxiliary a less logical combination of hourly performance data from 884 EGUs equipment required to operate the EGU opportunities in the region and provides conservative and reasonable itself. By contrast, net heat rate is the opportunities nationwide. Second, a regional estimates of heat rate remaining Btu/kWh after subtracting the regionalized approach provides a more improvement potential. Indeed, given power used by the EGU’s own auxiliary representative average of the potential the conservative nature of our equipment from the gross heat rate heat rate improvement that EGUs in a methodology, a unit-specific approach value, i.e., what the EGU is able to given region are capable of achieving. that evaluates the full range of best provide to the grid. Improvements in net The populations of affected coal-fired practices and equipment upgrades heat rate alone (e.g., reducing parasitic EGUs in each region differ in some available at individual EGUs—including load of on-site equipment) may be respects, as discussed in the GHG upgrades not accounted for here— possible on many units. Therefore, our Mitigation Measures TSD, and the more would be more likely to result in higher use of gross heat rate to estimate nuanced regionalized approach thus overall heat rate improvement figures potential heat rate improvement was indirectly accounts for some of those than we are finalizing for building block conservative because of the additional systemic differences. For these and 1. Furthermore, site-specific information opportunities to achieve the uniform other reasons described in Section V.A. forms the foundation of the EPA’s performance rate through improvements of the preamble with respect to the estimated heat rate improvement in net heat rate alone. BSER as a whole, we have reasonably potential, and similar data likely would Commenters also raised concerns that based building block 1 on a regionalized be used in any site-specific heat rate the EPA was not taking into account net approach. Applying this regionalized improvement engineering study. heat rate increases due to additional approach to building block 1 strikes an Finally, EGU-specific detailed design add-on pollution controls that may, for appropriate balance between the and operation information is not some units, be required by other proposed nationwide analysis and consistently available for all the factors rules.645 commenters’ suggested state-specific that influence heat rate. The EPA has The results of our statistical analyses analysis, which does not fully reflect the used the comprehensive data that are are based on gross heat rates and would interconnected nature of the system available to reasonably and not change with installation of emission within which affected coal-fired EGUs conservatively estimate potential heat controls for CSAPR, MATS, or other operate. rate improvement in each region. rules because these controls will add The practical consequence of Commenters also said that shifting parasitic load requirements and thereby calculating building block 1 on a electricity generation from coal-fired have an impact on the net heat rates regionalized versus nationwide basis is EGUs to other EGUs because of only. Furthermore, we conservatively minimal. This is because the CO2 measures implemented under other consider region-wide net heat rate emission performance rates are based on building blocks will lower the capacity the overall performance rate determined factors of coal-fired EGUs, and thus 645 See above for an explanation of gross versus to be reasonable for EGUs in the Eastern increase, not decrease, their heat rates. net heat rate.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00133 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64794 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

improvement potential to be the same as coal-fired EGUs that retired prior to In terms of concerns with future that indicated for the region-wide gross 2012 were not included in the dataset. methodological changes, the heat rate, when in fact it is not. In order Commenters stated that many of the overwhelming majority of the 884 EGUs to check our assumptions concerning changes in heat rate reflected in the 11- in the dataset we used to assess heat rate gross versus net heat rate, we used the year hourly gross heat rate dataset are improvement have already changed IPM Power Sector Modeling Platform attributable to changes in monitoring their stack gas flow monitoring (version 5.14) and National Electric methodology, and thus do not represent methodology in 2012 or earlier. Energy Data System (NEEDS) (version heat rate improvements attributable to Furthermore, extension of the 5.14) to analyze the anticipated best practices or equipment upgrades. In compliance date to 2022 for this rule, as incremental heat input required to addition, commenters are concerned discussed above, more than adequately operate additional add-on controls to that changes to the monitoring allows enough time for EGUs to comply with various EPA rules, methodology in the future could determine how to actually improve their including CSAPR, MATS, effluent artificially alter the measured heat rate. heat rates and lower CO2 emissions guidelines for EGUs, and coal Different stack gas flow monitoring while accommodating future changes to combustion residuals. From this methods can yield more or less accurate monitoring methodologies. For a more analysis, we project that between 2012 measurements of heat input and CO2 detailed explanation, see the GHG and 2025, existing coal-fired EGUs are emissions. These differences depend on Mitigation Measures TSD supporting the expected to install approximately 18.6 the characteristics of the stack gas flow final CPP. GW of wet flue gas desulphurization where the monitoring and reference Commenters said that there is no (FGD), 16.6 GW of dry FGD, 24.9 GW of method measurements are taken, and proof that lowering the heat rate will selective catalytic reduction (SCR), and which options under the Part 75 reduce variability or that reduced 3.9 GW of selective noncatalytic emission measurement rules are chosen variability will reduce heat rate, i.e., reduction (SNCR). The resulting impact in the application of the various flow correlation does not prove causation. rate reference methods. In general, more from new pollution controls on existing As an initial matter, it is important to accurate stack gas flow monitoring coal-fired EGUs’ heat rate is expected to note that for the final rule the EPA used be very small, at conservatively less methodologies yield lower values that, when used to calculate emissions or three types of statistical analyses to than 31 Btu/kWh, or less than 0.3 evaluate and estimate potential heat rate 646 heat input, may lower the heat rate percent in 2025. After 2025, this improvements of coal-fired EGUs, and estimate is particularly conservative values reported to the EPA. Some EGUs adopted monitoring only one of these analyses involved any because the EPA’s cost performance consideration of heat rate variability. All models overestimate the parasitic load methodologies that have the potential to three types of statistical analyses are from individual add-on controls for affect the exactness of the data we used described in the GHG Mitigation future years. Furthermore, at some EGUs for assessing heat rate improvements. Measures TSD supporting the final CPP. these newer pollution control devices However, as discussed in detail in the will replace existing pollution control GHG Mitigation Measures TSD These commenters are correct that, in devices. Accordingly, for these EGUs, supporting the final CPP, our review of the abstract, reducing heat rate the minimal increase in net heat rate the data shows that a relatively small variability only means that heat rate will due to power required to operate new amount of the data are affected by these be more consistent—not necessarily controls will be at least partially offset changes; we are confident that the lower or higher. However, our analysis by the decrease in net heat rate caused values adopted for building block 1 are is not an abstract evaluation of the by removal of the control devices conservative and reasonable estimates of potential to reduce variability, as currently in place. For more information the potential for heat rate improvement commenters suggest, but rather is an about this analysis, see the GHG in each region. Some changes in evaluation of the potential heat rate Mitigation Measures TSD supporting the monitoring methodology would have improvement achievable through final CPP. the result of tending to cause us to reducing variability—i.e., reducing Commenters contended that the 11 underestimate the potential for heat rate variability to achieve a more years of data used to evaluate potential improvement. Furthermore, because our consistently low heat rate. See the more heat rate improvement is too broad, and methodology analyzes percentage heat detailed discussion of the statistical that the population of domestic coal- rate improvement based on 2012 gross procedures used for the final rule, fired EGUs has changed significantly heat rate data, our results are unaffected above. In particular, the application of over this time period. by EGUs that used more accurate a ‘‘consistency factor’’ in the analyses The 11-year span for the hourly gross monitoring methodologies in 2012 or performed for both the proposed and heat rate data is appropriate because it used the same monitoring final rule demonstrates the potential represents a wide variety of economic methodologies consistently throughout results if each individual EGU operated conditions, market conditions and fleet the 11-year study period. For these and slightly more consistently with the composition, while also capturing the other reasons discussed in detail in the lower heat rates that the EGU had itself relatively recent historical performance GHG Mitigation Measures TSD, we previously achieved under similar of affected coal-fired EGUs. We also remain confident in our results despite conditions. noted in the proposal TSD that the the marginal differences attributable to The consequence of a reduced heat population of coal-fired EGUs used in monitoring methodologies in some of rate is, of course, a lower rate of CO2 the analytical approaches to determine the heat rate data for a subset of emissions, which is the purpose of the potential heat rate improvement is made EGUs.647 BSER for building block 1. This way of up of coal-fired EGUs that operated in thinking about reduced variability is 2012. The gross heat rate data of any 647 Furthermore, on a fundamental level, our consistent with the utility power methodology accounts for a certain amount of any sector’s own efforts to reduce 646 When considered on a regional basis, we residual inexactness because we have variability, which are aimed at securing expect these controls to impact heat rate by conservatively adopted the lowest value identified approximately 0.3 percent in both the Eastern and by any of our reasonable approaches—all three of Western Interconnections, and by less than 0.1 which are themselves conservative because they do improvements achievable through equipment percent in the Texas Interconnection. not account for the full extent of heat rate upgrades.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00134 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64795

the economic benefits of a more industry.649 As the name indicates, fired EGUs (as well as oil- and gas-fired consistently lower overall heat rate. SCED has two defining components: steam EGUs) and NGCC units. In the Some commenters expressed concern Economic operation of generating short term—that is, over time intervals that heat rate improvements could facilities and assurance that the electric shorter than the time required to build trigger applicability of new source system remains reliable and secure.650 a new electric generation unit—fossil review (NSR) provisions. The Economic dispatch generally refers to fuel-fired units consequently tend to relationship of this final rule to other shorter-term planning and operations compete more with one another than regulatory provisions, including NSR, is from a day ahead through real time. with nuclear and renewable EGUs. The discussed in section X of the preamble. During this period, generating units are amount of generation shifting from coal- committed—a process known as ‘‘unit D. Building Block 2—Generation Shifts fired EGUs to NGCC units that takes commitment,’’ in which units are Among Affected EGUs place as a result of this competition is committed to be ready to provide highly relevant to overall power sector The second element of the foundation generation to the system when they will GHG emissions, because a typical NGCC for the EPA’s BSER determination for be needed—and then dispatched in real unit produces less than half as much reducing CO2 emissions at affected time to meet the electricity demand of CO2 per MWh of electricity generated as fossil fuel-fired EGUs entails an analysis the system. Overall changes in the level a typical coal-fired EGU. of the extent to which fossil steam EGUs of generation from different facilities are b. Trends in generation shifts from can shift generation to existing NGCC also planned over time periods longer coal-fired to natural gas-fired sources. EGUs. In this section, we define than this 2-day dispatch period. Over a building block 2 as the gradual shifting calendar year, for example, units are Since at least 2000, fossil fuel-fired of generation from existing fossil steam planned and scheduled seasonally or generation has been shifting from coal- to existing NGCC within each region up monthly to ensure that sufficient and oil-fired EGUs to NGCC units, both to a maximum NGCC utilization of 75 capacity and energy will be available to as a result of construction of additional percent on a net summer basis. In each meet expected loads in an area. Over a NGCC units, and also as a result of year of the interim period, this 75 period of a week, units are committed dispatch of pre-existing NGCC units at percent net summer maximum potential to be prepared to start up or shut down higher capacity factors. As a result, is subject to a regional limit informed by to meet forecast loads, and dispatch is generation from NGCC EGUs in 2012 historical growth rates. coordinated within this planning and reached over four times the level of This section summarizes the EPA’s unit commitment framework. This NGCC generation in 2000, while analysis supporting that definition. We process enables system operators to generation from coal and oil/gas steam begin by discussing the sector’s ability respond quickly to short-term changes EGUs decreased by around one third.651 to reduce CO2 emissions by shifting in demand, and also to shift generation As we demonstrate in the GHG generation, including selected among different generation types to Mitigation Measures TSD, NGCC units background information, data on trends match longer-term requirements and are capable of operating at higher toward greater NGCC generation, and goals. annual capacity factors than they have various mechanisms for executing or EGUs using technologies with historically, so there remains facilitating generation shifts. Next, we relatively low variable costs, such as considerable opportunity for increased describe the amount and timing of nuclear units, are for economic reasons use of existing NGCC units to replace generation shift we have determined to generally operated at their maximum generation currently supplied by higher- be achievable through the building output whenever they are available. emitting coal and oil/gas steam units. block. We then discuss various elements Renewable EGUs such as wind and solar The electric utility industry is thus well- supporting our quantification of units also have low variable costs, but positioned to address the requirements achievable generation shift, including the magnitude and timing of their of this building block by increasing use the technical feasibility of NGCC units output generally depend on wind and of existing NGCC units and to increase generation; historical shifts sun conditions rather than the correspondingly decreasing use of steam to NGCC generation; considerations operators’ discretion. In contrast, fossil units. The electric industry has been related to reliability, natural gas fuel-fired EGUs have higher variable shifting generation to NGCC units in transmission infrastructure, natural gas costs and are also relatively flexible to recent years and is expected to continue production, and electricity transmission operate. Fossil fuel-fired EGUs are to retire coal capacity and add new infrastructure; and regulatory flexibility. therefore generally the units that NGCC capacity. In the reference case A discussion of costs follows. Finally, operators use to respond to intra-day without implementation of CO2 we respond to certain comments not and intra-week changes in demand. emission limitations, EIA forecasts 40 addressed in the preceding discussions. Because of these typical characteristics GW of coal retirements and 53 GW of NGCC capacity additions from 2014 to 1. Demonstration of Ability To Reduce of the various EGU types, the primary opportunities for switching generation 2030.652 An EPA review of state CO2 Emissions Through Shifting Integrated Resource Plans (IRPs) shows Generation among existing units available to EGU owners and grid operators generally a pattern of shifting away from coal a. Background of utility power sector. consist of opportunities to shift steam capacity to NGCC capacity and, in The ability to shift generation from generation among various fossil fuel- some cases, conversion of coal steam higher- to lower-emitting sources is fired units, in particular between coal- capacity to natural gas steam capacity. compatible with the way EGUs are For example, Ameren plans to add 600 648 generally dispatched. The standard 649 ‘‘Economic Dispatch: Concepts, Practices and MW of NGCC capacity and convert two approach to dispatching generation is Issues’’, FERC Staff Presentation to the Joint Board coal units to natural gas steam units, through Security Constrained Economic for the Study of Economic Dispatch’’, Palm Springs, and Duke plans to add 680 MW of Dispatch (SCED), a well-established California, November 13, 2005. A copy of this presentation is available in the docket for this rule. practice in the electric power 650 ‘‘Security Constrained Economic Dispatch: 651 Ventyx Electric Power Database. Definitions, Practices, Issues and 652 Energy Information Administration, Annual 648 See preamble section II.C.1, History of the Recommendations: A Report to Congress’’, Federal Energy Outlook 2015 reference case, Power Sector, for background to this discussion. Energy Regulatory Commission, July 31, 2006. ref2015.d021915a.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00135 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64796 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

NGCC capacity and convert one coal for compliance. There are several such an allowance-holding requirement. unit to a natural gas steam unit.653 alternatives to accomplish this result: The RGGI is an example of a state c. Mechanisms for dispatch shifts The owner of the higher-emitting program that has this effect. In the from coal-fired to natural gas-fired affected EGU may also own, or have present rule, although shifts in the mix generation. affiliates that own, lower emitting of generation to address the costs of There are a variety of patterns of generation and thus reduce its own pollution control can lead to higher ownership and operational control of generation and use its control over these electricity generating costs overall, the EGUs; these ownership and operational other EGUs to increase their generation; EPA analysis shows these costs to be structures influence how EGUs will an EGU may be able to reduce its modest and well below their associated respond to this building block. generation and buy replacement power benefits.655 However, all owners and operators have from the market that is lower emitting; Many of the NGCC units are owned by the ability to comply by using this or the EGU may be able to reduce its the same companies or affiliates that building block. In terms of ownership, generation and procure generation from also own steam units. In these cases, investor-owned utilities (IOUs) serve a separately-owned lower-emitting EGU. changes in EGU generation can be about 75 percent of the US population, These alternatives will be available in planned by the company or affiliate while consumer-owned utilities serve states with either rate or mass-based without the need to engage in separate the remaining 25 percent.654 In states state plans without any change in their market transactions with outside that have maintained traditional general form. Under a rate-based state parties. Where the affected EGU owner regulation, IOUs are generally vertically plan, an EGU owner may also be able to is also the dispatch entity, as in most integrated (owning generating capacity purchase ERCs and average the ERCs traditional market structures, the EGU as well as transmission and distribution into its emission rate for purposes of owner will generally have operational infrastructure), and the wholesale sales demonstrating compliance with its control over the unit. Environmental of these EGUs are regulated by the state; standard of performance. Under conditions, such as compliance costs or in states that have deregulated their standards of performance that limits on generation, can be factored in retail service, ownership of the EGU is incorporate emissions trading, an EGU with fuel costs for purposes of separated from ownership of owner may be able to purchase rate- determining when the unit is committed transmission, and wholesale sales of based emission credits or mass-based to be available, how the unit can be generation are regulated by FERC. emission allowances not needed by most efficiently cycled, and at what Consumer-owned utilities comprise other EGUs and use those credits or level the unit is dispatched. municipal utilities, public utility allowances to help achieve its standard An analysis of generation data from districts of various types owned by of performance. steam and NGCC units in 2012 shows government agencies, nonprofit The potential to shift generation that 77 percent of the steam generation cooperative entities (co-ops), and a identified for this building block is occurred from an EGU that owned, or number of other entities such as Native entirely consistent with the existing that had an affiliate that owned, NGCC American Tribes. economic dispatch protocols described generation. Eighty percent of the Operational control of the dispatch of above. State environmental policies can generation shift potential identified in power over the electricity grid is shift generation in two ways. The first this building block (increasing NGCC superimposed on this pattern of is operational restrictions, such as generation up to a 75 percent capacity ownership. Prior to electricity permit limits on the number of hours factor on a net basis to replace steam restructuring, this dispatch was that an EGU can operate in order to generation) could occur among these typically operated by major vertically- limit emissions. The second is changes entities that own (either directly or integrated utilities or by public power in the relative costs of generation among through affiliates) both steam and NGCC entities. Over the last 15 years, large different types of EGUs related to generation.656 These data show that portions of the power grid are now pollution reduction measures. For most EGU generation relevant for this independently operated by ISOs or example, a regulation that necessitates building block is produced by entities RTOs. These entities are regulated by the use of a control technology that that own both steam and NGCC FERC and dispatch power from multiple requires the application of a reagent in generation. owners to meet the loads on the bulk a certain kind of EGU will increase the Another alternative available to an power grid. variable cost of operating that plant, affected EGU owner that does not also The combination of multiple which in turn may reduce the amount own NGCC generation is for the higher- ownership and types of operational of generation it is called upon to deliver emitting affected EGU to reduce its control adds to the complexity of to the grid through security-constrained generation and purchase replacement electricity dispatch, but all affected economic dispatch procedures. power from the market. In organized EGUs, regardless of ownership and type In an organized market, where the markets such as RTOs, it is available of control, can use this building block system operator dispatches units partly through standard practice, because the to comply with the final rule. The based upon costs, an electric power owner impacts how its EGUs are principal difference among the differing plant that experiences an increase in its dispatched based upon how it bids into entities lies in the types of methods that variable costs will tend to operate less the RTO market. In this case, the owner are available for the affected EGU owner than it otherwise would have. For can exercise control over the levels of to bring about the shift in generation example, market-based pollution control generation across units by when it offers that will make use of this building block programs require units to hold tradable generation to the market operator (the allowances to authorize their emissions RTO or ISO), and the prices it bids for 653 For further examples, see the memo entitled of a regulated pollutant. Such an this generation. As in traditional ‘‘Review of Electric Utility Integrated Resource allowance-holding requirement puts a economic dispatch by a utility, Plans’’ (May 7, 2015) available in the docket. price on the act of emitting the regulated environmental conditions, compliance 654 Regulatory Assistance Project, Electricity pollutant, which increases the operating Regulation in the US: A Guide, Page 9, March 2011. Available at http://www.raponline.org/docs/RAP_ costs of units that emit that pollutant, 655 See the Regulatory Impact Analysis. Lazar_ElectricityRegulationInTheUS_Guide_2011_ and thus such units will be dispatched 656 SNL Energy. Data used with permission. 03.pdf. less than they otherwise would without Accessed May 2015.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00136 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64797

costs, or limits on generation can be higher-emitting generation sources will alternative will depend on how a state incorporated by the owner into the have to incorporate correspondingly elects to develop its plan. If a state determination of the cost-effective higher costs of pollution reduction into chooses a mass-based approach, the generation pattern of its EGUs. their supply bids compared to lower- EGU would simply need to hold In regions with organized electricity emitting generation sources, and as a allowances to cover its emissions. To markets (including, but not limited to, result, load-serving entities will seek to realize an emission reduction from RTOs or ISOs), the various types of EGU buy a greater share of electricity from building block 2 under this approach, a owners of higher-emitting sources can the lower-emitting sources because their steam generator would only need either reduce their generation, and any supply bids will be more economically to reduce its emissions by reducing its resulting deficit in generation on the attractive. Once the steam generators generation, which would lead to that system can be supplied from other EGUs reduce their generation (and associated generator needing fewer allowances to in the region; for example, a coal-fired emissions), the other entities in the cover its emissions under the program, unit can reduce generation that is then electricity system arrange for the or to purchase surplus allowances not replaced through the operation of the replacement electricity. The outcome of needed by another EGU that had market by generation from an NGCC this power market process will reduce reduced its emissions. In a rate-based unit, subject to dispatch by a regional both the mass and the rate of emissions state, the state may choose to provide operator to ensure the reliable delivery across sources. for compliance through the acquisition of the generation to loads within the An owner of a source can also reduce of tradable ERCs. To realize an emission region. To comply with this rule, the generation of an EGU by substituting reduction from building block 2 under higher-emitting steam units will need generation from a lower-emitting NGCC this approach, a steam generator would greater emission reductions relative to directly. For an EGU owner without be able to adjust its effective emission lower-emitting NGCC units which will, existing NGCC generation, this rate by purchasing ERCs that are in turn, tend to raise steam unit costs substitution can take the form of a produced by other sources whose compared to NGCC units. As a result, bilateral contract purchase. In RTOs and emission rates are lower than the the bids that a steam unit provides a ISOs, this alternative often takes the applicable rate standard. In this fashion, market operator will rise relative to form of a contract for differences, where a steam generator does not need to NGCC units. This process of reducing the replacement source could be an purchase lower-emitting replacement generation from a higher-emitting unit NGCC and the contract specifies a power per se in order to demonstrate an will lead to substitution of lower- delivery location and the price of the emission reduction from this building emitting generation. power. In bilateral markets, the contract block; instead, the steam generator may EGU owners that do not participate in vehicle could be a Power Purchase purchase any ERCs that were produced an organized electricity market may Agreement from a replacement source. It from lower-emitting sources (see section nevertheless purchase power from the is also possible that the owner of a VIII for more detail on how state plans wholesale power market. Purchases in steam unit could directly invest in an can use an ERC approach to facilitate a the wholesale power market can be spot existing EGU by purchasing the asset or rate-based compliance demonstration of purchases, which are typically general taking a partial ownership position, thus this type of emission reduction).658 purchases of system power supplied by acquiring the generation from the unit The approaches shown here the EGUs across a region, or contract through that means. The acquired collectively demonstrate that all steam purchases, which may have more generation and its associated emissions generators—regardless of size, location, provider-specific characteristics (such could be used for compliance by the form of ownership, or type of market in as specifying the type of unit that is higher-emitting EGU, in accordance which they operate—can implement providing the power). Purchases with the plan under which it is building block 2 through some or all of between EGUs through the wholesale operating. The amount of generation the mechanisms described. that could be shifted using the power market will have similar 2. Amount and Timing of Generation approaches described in this paragraph emission-lowering properties as Shift operation of the organized market will depend on the type and terms of The EPA has determined that for discussed above, because dispatch in the commercial arrangements, as well as purposes of quantifying the CO balancing areas outside RTOs and ISOs the potential need for regulated entities 2 emission reductions achievable through also follows a similar economic to obtain approvals for contracts or for building block 2, a reasonable amount of dispatch protocol that is informed by changes in asset positions. The wide generation shift is the amount of each unit’s production costs and range of approaches permitted by this generation shift that would result from environmental limitations. rule provides flexibility, both within a existing NGCC units, on average, Under this alternative, the steam year and across multiple years, for EGUs increasing their annual utilization rates generators may, in effect, realize to fashion these arrangements to fit their to 75 percent of net summer capacity. emission reductions from building block circumstances. However, the building block does not 2 simply by reducing their generation. Where permitted under its state plan, reflect achievement of this average Steam generators do not need to an EGU would also be able to meet its capacity factor at the start of the interim purchase replacement electricity as a reduction obligations using ERCs or period, but instead reflects a glide path prerequisite for realizing emission allowances. The particular nature of this of increases in NGCC utilization over reductions from reducing their own generation because other generators generators. However, such parties may fulfil those supply obligations using the wholesale power 658 Stakeholders have recognized that ERCs and already have an incentive to provide as market in the exact same way described here that allowances are an effective tool for EGUs to much electricity as load-serving entities enables any other generator with economically implement the building blocks and achieve their are willing to buy in order to satisfy attractive electricity to offer such supply. In other standards of performance required under this rule. 657 words, the ability of a steam generator to reduce its See ‘‘Clean Power Plan Implementation: Single- electricity demand. As noted above, generation is not contingent on an associated State Compliance Approaches with Interstate purchase to replace that power, notwithstanding the Elements,’’ Georgetown Climate Center (May 2015), 657 Some owners or operators of steam generators possibility that the owner or operator of that steam http://www.georgetownclimate.org/sites/ may have electricity supply obligations to which unit may choose to make such a purchase to meet www.georgetownclimate.org/files/GCC_Compliance they may be applying power from those steam an electricity supply obligation. ApproacheswithInterstateElements_May2015.pdf.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00137 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64798 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

the interim period. Below, we discuss of RE generating capacity and increased these parameters are determined by the glide path, and in the following demand-side EE, would be achievable examining the extent to which gas-fired section we discuss the basis for finding on a phased-in basis between 2020 and generation has increased over historical the 75 percent utilization rate, achieved 2029, reflecting the time needed for time periods. The first parameter is over the period of time consistent with deployment.659 In light of the concerns based on the single largest annual the glide path, to be reasonable. noted above, in the October 2014 increase in power sector gas-fired The EPA received significant public NODA, the EPA solicited comment on generation since 1990, which occurred comments expressing concern regarding potential rationales for phasing in the between 2011 and 2012 and is equal to the proposal’s incorporation of the full potential to shift generation under 22 percent.661 We believe that this building block 2 shift in generation by building block 2.660 amount is a conservative estimate of the the first year of the interim period. As already noted, in the final rule the ability of the sector to increase These commenters perceived this EPA has revised the interim period to utilization of NGCC capacity by 2022, approach as requiring states to achieve start in 2022, which itself is a given that this increase has already such a significant portion of the meaningful response regarding the occurred in a single year. The second required CO2 emission reductions early concerns expressed by commenters parameter is based on the average in the interim period that states would about the timing of building block 2’s annual growth in gas-fired generation in lack flexibility in when and how they generation shift potential. In addition, the power sector between 1990 and may achieve the required emission the EPA has evaluated the feasibility 2012, which is approximately 5 percent reductions. Other commenters over time of building block 2 within the per year. expressed concern that the full extent of framework of BSER, and is finalizing a In the performance rate calculation building block 2 would be difficult for change to building block 2 that methodology, these two parameters some states to achieve by the first year gradually phases in the shift from constrain the annual rate at which of the interim period as a result of existing fossil steam to existing NGCC building block 2 shifts generation from technical, engineering, and over the interim period. This phase-in fossil steam units to NGCC units. The infrastructure limitations or other allows for additional time to complete interim performance rate is an average considerations; that such timing may potential infrastructure improvements of annual rates calculated over the crowd out other cost-effective options (e.g., natural gas pipeline expansion or 2022–2029 period. The two parameters for emission reductions; and that such transmission improvements) that might above limit the extent to which NGCC timing might have negative implications be needed to support more use of generation is able to increase and for reliability. existing natural gas-fired generation, replace fossil steam generation in each In the proposal, the EPA determined and provides states with the increased year of the interim period. In the first that emission reductions are feasible ability to coordinate actions taken under year, NGCC generation is limited to a and achievable at fossil fuel-fired steam building block 2 with actions taken maximum of a 22 percent increase from EGUs by shifting from more carbon- under building block 3 (deployment of 2012 levels in each region. In each intensive EGUs to less carbon-intensive new renewable capacity). subsequent year, regional NGCC EGUs, as part of the BSER. More The phase-in schedule applies a limit generation is limited to a maximum of specifically, the EPA proposed that to the maximum building block 2 a 5 percent increase from the previous generation shifts from fossil fuel-fired potential in each year of the interim year. This phase-in continues in the steam units (which are primarily coal- period based on two parameters. The performance rate-setting methodology fired) to NGCC units, up to a utilization first parameter defines an amount of until the full building block 2 level of of 70 percent on a nameplate capacity generation shift to existing NGCC shifting from fossil steam generation to basis, could be achieved by 2020. In capacity that is feasible by 2022, and the NGCC generation is reached. Under this contrast, the EPA proposed that second parameter defines how quickly approach, building block 2 is reductions in CO2 emissions from fossil that amount could grow until the full completely phased into the source fuel-fired units associated with other amount of NGCC generation could be category calculation of all regions by the measures, such as increased utilization achieved as part of the BSER. Both of end of the interim period.

TABLE 7—BSER MAXIMUM NGCC GENERATION BY REGION AND YEAR (TWh)

NGCC generation (TWh) Region Maximum BSER maximum potential 2012 at 75% (adjusted) 2022 2023 2024 2025 2026 2027 2028 2029 2030

Limit ...... 22% 5% 5% 5% 5% 5% 5% 5% 5% Eastern Interconnection...... 988 735 896 941 988 988 988 988 988 988 988 Western Interconnection...... 306 198 242 254 267 280 294 306 306 306 306 Texas Interconnection...... 204 137 167 176 185 194 203 204 204 204 204

This phase-in, in addition to the flexible and strategies for reducing emissions to occur should they prove necessary in nature of the goals, ensures that the from the affected units, so that states some locations. overall framework of this final rule can develop cost-effective strategies and includes sufficient flexibility, allow for infrastructure improvements particularly with respect to timing of

659 79 FR 34866. 661 US EIA Monthly Energy Review, Table 7.2b (2015), available at http://www.eia.gov/totalenergy/ 660 79 FR 64543. Electricity Net Generation: Electric Power Sector data/browser/xls.cfm?tbl=T07.02B&freq=m.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00138 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64799

3. Basis for Magnitude of Generation in generation patterns have been driven power. In addition to the 15 percent of Shift largely by changes over time in the NGCC plants that operated a. Technical feasibility of NGCC units relative prices of natural gas and coal. approximately at a 75 percent to generate at 75% of their capacity. Although the relative fuel prices vary by utilization rate on an annual basis, some In order to estimate the potential location, as do the recent generation NGCC plants operated at even higher magnitude of the opportunity to reduce patterns, this trend holds across broad utilization rates for shorter, but still power sector CO2 emissions through regions of the U.S. In the aggregate, the sustained, periods of time in response to shifting generation among existing historical data provide ample evidence high cyclical demand. For example, on EGUs, the EPA first examined indicating that, on average, existing a seasonal basis, a significant number of information on the design capabilities NGCC units can achieve and sustain NGCC plants have achieved utilization and availability of NGCC units. utilization rates higher than their rates greater than 90 percent on a net Availability is defined as the number of historical average utilization rates. summer basis; during the summer of Utilization of EGUs is often hours that generators are available to 2012 (June through August), about 30 considered using the metric of a generate electricity, and it is typically percent of NGCC plants operated at capacity factor, which is the percentage expressed as a percentage of the total utilization rates of 75 percent or more number of hours in a year. Since the of total production potential that an across the entire season. During the value of NGCC capacity is related to electric generating unit achieves in a spring and fall periods when electricity how much electricity the owner of that given time period. A capacity factor of capacity can generate and sell, units are 75 percent thus represents a unit demand levels are typically lower, these typically designed with very high producing three-quarters of the plants were sometimes idled or operated availability ratings. Baseload units have electricity it could have produced in at much lower capacity factors. annual average availabilities of that time had it utilized its entire Nonetheless, the data clearly approximately 91%–92%, and peaking capacity. The EPA received multiple demonstrate that a substantial number units are generally available 96% to comments regarding the proposed use of of existing NGCC plants have proven the 98% of peak hours.662 The EPA also nameplate capacity in calculating the ability to sustain 75 percent utilization examined information on the historical potential utilization level of existing rates for extended periods of time. We availability of NGCC units in practice. NGCCs under building block 2. These view this as strong evidence that This examination showed that, although comments stated that net summer increasing the annual average utilization most NGCC units have historically been capacity is a more meaningful and rates of existing NGCC units to 75 operated in intermediate-duty roles for reliable metric than nameplate capacity, percent on a net summer basis would be economic reasons, they are technically because net capacity best reflects the technically feasible. electric output available to serve load. capable of operating in baseload roles at The EPA believes that an annual The EPA agrees with these comments. much higher annual utilization rates. average utilization rate of 75 percent on The quantification of building block 2 as Average annual availability (that is, the a net summer basis is a conservative percentage of annual hours when an well as performance rate and state goal assessment of what existing NGCC EGU is not in a forced or maintenance calculations in the final rule are all plants are capable of sustaining for outage) for NGCC units in the U.S. based on net summer generating generally exceeds 85 percent, and can capacity. An annual utilization rate of extended periods of time. In 2012, exceed 90 percent for some groups.663 75 percent on a net summer basis is roughly 10 percent of existing NGCC We also researched historical data to similar to the proposed rule’s plants operated at annual utilization determine the utilization rates that consideration of 70 percent utilization rates of 80 percent or higher on a net NGCC units have already demonstrated on a nameplate basis.665 summer basis. While the EPA believes their capability to sustain. Over the last The experience of relatively heavily- this level is also technically feasible on several years, the utilization patterns of used NGCC units provides an additional average for the existing NGCC fleet, the fossil fuel-fired units have shifted indication of the degree of increase in EPA is quantifying building block 2 relative to historical dispatch patterns, average NGCC unit utilization that is assuming an NGCC utilization level of with NGCC units increasing generation technically feasible. 75% on a net summer basis in order to and many coal-fired EGUs reducing The EPA reexamined the historical offer sources additional compliance generation. In fact, in April 2012, for the NGCC plant utilization rate data flexibility, given that the extent to first time ever the total quantity of reported to the EIA, and found that in which they realize a utilization level electricity generated nationwide from 2012 roughly 15 percent of existing beyond 75 percent will reduce their natural gas was approximately equal to NGCC plants operated at annual need to rely on other emission reduction the total quantity of electricity generated utilization rates of 75 percent or higher measures or building blocks. nationwide from coal.664 These changes on a net summer basis.666 In effect, these plants were providing baseload b. Historical generation shifts to 662 Negotiating Availability Guarantees for Gas NGCC generation. Turbine Plants, available at: http://www.power- 665 For a given amount of net generation, a net In 2012, total electric generation from eng.com/articles/print/volume-105/issue-3/ summer capacity factor appears higher compared to existing NGCC units was 966 TWh.667 features/negotiating-availability-guarantees-for-gas- a corresponding nameplate capacity factor because turbine-plants.html. net summer capacity reflects a lower amount of After the application of the building 663 See, e.g., North American Electric Reliability total generation potential achievable by the unit in block 2 potential (increasing NGCC Corp., 2008–2012 Generating Unit Statistical practice. utilization up to a 75 percent capacity Brochure—All Units Reporting, http:// 666 Net summer capacity is defined as: ‘‘The factor on a net summer basis, including www.nerc.com/pa/RAPA/gads/Pages/Reports.aspx; maximum output, commonly expressed in Higher Availability of Gas Turbine Combined Cycle, megawatts (MW), that generating equipment can generation from NGCC units that were Power Engineering (Feb. 1, 2011), http:// supply to system load, as demonstrated by a multi- under construction), the total generation www.power-eng.com/articles/print/volume-115/ hour test, at the time of summer peak demand issue-2/features/higher-availability-of-gas-turbine- (period of June 1 through September 30.) This 667 combined-cycle.html. output reflects a reduction in capacity due to Appendix 1, CO2 Emission Performance Rate 664 http://www.eia.gov/todayinenergy/ electricity use for station service or auxiliaries.’’ and Goal Computation Technical Support detail.cfm?id=6990. (EIA, http://www.eia.gov/tools/glossary). Document for CPP Final Rule.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00139 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64800 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

from these existing sources is assumed utilization rates (which have recently pipeline industry projected that to be 1,498 TWh.668 been in the range of 40 to 50 percent).670 increases of up to 30 percent in total The EPA believes that producing this Fleet-wide combined-cycle average deliverability out of the pipeline system quantity of generation from this set of monthly utilization rates have reached would be possible.673 There have been NGCC units is feasible. To put this level 65 percent,671 showing that the pipeline notable pipeline capacity expansions of generation into context, NGCC system can currently support these rates over the past five years, and substantial generation increased by approximately for an extended period. If the current additional pipeline expansions are 439 TWh (an 83 percent increase) pipeline and transmission systems currently under construction.674 between 2005 and 2012. The EPA allow these utilization rates to be Further, the phasing in of building block calculates that assumed NGCC achieved in peak hours and for 2’s potential in the determination of the generation in 2022 through the extended periods, it is reasonable to BSER; the flexible nature of multi-year quantification of building block 2 expect that similar utilization rates compliance with the ultimate emission potential is approximately 44 percent should also be possible in other hours reduction requirements of the rule; and higher than 2014 levels. This reflects a when constraints are typically less the seven years between finalization of smaller growth rate in potential NGCC severe, and be reliably sustained for this rule and the first year of compliance generation between 2015 and 2022 than other months of the year. Furthermore, provide time for infrastructure has been observed in practice from 2005 the NGCC utilization increase assumed improvements to occur should they to 2012, a time period of the same in building block 2 could occur without prove necessary in some locations. duration. a significant impact on peak demand for Combining these factors of currently c. Reliability. natural gas, including winter demand observed average monthly NGCC We also expect that an increase in (when the power sector’s demand for utilization rates of up to 65 percent, the NGCC generation of this amount would natural gas competes with other sectors’ flexibility of the emission guidelines, not impair power system reliability. demands for natural gas), since the rates of historical growth, and the Sources can achieve increases in increasing annual utilization of NGCCs availability of time to address any utilization of existing NGCCs that could focus on non-peak periods when existing pipeline infrastructure displace generation from steam sources NGCC capacity factors are currently limitations, it is reasonable to conclude without impacting reliability because low. that the natural gas pipeline system can this shift in average annual utilization The second consideration supporting reliably deliver sufficient natural gas across existing EGUs does not inhibit a conclusion regarding the adequacy of supplies to allow NGCC utilization to the power sector’s ability to maintain the gas supply infrastructure is that increase up to an average annual adequate dispatchable resources to pipeline and transmission planners capacity factor of 75 percent on a net continue to meet reserve margins and have repeatedly demonstrated the summer basis. ability to methodically relieve e. Natural gas production. maintain reliability. Furthermore, 672 sources are not required to achieve the bottlenecks and expand capacity. We recognize that an increase in exact or even the full extent of the Natural gas pipeline capacity has NGCC utilization rates at existing units building block 2 generation shift itself, regularly been added in response to corresponds with an associated increase which means that sources will have increased gas demand and supply, such in natural gas production, consistent ample flexibility to maintain reliability- as the addition of large amounts of new with the current trends in the natural relevant operations while achieving NGCC capacity from 2001 to 2003, or gas industry. The EPA expects the the delivery to market of emission reductions through a variety of growth in NGCC generation assumed for unconventional gas supplies since 2008. building block 2 to be feasible and measures.669 These pipeline capacity increases have consistent with the production potential d. Natural gas infrastructure. added significant deliverability to the of domestic natural gas supplies. The EPA also examined the technical natural gas pipeline network to meet the Increases in the natural gas resource capability of the natural gas supply and potential demands from increased use of base have led to fundamental changes in delivery system to provide increased existing NGCC units. Over a longer time the outlook for natural gas. There is quantities of natural gas and the period, much more significant pipeline general agreement that recoverable capability of the electricity transmission expansion is possible. In previous natural gas resources will be system to accommodate shifting studies, when the pipeline system was substantially higher for the foreseeable generation patterns. For several reasons, expected to face very large demands for future than previously anticipated, we conclude that these systems would natural gas use by electric utilities, the exerting downward pressure on natural be capable of supporting the degree of gas prices. According to EIA, proven increased NGCC utilization potential in 670 EIA, Average utilization of the nation’s natural natural gas reserves have doubled building block 2. First, the natural gas gas combined-cycle power plant fleet is rising, between 2000 and 2012. Domestic dry pipeline system is already supporting Today in Energy, July 9,2011, http://www.eia.gov/ gas production has increased by 25 national average NGCC utilization rates todayinenergy/detail.cfm?id=1730#; EIA, Today in Energy, Jan. 15, 2014, http://www.eia.gov/ percent over that same timeframe (from of 60 percent or higher during peak todayinenergy/detail.cfm?id=14611 (for recent 19.2 TCF in 2000 to 24.0 TCF in 2012). hours, which are the hours when data). constraints on pipelines or electricity 671 EIA, Electric Power Monthly, February, 2014. 673 Pipeline and Storage Infrastructure transmission networks are most likely to Table 6.7.A. 672 See, e.g., EIA, Natural Gas Pipeline Additions Requirements for a 30 Tcf Market, INGAA arise. NGCC unit utilization rates during in 2011, Today in Energy, available at http:// Foundation, 1999 (Updated July, 2004); U.S. gas the range of peak daytime hours from 10 www.eia.gov/todayinenergy/detail.cfm?id=5050; groups confident of 30-tcf market, Oil and Gas a.m. to 9 p.m. are typically 15 to 20 INGAA Foundation, Pipeline and Storage Journal, 1999. 674 percentage points above their average Infrastructure Requirements for a 30 Tcf Market For example, between 2010 and April 2014, (2004 update), available at http://www.ingaa.org/ 118 pipeline projects with 44,107 MMcf/day of Foundation/Foundation-Reports/Studies/ capacity (4,699 miles of pipe) were placed in 668 Appendix 1, CO2 Emission Performance Rate FoundationReports/45.aspx; INGAA Foundation, service, and between April 2014 and 2016 an and Goal Computation Technical Support North American Midstream Infrastructure Through additional 47 pipeline projects with 20,505 MMcf/ Document for CPP Final Rule. 2035—A Secure Energy Future Report (2011), day of capacity (1,567 miles of pipe) are scheduled 669 See section VIII for further discussion of available at http://www.ingaa.org/ for completion. Energy Information Administration, electric reliability planning. File.aspx?id=14911. http://www.eia.gov/naturalgas/data.cfm.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00140 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64801

EIA’s Annual Energy Outlook Reference f. Transmission planning and on a net summer basis is the substantial Case for 2015 projects that production construction. unit-level compliance flexibility of the will further increase to 29.5 TCF by Achieving the generation shift emission guidelines. The final rule does 2022 and 33 TCF by 2030, as a result of quantified in building block 2 would not require any particular NGCC unit to increased supplies and favorable market not impose significant additional achieve any particular utilization rate in conditions. In the AEO 2015 high oil burden on the transmission planning any specific hour or year. Thus, even if and gas resource case, production is process and does not necessitate major isolated natural gas or electricity system projected to increase to 42.7 TCF in construction projects. Two constraints were to limit NGCC unit 2030. For comparison, building block 2 considerations are important for this utilization rates in certain locations in assumes NGCC generation growth of 235 conclusion: certain hours, this would not prevent an TWh from 2012 to reach the level First, building block 2 applies only to increase in NGCC generation overall assumed for 2022, and that NGCC increases in generation at existing NGCC across a state or broader region and generation growth would result in facilities and does not contemplate any across all hours on the order assumed in increased gas consumption of less than connection of new capacity to the bulk the generation shift potential quantified 2 TCF for the electricity sector, which power grid. Second, regional grids are for building block 2. is less than EIA’s projected increase in already supporting operation of the 4. Cost natural gas production of 5.5 TCF from NGCC units for sustained periods of 2012 to 2022. time at the capacity factors quantified in Having established the technical feasibility and quantification of the The EPA has also assessed the ability building block 2.675 Although some potential to replace incremental of the electricity and natural gas upgrades to the grid (including generation at higher-emitting EGUs with industries to achieve the potential potential, but modest, expansions of generation at NGCC facilities as a CO quantified for building block 2 using the transmission capacity) may be necessary 2 emissions reduction strategy, we next Integrated Planning Model (IPM). IPM is to support the extension of the time that turn to the question of cost. The cost of a multi-regional, dynamic, deterministic these capacity factors are sustained over the power sector CO emission linear programming model of the U.S. the course of the annual time period on 2 reductions that can be achieved through electric power sector that the EPA has which building block 2 is based, such shifting generation among existing fossil used for over two decades to evaluate upgrades are part of the normal fuel-fired EGUs depends on the relative the economic and emission impacts of planning process around the increased use of existing facilities. In fact, the variable costs of electricity production prospective environmental policies. To at EGUs with different degrees of carbon electric transmission system is currently inform its projections of least-cost intensity. These variable costs are undergoing substantial expansion.676 capacity expansion and electricity driven by the EGUs’ respective fuel Consequently, EPA does not believe that dispatch, IPM incorporates costs and by the efficiencies with which achieving the generation shift potential representations of constraints related to they can convert fuel to electricity (i.e., in building block 2 would necessitate fuel supply, bulk power transmission their heat rates). Historically, natural gas any significant additional requirements capacity, and unit availability. The has had a higher cost per unit of energy for transmission planning and model includes a detailed content (e.g., MMBtu) than coal in most construction beyond those already being representation of the natural gas locations, but for NGCC units this addressed at routine intervals by the pipeline network and the capability to disadvantage in fuel cost per MMBtu project economic expansion of that power sector. Furthermore, the phasing relative to coal-fired EGUs is typically network based on pipeline load factors. in of building block 2’s potential in the offset in significant part, and sometimes At the EGU level, IPM includes detailed determination of the BSER; the flexible completely, by a technological heat rate representations of key operational nature of multi-year compliance with advantage. limitations such as turn-down the ultimate emission reduction To consider the cost implications of constraints, which are designed to requirements of the rule; and the seven building block 2, the EPA expanded account for the cycling capabilities of years between finalization of this rule upon the proposal’s extensive analysis and the first year of compliance all EGUs to ensure that the model properly of the magnitude and cost of CO2 reflects the distinct operating provide time for infrastructure emission reductions through generation characteristics of peaking, cycling, and improvements to occur should they shifting within defined areas (consistent base load units. prove necessary in some locations. with the application of building blocks As described in more detail below, g. Regulatory flexibility. for performance rate- and state goal- the EPA used IPM to assess the costs of The final consideration supporting setting), without consideration of the increasing generation from existing our view that natural gas and electricity availability of other emission reduction NGCC capacity. IPM was able to meet system infrastructure would be capable methods ultimately available to units for average NGCC utilization rates of 75 of supporting increased NGCC unit compliance. percent on a net summer basis, while utilization rates at a maximum of 75% To evaluate how EGU owners and observing the market, technical, and grid operators could respond to a state regulatory constraints represented in the 675 See Greenhouse Gas Mitigation Measures TSD plan’s possible requirements, signals, or for a discussion of regional NGCC capacity factors. model. This modeling also demonstrates 676 According to the Edison Electric Institute, incentives to shift generation from more the ability of domestic natural gas member companies are planning over 170 projects carbon-intensive to less carbon- supplies to increase their production through 2024, with costs totaling approximately intensive EGUs, the EPA analyzed a levels, and deliver that supply through $60.6 billion (this is only a portion of the total series of scenarios in which the fleet of transmission investment anticipated). the pipeline network, to support the Approximately 75 percent of the reported projects NGCC units within each of the regions level of NGCC generation quantified in (over 13,000 line miles) are high voltage (345 kV considered for quantifying BSER (i.e., building block 2. Such a result is and higher). Construction of transmission lines of the three interconnections) was directed consistent with the EPA’s determination 345KV and above are generally major projects that to achieve a specified average annual are particularly effective at carrying power of large that increasing the average utilization distances. http://www.eei.org/issuesandpolicy/ utilization rate across that region on a rate of existing NGCC units to 75 transmission/Documents/Trans_Project_lowres_ net basis while maintaining a fixed level percent would be technically feasible. bookmarked.pdf. of aggregate generation in that region

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00141 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64802 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

across all existing fossil fuel-fired just described are higher than we would Chapter 3 of the GHG Mitigation sources. The EPA conducted such expect to actually occur in real-world Measures TSD for the CPP Final Rule. scenarios to address average utilization compliance with the final rule’s 5. Major Comments and Responses rates of 70 percent, 75 percent and 80 compliance requirements for the percent on a net basis, allowing for following reasons. First, this analysis The EPA received numerous shifting of fossil generation between does not capture the building block 2 comments regarding building block 2. existing units within the regions phase-in, which assumes an average Many of these comments provided described above. This scenario utilization rate over the interim period helpful information and insights and identifies a generation pattern that of less than 75 percent in all three have resulted in improvements to the would meet electricity demand at the interconnections. Second, the analysis rule. This section summarizes some of lowest total cost, subject to all other overstates the extent to which building these comments, and the remainder of specified operating and bulk power block 2 is ultimately reflected in the the comments are responded to in the transfer constraints for the scenario, source category performance rates. Response to Comment document, including the specified average NGCC While the performance rate computation available in the docket. unit utilization rate. procedure assumes a maximum NGCC The EPA received comment regarding The costs of the various scenarios utilization rate of 75 percent on a net the potential for an increase in upstream were evaluated by comparing the total summer basis, the Eastern methane emissions from increased costs and emissions from each scenario Interconnection’s realization of this utilization of natural gas. Our analysis to the costs and emissions from a base level of NGCC utilization yields higher found that the net upstream methane case scenario. For the scenario reflecting source category performance rates for emissions from natural gas systems and a 75 percent NGCC utilization rate on a steam than what would have been coal mines and CO2 emissions from net basis with regional fossil generation calculated for units in the Western flaring of methane will likely decrease shifting, comparison to the base case Interconnection and Texas under the Clean Power Plan. indicates that the average cost of the Interconnection if they realized that Furthermore, the changes in upstream methane emissions are small relative to CO2 reductions achieved over the 2022– maximum NGCC utilization rate in 2030 period was $24 per short ton of conjunction with the other building the changes in direct emissions from CO . We view these estimated costs as blocks. In other words, there is power plants. The technical details 2 supporting this analysis can be found in reasonable and therefore as supporting substantial building block 2 potential in the Regulatory Impact Analysis. the use of a 75 percent net utilization the Western Interconnection and Texas Commenters also expressed concern rate target for purposes of quantifying Interconnection that is not actually captured in the source category that neither a utility nor any state the emission reductions achievable at a agency controls dispatch in most states. reasonable cost through the application performance rates that are ultimately assigned to steam through this rate- and The EPA believes these comments fail to of building block 2 in the BSER. adequately appreciate that the utilities We also conclude from these analyses goal-setting approach (where the do control the dispatch of units that that potential impacts to fuel prices and performance rates are ultimately they own and/or operate, either by being electricity prices from achieving the determined by the BSER region with the the actual dispatch agent in many cases extent of fossil generation shifting highest rate outcome in the calculation). where there is no RTO or ISO that quantified for this building block are Therefore, the building block 2 analysis schedules the dispatch, or by the choice reasonably within the bounds of power overstates the cost of this component of of units and bids they offer into an sector experience. For example, in the BSER to the extent that it assumes organized electricity market operated by 75 percent NGCC unit utilization rate achievement of this generation shift an RTO or ISO. These entities currently scenario where generation shifting is potential that is not reflected in the control the dispatch of their units while limited to regional boundaries, the source category performance rates respecting all existing requirements delivered natural gas price was ultimately determined. Third, as a from environmental rules. This final projected to increase by an average of 7 practical matter, sources will be able to rule does not change these current percent over the 2022–2030 period, achieve additional emission reductions circumstances and makes clear that it is which is well within the range of through other measures that may prove the EGU that is responsible for meeting historical natural gas price to be less costly than generation shifting the requirements in the state plan; the variability.677 Projected wholesale and could substitute for the reductions state is responsible for the development electricity price increases over the same and costs considered here. These of that plan, but the state does not need period were less than 4 percent, which building block 2 analyses were focused to control the dispatch. similarly is well within the range of on evaluating the potential impacts of fossil generation shifting in isolation, Other comments object to the use of historical electric price variability. a single capacity factor for all existing These projected impacts on prices were and as a result, they do not consider states’ and sources’ flexibility to choose NGCCs to quantify building block 2 captured in the emission reduction costs potential on the grounds that not all of these scenarios already described among alternative CO2 reduction strategies that could offer lower-cost units may be able to achieve this above, which are reasonable and reductions, instead of relying on fossil utilization level, and that some units support use of a 75 percent NGCC generation shifting to the extent may be designed for cycling and so may utilization rate target for purposes of analyzed here. need upgrades to sustain such quantifying the emission reductions Based on the analyses summarized utilization. The EPA disagrees with achievable through application of the above, the EPA concludes that an these comments. The 75 percent BSER. average annual utilization rate for each capacity factor establishes a regional However, we also note that the costs region’s NGCC units of up to 75 percent potential for generation from existing (and their incorporated price impacts) is a technically feasible, cost-effective, NGCC capacity, and it does not establish and adequately demonstrated building any individual unit requirements. 677 According to EIA data, year-to-year changes in natural gas prices at Henry Hub averaged 29.9 block for BSER. Some comments argue that generation percent over the period from 2000 to 2013. http:// For further information on the limits in permits for some existing www.eia.gov/dnav/ng/hist/rngwhhdA.htm. analysis discussed in this section, see NGCC units will limit the amount by

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00142 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64803

which these units can increase their capacity to produce replacement credits for the production of RE and generation and thereby limit the generation. investments in RE. feasibility of building block 2. The EPA In this section we address first the States have also taken a significant disagrees with these comments. history of and then trends in RE lead in requiring the development of RE Although permit limits can constrain development, as well as the importance resources. In particular, a number of the ability of individual units to operate of expanding the use of RE. Next we states have adopted renewable portfolio above certain levels, building block 2 discuss the ability of affected EGUs to standards (RPS), which are regulatory was developed conservatively, with access generation from new RE mandates to increase production of RE. units operating on average at a level generating capacity, followed by a As of 2013, 29 states and the District of below the maximum levels at which discussion of renewable energy Columbia had enforceable RPS or some units have demonstrated the certificate (REC) markets. We then similar laws.681 These RPS requirements capability to operate. No individual unit describe the quantification of the continue to drive robust near-term is required to achieve the average amount of generation from new RE growth of non-hydropower RE. generation levels used to quantify generating capacity achievable through 2. Trends in RE Development building block 2. Further, permit limits building block 3, including key at individual units can be considered comments, changes made from the Today, RE is tightly integrated with when state plans are developed. There proposal, the method by which RE the utility power sector in multiple are many flexibilities in the final rule, target generation levels are quantified, ways: States have set RE targets for including the opportunity to establish and the magnitude and timing of electrical load serving entities; utilities standards of performance that increases in RE generation associated themselves are diversifying their incorporate emissions trading or with this building block. Next, we portfolios by contracting with RE develop plans that will respect any discuss the feasibility of implementing generators; and new RE generators are existing permit limits at individual the identified incremental amounts of being developed to provide more units. RE generation. Finally, we address the electrical power grid support services The EPA also received comments costs associated with those increases in beyond just energy (e.g., modern asserting that increasing generation from RE generation. electronics allow wind turbines to new renewables would require 1. History of RE Development provide voltage and reactive power increased use of natural gas capacity for control at all times).682 683 back-up and ramping, and therefore it is RE generating technologies are a well- Use of RE continues to grow rapidly not possible for NGCC units to run at established part of the utility power in the U.S. In 2013, electricity generated BSER utilization rates and also be sector. These technologies generate from RE technologies, including available to support the additional electricity from renewable resources, conventional hydropower, represented variable renewable generation resulting such as wind, sun and water. While RE 12 percent of total U.S. electricity, up from building block 3. The EPA has been used to generate electricity for from 8 percent in 2005.684 In 2013, U.S. disagrees with this comment. The 75% over a century, the push to non-hydro RE capacity for the total net summer utilization rates defined by commercialize RE more broadly began electric power industry exceeded 80,000 building block 2 is a conservative in the 1970s.678 Following a series of megawatts, reflecting a fivefold increase assessment and applied on an annual energy crises, new federal organizations in just 15 years.685 In particular, there average basis. It is therefore possible for and initiatives were established to has been substantial growth in the wind these existing units to both operate at coordinate energy policy and promote and solar photovoltaic (PV) markets in higher annual utilization rates, and also energy self-sufficiency and security, the past decade. Since 2009, U.S. wind to operate at higher rates during limited including solar energy legislation, the generation has tripled and solar periods and still maintain a 75% net Public Utility Regulatory Policies Act of generation has grown twentyfold.686 summer average annual utilization rate. 1978 (PURPA) and the 1980 Energy The global market for RE is projected While variable renewable generation 679 Security Act. to grow to $460 billion per year by does require additional load following PURPA was a key step in stimulating and ramping resources and unit cycling, RE development. By requiring utilities 681 Energy Information Administration, Annual these requirements are generally a small to purchase generation from qualifying Energy Outlook 2014 with Projections to 2040, at part of the overall ramping costs of the facilities (i.e., certain CHP and RE LR–5 (2014). system (see NREL, Relevant Studies for generators) at avoided costs, PURPA 682 IPCC, Renewable Energy Sources and Climate NERC’s Analysis of EPA’s Clean Power opened electricity markets to more RE Change Mitigation, 2012. Accessed March 2015. Plan 111(d) Compliance). Additionally, Available at: http://www.ipcc.ch/pdf/special- generation and gave rise to non-utility reports/srren/SRREN_Full_Report.pdf. while existing NGCC units are an generators that were willing to try new 683 American Wind Energy Association. AWEA efficient source of ramping to support RE technologies.680 In addition, since Comments on EPA’s Proposed Carbon Pollution variable renewables, other units running 1992, federal tax policy has provided Emission Guidelines for Existing Stationary Sources in an intermediate mode can also important financial support via tax and Supplemental Proposed Rule. p. 107. provide load following and ramping. 684 Energy Information Administration, Monthly Energy Review, May 2015, Table 7.2b. Available at: 678 Nearly all U.S. hydroelectric capacity was http://www.eia.gov/totalenergy/data/monthly/pdf/ E. Building Block 3—New Zero-Emitting _ Renewable Generating Capacity built before the mid-1970s. U.S. DOE. History of sec7 6.pdf. Hydropower. Accessed March 2015. Available at: 685 Non-hydro RE capacity for the total electric The third element of the foundation http://energy.gov/eere/water/history-hydropower. power industry was more than 16,000 megawatts in 679 U.S. DOE Office of Management, Timeline of 1998. Energy Information Administration, 1990– for the EPA’s BSER determination for Events: 1971–1980. Accessed March 2015. 2013 Existing Nameplate and Net Summer Capacity reducing CO2 emissions at affected Available at: http://energy.gov/management/office- by Energy Source Producer Type and State (EIA– fossil fuel-fired EGUs entails an analysis management/operational-management/history/doe- 860). Available at: http://www.eia.gov/electricity/ of the extent to which generation at the history-timeline/timeline-events-1. data/state/. 680 ‘‘Restructuring or Deregulation?’’ Smithsonian 686 Energy Information Administration, Monthly affected EGUs can be replaced by using Museum of American History. Accessed March Energy Review, May 2015, Table 7.2b. Available at: an expanded amount of zero-emitting 2015. Available at: http://americanhistory.si.edu/ http://www.eia.gov/totalenergy/data/monthly/pdf/ renewable electricity (RE) generating powering/dereg/dereg1.htm. sec7_6.pdf.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00143 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64804 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

687 2030. RE growth is further spurred by prices of solar PV in utility-scale RE has large potential to mitigate CO2 the significant amount of existing deployments were 40 percent lower in emissions.700 natural resources that can support RE 2013 than five years earlier.694 695 Increased use of RE provides production in the U.S.688 In the Energy Initially, price declines were partially numerous benefits in addition to lower Information Administration’s Annual driven by oversupply and CO2 emissions. RE typically consumes Energy Outlook 2015, RE generation manufacturers’ thin margins, but, in less water than fossil fuel-fired EGUs. grows substantially from 2013 to 2040 2014, prices have remained low due to Wind power and solar PV systems do in the reference case and all alternative reductions in manufacturing costs.696 not require the use of any water to 689 cases. In the reference case, RE The capacity factors of new utility-scale generate electricity; water is only generation increases by more than 70 installations have increased as systems needed for cleaning to ensure efficient percent from 2013 to 2040 and accounts are optimized to maximize energy operation. In contrast, utility boilers, in for over one-third of new generation production. For example, a growing particular, require large quantities of capacity.690 water for steam generation and number of utility-scale PV systems are The recent and projected growth of RE cooling.701 increasing the direct current capacity of is in part a reflection of its increasing Increasing RE use will also continue economic competitiveness. Numerous the solar array relative to the alternating to lower other air pollutants (e.g., fine studies have tracked capital cost current rating of the array’s inverter to particles, ground-level ozone, etc.). In reductions and performance increase energy production and improve addition, the RIA notes that increasing 697 improvements for RE, particularly for project economics. The cost and RE will diversify energy supply, hedge solar and wind. For instance, Lazard’s performance improvements for wind against fossil fuel price increases and analysis of wind and utility-scale solar and solar are driven by increased scale create economic development and jobs PV levelized costs of energy (LCOE), on of production, improved technologies, in manufacturing, installation, and other an unsubsidized basis, over the last five and advancements in system sectors of the economy. years found the average percentage deployments. decrease of high and low of LCOE 4. Access to RE by Owners of Affected ranges were 58 percent and 78 percent, 3. Importance of Increasing Use of RE EGUs 691 respectively. Analyses of wind’s Currently, the utility power sector The ability of affected EGUs to co- competitiveness found falling wind accounts for 40 percent of total annual locate or obtain incremental RE to turbine LCOE while the wind industry energy consumption in the U.S.698 reduce CO2 emissions is well- developed projects at lower wind speed Introducing more zero-emitting RE demonstrated, whether it is through sites using new turbine designs (e.g., generation over the long term could direct ownership, bilateral contracts, or increased turbine hub heights and rotor procurement of the environmental significantly reduce CO emissions, as diameters). Performance improvements 2 attributes associated with RE production of RE predominantly have come from novel deployments of generation.702 Consequently, the EPA new turbines designed for lower quality replaces fossil fuel-fired generation and believes that an increase in RE is a thereby avoids the emissions from that wind sites that are deployed at higher proven way to reduce CO2 emissions at quality wind sites, which have resulted replaced generation. affected EGUs of all types at a in capacity factor increases for these A number of studies and recent policy reasonable cost. locations.692 693 For utility-scale solar, developments have acknowledged RE as Owners and operators of affected cost and performance have also an important means of achieving CO2 EGUs across the U.S. already have improved significantly. Analysis has reductions. California cited the substantial opportunities to procure RE shown that the installed price of solar reduction of CO2 emissions from regardless of their organizational photovoltaics (PV) systems, prior to any electrical generations as one of the structure and/or business model. In incentives, has declined substantially reasons for increasing its RE target from many parts of the country, EGUs are since 1998. Capacity-weighted average 20 percent to 33 percent by 2020 (and owned and operated by vertically potentially 50 percent by 2030).699 A integrated utilities. These utilities can 687 ‘‘Global Renewable Energy Market Outlook.’’ recent IPCC report also concluded that be investor-owned utilities that operate Bloomberg New Energy Finance, November 16, under traditional electricity regulation, 2011. Available at http://bnef.com/WhitePapers/ download/53. 694 ‘‘Tracking the Sun VII’’ LBNL, Sept 2014. municipal utilities (munis), or electric 688 Lopez et al., NREL, ‘‘U.S. Renewable Energy Available at: http://emp.lbl.gov/publications/ cooperatives (co-ops). These utilities Technical Potentials: A GIS-Based Analysis,’’ (July tracking-sun-vii-historical-summary-installed-price- have significant control over the types 2012). Available at http://www.nrel.gov/docs/ photovoltaics-united-states-1998-20. of generating capacity they develop or fy12osti/51946.pdf. 695 ‘‘Photovoltaic System Pricing Trends,’’ NREL, acquire, and over the electricity mix 689 Energy Information Administration, Annual 22 Sept 2014. Available at: http://www.nrel.gov/ Energy Outlook 2015 with Projections to 2040 docs/fy14osti/62558.pdf. used to meet demand within their (2015), p. 25. Available at http://www.eia.gov/ 696 ‘‘Revolution Now—The Future Arrives for service territories. forecasts/aeo/pdf/0382(2015).pdf. Four Clean Energy Technologies—2014 Update,’’ Even when EGU owners participating 690 Energy Information Administration, Annual DOE, Oct 2014. Available at: http://energy.gov/sites/ in organized markets do not directly Energy Outlook 2015 with Projections to 2040 prod/files/2014/10/f18/revolution_now_updated_ (2015), p. ES–6–7. Available at http://www.eia.gov/ charts_and_text_october_2014_1.pdf. determine dispatch among energy forecasts/aeo/pdf/0382(2015).pdf. 697 ‘‘Utility-Scale Solar 2013,’’ LBNL, Sept 2014. sources, such EGU owners make 691 Lazard, Levelized Cost of Energy Analysis- Available at: http://emp.lbl.gov/publications/utility- Version 8.0, September 2014, p. 9, Available at: scale-solar-2013-empirical-analysis-project-cost- 700 IPCC, Renewable Energy Sources and Climate http://www.lazard.com/media/1777/levelized_cost_ performance-and-pricing-trends. Change Mitigation, 2012. Accessed March 2015. of_energy_-_version_80.pdf. 698 U.S. Energy Information Administration Available at: http://www.ipcc.ch/pdf/special- 692 ‘‘2013 Wind Technologies Market Report,’’ Annual Energy Review, 2011. Accessed March reports/srren/SRREN_Full_Report.pdf. LBNL, August 2014. Available at http://emp.lbl.gov/ 2015. Available at: http://www.eia.gov/totalenergy/ 701 EPA, Water Resource Use. Accessed on March sites/all/files/2013_Wind_Technologies_Market_ data/monthly/pdf/flow/primary_energy.pdf. 2015. Available at: http://www.epa.gov/clean Report_Final3.pdf. 699 California S.B. 2 (1X), 2011. Accessed March energy/energy-and-you/affect/water-resource.html. 693 ‘‘2013 Cost of Wind Energy Review,’’ NREL, 2015. Available at: http://www.leginfo.ca.gov/pub/ 702 Refer to the GHG Mitigation Measures TSD for Feb 2015. Available at: http://www.nrel.gov/docs/ 11-12/bill/sen/sb_0001-0050/sbx1_2_bill_ additional information on RE ownership and co- fy15osti/63267.pdf. 20110412_chaptered.pdf. location.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00144 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64805

decisions about what types of capacity with RE regardless of their Some of the largest owners of affected they choose to develop and thus what organizational type and regardless of EGUs also owned RE (see Table 8). For generation mix they can ultimately whether they operate in a cost-of-service example, NRG Energy, Inc. owns more supply into that market’s dispatch framework or in a competitive, than 3,000 megawatts of RE capacity, choices. Because zero-emitting RE organized market. over 20 percent of which (nearly 800 technologies have relatively low Many affected EGUs have already megawatts) is solar, and almost 80 variable costs, an EGU owner’s decision directly invested in RE. Of the 404 percent of which (over 2,500 megawatts) to install (or to finance the installation entities that owned part of at least one is wind. Duke Energy Corporation owns of) RE capacity will yield lower-cost affected EGU under this rule, 178 also 175 megawatts of solar and over 1,500 electricity generation that, when owned RE (biomass, geothermal, solar, megawatts of wind. NextEra Energy, available, a system dispatcher will water or wind). These 178 owners Inc.’s share of RE capacity approaches prefer over higher-variable-cost owned 82 percent of affected EGU 40 percent of their total affected EGU generation from fossil fuel-fired capacity. As a whole, these entities’ capacity.704 Table 8 lists a sampling of capacity. Therefore, all owners of share of RE capacity was equal to 25 affected EGUs that have large amounts affected EGUs have a direct path for percent of the total of their affected EGU of fossil fuel-fired capacity and RE replacing higher-emitting generation capacity.703 capacity:

TABLE 8—SAMPLE OF OWNERS OF AFFECTED EGUS AND RE CAPACITY 705 706

Affected EGU Renewable Ultimate parent capacity capacity (MW) (MW)

NRG Energy, Inc ...... 48,787 3,149 Duke Energy Corporation ...... 39,028 5,526 Southern Company ...... 37,168 3,245 American Electric Power Company, Inc ...... 34,940 1,142 NextEra Energy, Inc ...... 29,471 11,626 Calpine Corporation ...... 23,878 1,509 Tennessee Valley Authority ...... 21,717 5,427 Berkshire Hathaway Inc ...... 18,899 6,650 FirstEnergy Corp...... 16,175 1,371 Exelon Corporation ...... 10,283 3,361 Nebraska Public Power District ...... 2,003 90 Basin Electric Power Cooperative ...... 1,526 275 American Municipal Power, Inc ...... 1,112 53 Sacramento Municipal Utility District ...... 925 834 Golden Spread Electric Cooperative, Inc ...... 521 78

Large vertically integrated utilities capacity on the system (owned or under Many affected EGUs are already generally have multiple options for contract) includes a variety of affected planning on deploying significant investing in RE, including building their EGU organizational structures, amounts of RE according to their own RE capacity or procuring RE under including vertically integrated investor- integrated resource plans (IRPs). Electric a long-term power purchase agreement. owned utilities, municipal utilities, and utilities use IRPs to plan operations and Municipal utilities and rural federal power authorities. Xcel Energy investments over long time horizons. cooperatives that own generating asset and Berkshire Hathaway Energy rank These plans typically cover 10 to 20 portfolios, particularly generation and first and second with 5,736 megawatts years and are mandated by public utility transmission cooperatives and larger and 4,992 megawatts of wind capacity, commissions (PUCs). A recent study of municipal utilities, have also used RE to respectively. Tennessee Valley IRPs, included in the docket for this reduce carbon emissions. Large Authority, a federal power authority, rulemaking, shows this trend.710 For generation and transmission had 1,572 megawatts and CPS Energy, a instance, Dominion plans for over 800 cooperatives also purchase significant public utility, had 1,059 megawatts of megawatts of wind and solar in their quantities of RE for their members. 711 wind power capacity.709 Basin Electric 2015 to 2029 planning period. Duke Federal power authorities own or Power Cooperative had 716 megawatts Energy Carolinas’ IRP has no plans for contract for significant amounts of new coal, but describes plans for RE.707 708 and was the top ranked cooperative utility, but is not on the top ten utilities roughly 1,250 megawatts of additional The list of ten electric utilities with with wind power capacity list. RE by 2021, and approximately 2,150 the largest amounts of wind power megawatts by 2029. A significant

703 SNL Energy. Data used with permission. 708 Solar Energy Industries Association. Berkshire Hathaway Energy; Southern California Accessed on June 9, 2015. Comments to the EPA and States on the Proposed Edison; American Electric Power; Pacific Gas & 704 Ibid. Clean Power Plan Regulating Existing Power Plants Electric; Tennessee Valley Authority; San Diego Gas Under Section 111(d) of the Clean Air Act. pp. 98– & Electric; CPS Energy; Los Angeles Department of 705 SNL Energy. Data used with permission. 147. Water & Power; and Alliant Energy. Accessed on June 9, 2015. 709 710 See memo entitled ‘‘Review of Electric Utility 706 American Wind Energy Association. U.S. eGRID, EPA. 2012 Unit-Level Data Using the Wind Industry Annual Market Report (2014 data). Integrated Resource Plans’’ (May 7, 2015). eGRID Methodology. Accessed July 2015. Available at http://www.awea. 711 Dominion North Carolina Power’s and 707 American Wind Energy Association. AWEA org/AnnualMarketReport.aspx?ItemNumber=7422& Dominion Virginia Power’s Report of Its Integrated Comments on EPA’s Proposed Carbon Pollution RDtoken=64560&userID=. The ten largest electric Resource Plan, August 2014. Available at: https:// Emission Guidelines for Existing Stationary Sources utilities with wind power capacity on the system www.dom.com/library/domcom/pdfs/corporate/ and Supplemental Proposed Rule. pp. 88–91. (owner or under contract) includes: Xcel Energy; integrated-resource-planning/nc-irp-2014.pdf.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00145 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64806 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

portion (1,670 megawatts) of the state RE targets, such as state RPS, and stakeholder comments and the EPA’s planned RE is solar.712 Ameren is also to substantiate claims stemming additional analysis and information planning to retire one-third of the coal from RE use. RECs are tradable collection. In evaluating the proposed generating capacity, as well as installing instruments that are associated with the and alternative RE approaches an additional 400 megawatts of wind, generation of one megawatt-hour of RE commenters observed that RPS, as the 445 megawatts of solar, and 28 and represent certain information or basis for quantifying RE generation megawatts of hydroelectric generating characteristics of the generation, called levels under the proposed approach, are capacity.713 attributes.715 RECs may be traded and policy instruments that states may Independent power producers (IPPs) transferred regardless of the actual choose to implement for a variety of also can and do own both RE and fossil energy flow. reasons not related to CO2 emission generation. For example, NRG is a The legal basis for RECs is established reductions. Additionally, differences diversified IPP that operates substantial by state statutes and administrative across RPS policies in eligible resources, coal, natural gas, wind, solar, and rules. Nearly all states with a mandatory crediting mechanisms, deliverability nuclear capacity. NRG demonstrates the RPS have established RECs as a means requirements, alternative compliance ability of IPPs to reduce utilization of of compliance. The Federal Energy payments, and other policy elements fossil fuel-fired EGUs and replace that Regulatory Commission (FERC) has made the regional averaging of state- generation with RE. NRG announced a observed that states created RECs to level RPS requirements challenging. goal to cut CO2 emissions from its fleet facilitate programs designed to promote Finally, commenters provided data by 50 percent by 2030 (from a 2014 increased use of RE, and that ‘‘attributes demonstrating that RE resource baseline).714 NRG has already reduced associated with the [RE] facilities are potential can vary significantly within CO2 emissions from its fleet by 40 separate from, and may be sold the regions identified under the percent since 2005. This achievement separately from, the capacity and proposed approach, producing state- demonstrates that when an IPP commits energy.’’ 716 level RE generation levels that may not to shifting its generation portfolio, it can In complying with states’ RPS be aligned with the opportunity to do so at reasonable cost and without requirements, utilities have contracted deploy incremental RE resources at reliability impacts. The NRG example for RECs from in-state and out-of-state reasonable cost. In contrast, commenters shows that reduced utilization of fossil resources in accordance with RPS argued that a methodology similar to the fuel-fired EGUs that is replaced by RE requirements. Utilities may have alternative RE approach, which is based also owned by the EGU owner is sourced RECs from out-of-state to on economic potential, represents a adequately demonstrated. reduce the cost of compliance, to source more technically sound basis for EGU owners can also replace fossil RECs from specific generation types, or quantifying building block 3 target fuel-fired generation with RE through for other reasons.717 generation levels that accounts for bilateral contracts and REC purchases, The development of REC markets to regional differences in RE resources and as described below. Both the bilateral facilitate RPS compliance provides power market conditions, such as market for RE contracts and REC evidence that markets can develop to projected fuel prices, load growth and markets are well-developed. There are facilitate compliance with rate-based wholesale power prices. The EPA agrees no legal or technical obstacles to a fossil state plans. These markets will afford with these comments. fuel-fired EGU owner acting as the affected EGU owners an alternative to Within the framework of the counterparty of a bilateral contract for directly invest in, or own, renewable alternative RE approach, the EPA purchase of energy from a RE facility. generating capacity in order to replace received significant comments on a Any type of EGU owner (utility or fossil fuel-fired generation with RE as an number of issues, including the use of otherwise) can purchase and retire emission reduction measure. historical deployment rates, the RECs. The fact that RECs are purchased interstate nature of RE and the power by a diverse set of market participants— 6. Quantification of RE Generation system, merits of total versus including residential consumers, Potential for BSER and Major Comments incremental RE generation as the metric commercial businesses, and industrial The methodology for quantifying RE by which building block 3 generation facilities—demonstrates that such a generation levels under building block 3 levels are quantified, types of RE purchase for all EGU owners is is a modified version of the alternative technologies that contribute to those adequately demonstrated. RE approach from proposal, with generation levels, cost and performance 5. REC Markets adjustments that reflect the data and estimates associated with those RE information the EPA collected through technologies, magnitude of the reduced Affected EGU owners do not need to cost applied to new RE capacity as an directly invest in, or own, renewable 715 EPA Green Power Partnership, Renewable incentive to deploy, and application of generating capacity in order to replace Energy Certificates July 2008). Available at http:// a nationally uniform benchmark _ fossil fuel-fired generation with RE as an www.epa.gov/greenpower/documents/gpp basics- development rate to modeled recs.pdf. emission reduction measure. RECs are projections of economic deployment. used to demonstrate compliance with 716 FERC Docket No. EL03–133–000, Petition for Declaratory Order and Request for Expedited Based on commenter data and Consideration, American Ref-Fuel Company, information, as well as further analysis 712 Duke Energy Carolinas’ 2014 Integrated Covanta Energy Group, Montenay Power and information collection, the primary Resource Plan, September 2014. Available at: http:// Corporation, and Wheelabrator Technologies, Inc. starw1.ncuc.net/NCUC/ViewFile.aspx?Id= June 16, 2003, Order Granting Petition for adjustments the EPA made to the c3c5cbb5-51f2-423a-9dfc-a43ec559d307. Declaratory Ruling, October 1, 2003. American Ref- alternative RE approach are: 713 Integrated Resource Plan Update, October Fuel Co. et al., 105 FERC ¶ 61,004 (2003); and Order • The basis for quantifying building block 2014. Available at: https://www.ameren.com/ Denying Rehearing. April 15, 2004. 107 FERC missouri/environment/renewables/ameren- ¶ 61,016 (2004). Available online at: http://www. 3 generation has been modified to missouri-irp. ferc.gov/whats-new/comm-meet/041404/E-28.pdf incorporate historical deployment patterns 714 NRG, ‘‘NRG Energy Sets Long-Term (accessed 11/7/2014). for RE technologies as well as the economic Sustainability Goals at Groundbreaking of ‘Ultra- 717 Heeter, J. Quantifying the Level of Cross-State potential identified through modeling Green’ New Headquarters’’ (Nov. 20, 2014). Renewable Energy Transactions. NREL 2015. projections. The introduction of historical Available at http://investors.nrg.com/phoenix.zhtml Available at http://www.nrel.gov/docs/fy15osti/ capacity additions to the final methodology ?c=121544&p=irolnewsArticle&ID=1991552. 63458.pdf. further grounds building block 3 generation

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00146 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64807

in demonstrated levels of RE deployment that in operation by 2012 in building block 3 methodology.720 Commenters detailed have been successfully incorporated into the because the impact of that generation on several issues with applying the benchmark power system. This adjustment also serves to fossil fuel-fired EGUs is already reflected in development rate, including that it does not harmonize the approach across all three the observed 2012 emissions and generation factor in the total size of the RE resource in building blocks in which historical data is data of those EGUs. a given state and is inconsistent with a the primary basis for identifying emission • Due to the interstate nature of RE and the regional approach to quantifying target reduction opportunities under the BSER. power system, and consistent with the generation levels. EPA agrees with these • The RE technologies used to quantify rationale provided in the October 2014 comments and the benchmark development building block 3 generation levels are Notice of Data Availability (NODA), building rate has been eliminated. onshore wind, utility-scale solar PV, block 3 generation levels are quantified for concentrating solar power (CSP), geothermal each of the three BSER regions—the Eastern In addition to the comments and hydropower. Each of these technologies Interconnection, Western Interconnection, described above, the EPA received is a utility-scale, zero-emitting resource that and Texas Interconnection—rather than at significant comments on a wide variety was included under the alternative RE the state-level. This regionalized approach, as of topics related to building block 3. approach at proposal. Additionally, the EPA described in the NODA, takes into account Many of these comments provided received significant comments on the the opportunity to develop regional RE helpful information and insights, and opportunities and challenges associated with resources and thus better aligns building have resulted in improvements to the distributed RE technologies. Distributed block 3 generation levels with the rule’s technologies, as a demand-side resource, approach to allowing the use of qualifying final rule. These comments, as well as present unique data and technical challenges out-of-state renewable generation for the EPA responses, are available in the (such as the role of evaluation, measurement compliance. Response to Comment document. and verification (EM&V) procedures in • Commenters observed that the cost and The final methodology for quantifying verifying their production, the diverse performance estimates the EPA relied on at incremental RE target generation levels economic incentives of different parties proposal from the Energy Information contains seven steps. Each step is involved in their deployment, and the variety Administration’s Annual Energy Outlook described below.721 of grid integration policies and conditions 2013 do not reflect the decline in cost and across potential deployment sites) that increase in performance that have been First, the EPA collected data for each complicate identifying a technically feasible demonstrated by current projects, RE technology (onshore wind, utility- and cost-effective level of generation. particularly in regards to wind and solar scale solar PV, CSP, geothermal and Consequently, the EPA is, at this time, technologies. Commenters provided data hydropower) to determine the annual choosing not to include distributed from a variety of sources to support these change in capacity over the most recent technologies as part of the BSER (although, claims, including Lawrence Berkeley five-year period. From these data, the as explained in section VIII.K of this National Laboratory (LBNL), the Department EPA calculated the five-year annual of Energy (DOE) and Lazard. Each of these preamble, distributed RE technologies that average change in capacity and the five- meets eligibility criteria may be used for sources supported the contention that RE compliance). Finally, any RE technology that technologies, particularly wind and solar, year maximum annual change in has not been deployed in the U.S., including have realized gains in cost and efficiency at capacity for each technology. demonstrated RE technologies for which a scale that has altered the competitive Second, the EPA determined an there is clear evidence of technical feasibility dynamic between RE and conventional appropriate capacity factor to apply to and cost-effectiveness (e.g., offshore wind), resources. As a result, it has become each RE technology that would be contributes no generation to building block 3 increasingly necessary for any long-term representative of expected future under this historically-based methodology. outlook of the utility power sector to continually assess the development of RE performance from 2022 through 2030. These RE technologies are consequently For this purpose the EPA relied on reserved for compliance, which offers technology cost and performance trends. In affected EGUs additional flexibility and will performing this task, the EPA revised its data NREL’s ATB. reduce their need to rely on other emission for onshore wind and solar technologies to Third, the EPA calculated two reduction measures or building blocks. reflect the mid-case estimates from the generation levels for each RE • Building block 3 generation levels are National Renewable Energy Laboratory’s technology. The first generation level is expressed in terms of incremental, rather (NREL’s) 2015 Annual Technology Baseline. the product of each technology’s five- than total, RE generation. As a metric, The EPA selected the NREL 2015 Annual year average capacity change and the Technology Baseline (ATB) estimates based incremental generation is better aligned with assumed future capacity factor. The quantifying an amount of expanded RE to on the quality of its data as well as NREL’s 718 demonstrated success in both reflecting and second generation level is the product of replace generation at affected EGUs. each technology’s five-year maximum Specifically, the generation levels under anticipating RE cost and performance trends. building block 3 include generation from In addition to wind and solar technologies, annual capacity deployment and the capacity that commenced operation the EPA evaluated hydropower deployment assumed future capacity factor. Table 9 subsequent to 2012 (the data year on which potential based on the latest cost and below shows the data and assumptions the BSER is evaluated). Commenters performance data from NREL’s Renewable used for these calculations. 719 remarked that it is unnecessary to include Energy Economic Potential study. • The benchmark development rate that generation from RE capacity that was already 720 constrained cost-effective RE deployment The technical potential limiter was a nationally uniform, technology-specific limit on under the alternative RE approach in the 718 Consistent with the October 2014 NODA, the cost-effective RE deployment based on the amount final goal-setting methodology assumes replacement proposal has been removed from the final of 2012 generation in a state as a share of that state’s of affected EGU generation by incremental building total technical potential. block 3 generation in calculating source-specific 719 For additional information on the updated RE 721 For supporting data, documentation, and CO2 emission performance rates. For additional cost and performance assumptions used to quantify examples for each step of the quantification information on the goal-setting methodology, refer building block 3 generation, refer to the GHG methodology, refer to the GHG Mitigation Measures to Section VI. Mitigation Measures TSD. TSD.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00147 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64808 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

TABLE 9—HISTORICAL CAPACITY CHANGES AND ASSOCIATED GENERATION LEVELS

Generation Generation Assumed Five-Year associated Maximum associated future average with five annual with maximum capacity capacity year-average capacity annual factor change (MW) capacity change (MW) capacity (percent) change (MWh) change (MWh)

Utility-Scale Solar PV 722 ...... 20.7 1,927 3,494,268 3,934 7,133,601 CSP ...... 34.3 251 754,175 767 2,304,590 Onshore Wind ...... 41.8 6,200 22,702,416 13,131 48,081,520 Geothermal ...... 85.0 142 1,057,332 407 3,030,522 Hydropower ...... 63.8 141 788,032 294 1,643,131

Total Generation ...... N/A N/A 28,796,222 N/A 62,193,363

Fourth, the EPA quantified the RE capacity change from the historical data 64 U.S. sub-regions.724 The 30 percent generation from capacity commencing analysis. In 2024, this produces a constraint applied to variable, non- operation after 2012 that can be building block 3 generation level of dispatchable RE resources reflects levels expected in 2021 (the year before this 332,869,933 megawatt-hours (aggregated commonly modeled in grid integration rule’s first compliance period) without across all three BSER regions); by 2030, studies at the level of the the imposition of this rule. Because that generation level is 706,030,112 interconnection. These studies have building block 3 is focused on the megawatt-hours. demonstrated that impacts to the grid in ability of fossil fuel-fired EGUs to reaching levels as high as 30 percent of reduce their emissions by deploying Seventh, to further evaluate the net energy for load are relatively incremental RE, it is reasonable to take technical feasibility and cost- minor.725 For example, the Western into account the considerable amount of effectiveness of the building block 3 Wind and Solar Study Phase 2 found RE deployment that is already taking generation levels (aggregated across all cycling costs ranged from $0.14 to $0.67 place and is projected to continue doing three BSER regions), as well as to per megawatt-hour of added wind and so before considering the additional produce interconnection-specific levels solar generation. These integration cost deployment that would be motivated by of building block 3 generation from the levels are not impactful in determining this rule’s mandate to reduce emissions national totals described in steps 5 and cost-effectiveness. As such, applying the from affected EGUs. The EPA 6, the EPA conducted analysis using 30 percent constraints at the IPM sub- considered its base case power sector IPM of a scenario directing the power region level is very conservative and modeling projections using IPM to sector to achieve those RE generation provides a high degree of assurance that quantify this component of future-year levels. IPM modeling projections assess the RE capacity deployment pattern RE generation, which the EPA assumes opportunities for RE deployment in an projected by the model would not incur to be 213,084,125 megawatt-hours in integrated framework across power, significant grid integration costs.726 2021. fuel, and emission markets. The In addition to facilitating the EPA’s assessment of the feasibility and cost of Fifth, the EPA applied the generation modeling framework incorporates a host reaching the aggregate building block 3 associated with the five-year average of constraints on the deployment of RE capacity change to the first two years of generation levels across all three BSER resources, including resource regions, the IPM projections also the interim period. Combining the constraints such as resource quality, projected 2021 RE generation from provide the EPA with a basis for land use exclusions, terrain variability, apportioning those generation levels to capacity starting operation after 2012 distance to existing transmission, and with the generation increment each interconnection. The EPA population density; system constraints associated with the five-year average considered the projected regional such as interregional transmission change in capacity produces location of the evaluated RE deployment limits, partial reserve margin credit for 241,880,347 megawatt-hours in 2022 in this analysis, which shows the and 270,676,570 megawatt-hours in intermittent RE installations, minimum 2023. The EPA believes it is appropriate turndown constraints for fossil fuel- 724 Regions that have already exceeded these limits are held at historical percent of net energy to apply the generation associated with fired EGUs, and short-term capital cost adders to reflect the potential added for load. the five-year average capacity change for 725 2013 Wind Technologies Market Report. the first two years of the interim period cost due to competition for scarce labor LBNL. August 2014. Available at http://emp.lbl.gov/ to ensure adequate opportunity to plan and materials; and technology sites/all/files/2013_Wind_Technologies_Market_ _ for and implement any necessary RE constraints such as construction lead Report Final3.pdf. times and hourly generation profiles for Grid Integration and the Carrying Capacity of the integration strategies and investments in U.S. Grid to Incorporate Variable Renewable advance of the higher RE deployment non-dispatchable resources by Energy. NREL. Cochran et al., April 2015. http:// levels assumed for later years. season.723 Additionally, the EPA energy.gov/sites/prod/files/2015/04/f22/QER%20 Sixth, for all years subsequent to 2023 assumes in this analysis that Analysis%20%20Grid%20Integration%20and%20 deployment of variable, non- the%20Carrying%20Capacity%20of%20the%20US the EPA applied the generation %20Grid%20to%20Incorporate%20Variable%20 associated with the maximum annual dispatchable RE resources is limited to Renewable%20Energy_1.pdf. 20 percent of net energy for load by The Western Wind and Solar Integration Study 722 Capacity values for utility-scale solar PV are technology type and 30 percent of net Phase 2. NREL. Lew et al., 2013. Available at http:// expressed in terms of MWDC. The assumed future energy for load in total at each of IPM’s www.nrel.gov/docs/fy13osti/55588.pdf. Refer to capacity factor for this utility-scale solar PV GHG Mitigation Measures TSD for further analysis. includes a DC-to-AC conversion, enabling the 726 Refer to the GHG Mitigation Measures TSD for generation totals to be combined across all RE 723 Refer to GHG Mitigation Measures TSD for additional information on constraints related to technologies. more detail on modeling methodology. deployment of non-dispatchable RE.

VerDate Sep<11>2014 22:36 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00148 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64809

majority of such deployment occurring apportionment of building block 3 generation levels for each in the Eastern Interconnection. The generation levels to each of the BSER interconnection from 2022 through GHG Mitigation Measures TSD regions, taking these modeling 2030. describes in greater detail the process by projections into account. Table 10 which the EPA calculated the describes the annual building block 3

TABLE 10—BUILDING BLOCK 3 GENERATION LEVELS (MWh).

Eastern Western Texas Year interconnection interconnection interconnection

2022 ...... 166,253,134 56,663,541 18,963,672 2023 ...... 181,542,775 60,956,363 28,177,431 2024 ...... 218,243,050 75,244,721 39,382,162 2025 ...... 254,943,325 89,533,078 50,586,893 2026 ...... 291,643,600 103,821,436 61,791,623 2027 ...... 328,343,875 118,109,793 72,996,354 2028 ...... 365,044,150 132,398,151 84,201,085 2029 ...... 401,744,425 146,686,508 95,405,816 2030 ...... 438,444,700 160,974,866 106,610,547

Through the quantification integration, reliability, backup capacity, regularly serving above 25 percent of methodology detailed above, the EPA transmission investments, and RE load with RE resources, recently began has identified amounts of incremental supply chains. seeing over 5,000 megawatt-hours of RE generation that are reasonable, rather Historical RE deployment rates are a solar energy, and is on track for 33 than the maximum amounts that could strong indication of the feasibility of the percent of load with no serious be achieved while preserving the cost- 2030 level of deployment and interim reliability or grid integration issues. effectiveness of the building block. For period pathway. The use of RE Germany exceeded 28 percent non- example, assuming gradual continues to grow rapidly in the U.S. In hydro RE as a percentage of total energy improvement in RE technology capacity 2013, electricity generated from RE, in first half of 2014. Other recent factors consistent with historical trends, including conventional hydropower, examples include: ERCOT met 40 expanding the portfolio of RE represented 12 percent of total U.S. percent of demand on March 31, 2014 technologies that contribute to the electricity, up from 8 percent in 2005. with wind power; SPP met 33 percent building block 3 generation level, and In particular, there has been substantial of demand on April 6, 2013 with wind applying the five-year maximum growth in the wind and solar markets in power; and, Xcel Energy Colorado met capacity change values to all years of the past decade. Since 2009, wind 60 percent of demand on May 2, 2013 the interim period are adjustments that energy has tripled and solar has grown with wind power. Operational and would produce higher building block 3 tenfold. technical upgrades to the power system generation levels and maintain the The expected future capacity may be required to accommodate high primacy of historical data in quantifying installations in 2022–2030 needed to levels of variable, non-dispatchable RE RE generation potential. External reach the 2030 level of incremental RE like wind and solar over longer time analysis and studies of RE penetration generation are consistent with historical periods; however, the penetration levels levels strongly support the technical deployment patterns. Forecasts by cited above have been achieved without feasibility and cost-reasonableness of RE Cambridge Energy Research Associates negative impacts to reliability due in deployment well in excess of the levels (CERA) of 17 gigawatts in 2015 and large part to low-cost measures such as established by building block 3, as historical deployment of 16 gigawatts in expanded operational flexibility and detailed in section V.E.7. By identifying 2012 are significant. The average effective coordination with other reasonable rather than maximum deployment of wind over the past five regional markets. years was 6,200 megawatts per year; achievable amounts, we are increasing RE can contribute to reliable system the assurance that the identified 2014 deployment of solar PV, both distributed and utility-scale, was 6,201 operation. The abundance and diversity amounts are achievable by the source of RE resources in the U.S. can support category and providing greater megawatts. This contribution from solar PV is consistent with the rapid multiple combinations of RE in much flexibility to individual affected EGUs to higher penetrations. When California, choose among alternative measures for reduction in costs that is currently being the Midwest, PJM, New York, and New achieving compliance with the observed and is expected to continue. England experienced record winter standards of performance established for Grid operators are reliably integrating demand and prices during the polar them in their states’ section 111(d) large amounts of RE, including variable, vortex, wind generation played a key plans. non-dispatchable RE today. For example, Iowa and South Dakota role in maintaining system reliability. 7. Feasibility of RE Deployment produced more than 25 percent of their Wind and solar PV are increasingly The 2030 level of RE deployment and electricity from wind in 2013, with a productive and capable of being the rate of progress during the interim total of nine states above 12 percent and accurately forecast, which improves grid period in getting to that level are well 17 states at more than 5 percent. reliability. Increasing capacity factors supported by comments received, DOE California served nearly 19 percent of mean less variability and more and NREL analysis, and external studies total load in 2013 with RE resources, not generation. While the wind industry evaluating the costs of and potential for including behind-the-meter distributed develops more projects at lower wind RE penetration. The EPA has assessed solar resources, and approximately 25 speed sites, wind turbine design the feasibility of RE in terms of percent of total load with RE in 2014. changes are driving capacity factors deployment potential, system On an instantaneous basis, California is higher among projects located in a given

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00149 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64810 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

wind resource regime.727 Average been added on average between 1991 raw materials availability or capacity factors have risen from the low and 2013. 11.5 gigawatts per year is manufacturing capability. For solar 30 percent range to high 30 percent consistent with building block 3 technologies, the global supply chain range and continue to improve. One key deployment levels for wind capacity has a capacity that has significantly recent advancement is the increasing over the compliance period. DOE’s expanded over the past few years from use of turbines designed for low to SunShot scenario, which increases 1.4 gigawatts per year in 2004 to 22.5 medium wind speed sites (with higher utility-scale PV to 180 gigawatts by gigawatts per year in 2011. Current hub-heights and larger rotors, relative to 2030, required spending of $60 billion capacity exceeds these levels and is nameplate capacity) at higher wind- on transmission through 2050. On an expected to grow. For PV systems, raw speed sites with low turbulence. average annual basis, this expenditure is materials like tellurium and indium are New variable RE generators can within the historical range of annual at highest risk of supply shortage, but provide more electrical power grid transmission investments made by IOUs these materials are not used in the PV support services beyond just energy. in recent decades. technologies currently being deployed Modern wind turbine power electronics Incremental grid infrastructure needs at large-scale. allow turbines to provide voltage and can be minimized by repurposing 8. Cost of CO Emission Reductions reactive power control at all times. existing transmission resources. 2 From RE Generation Wind plants meet a higher standard and Transmission formerly used to deliver far exceed the ability of conventional fossil-fired power to distant loads can— The EPA believes that RE generation power plants to ‘‘ride-through’’ power and is—being used to deliver REwithout at the levels represented in building system disturbances, which is essential new infrastructure. First Solar’s Moapa block 3 can be achieved at reasonable for maintaining reliability when large project uses transmission built to costs. In the EPA’s modeling of the conventional power plants break down. deliver coal-fired power from Navajo to building block 3 generation level, the Xcel Energy sometimes uses its wind Los Angeles. NV Energy’s retirement of projected cost of achieving CO2 plants’ exceedingly fast response to Reid-Gardner will free up additional reductions through this expansion of RE meet system need for frequency transmission capacity. The Milford generation is $37 per ton on average response and dispatchable resources. wind projects in Utah already utilize from 2022 through 2030.728 There are a Utility-scale PV can incorporate control transmission that was built to deliver number of reasons why the EPA systems that enable solar PV to coal power to Los Angeles. believes that the cost of CO2 emission contribute to grid reliability and Storage can be helpful but is not reductions from RE generation will be stability, such as voltage regulation, essential for the feasibility of RE lower than this analysis suggests. First, active power controls, ramp-rate deployment because there are many modeling constraints that restrict controls, fault ride through, and sources of flexibility on the grid. DOE’s variable, non-dispatchable RE frequency control. Solar generation is Wind Vision and many other studies technologies to 30 percent of net energy capable of providing many ancillary have found an array of integration for load at each of the 64 U.S. IPM services that the grid needs but, like options (e.g., large balancing areas, regions is a conservative limit intended other generators, needs the proper geographically dispersed RE, weather to eliminate significant grid integration forecasting used in system operations, market signals to trade energy costs at increased levels of RE sub-hourly energy markets, access to generation for ancillary service penetration. In fact, many regions have neighboring markets) for RE beyond provision. already demonstrated levels of RE The transmission network can storage. Storage is a system resource, as penetration that exceed the constraints, connect distant high-quality RE to load its value for renewables is a small share and in practice intermittency can be of its total value. centers and improve reliability by managed across larger regions than the Increasing regional coordination increasing system flexibility. 64. Consequently, the extent to which between balancing areas will increase Investments in transmission and these regions could, in practice, achieve operational flexibility. The Energy higher levels of RE deployment without distribution upgrades also enable Imbalance Market (EIM) recently improvements in system-wide facing substantial grid integration costs implemented by the California ISO and would lead to a lower-cost RE outcome environmental performance at lower Pacificorp is a good example of the cost. than is estimated by this analysis. increased coordination that will be Second, there are multiple RE The potential range of new helpful in ensuring that resources across technologies not quantified under transmission construction is within the West are being utilized in an building block 3 that affected EGUs may historical investment magnitudes. efficient way. Under nearly all scenarios analyzed for Significant wind and solar supply use to demonstrate compliance the DOE’s Quadrennial Energy Review, chains have developed in the past (distributed generation technologies, circuit-miles of transmission added decade to serve the fast-growing US RE offshore wind, etc.). Based on through 2030 are roughly equal to those market. For wind, domestic production preliminary analysis from DOE and needed under the base case, and while capability would likely have to increase NREL, cost-effective opportunities for those base case transmission needs are to accommodate projected builds under distributed generation alone could significant, they do not appear to exceed the CPP in the 2022–2030 time period; satisfy one-third to over one-half of the historical annual build rates. DOE’s stringency associated with building however, the global supply chain has 729 Wind Vision findings project 11.5 expanded significantly to serve multiple block 3. Third, as discussed in gigawatts of wind per year from 2021– markets and can augment production section V and VI of the preamble, the 2030. This deployment level would from the domestic supply chain, if BSER reflects the degree of emission require 890 circuit miles per year of new necessary. At the start of 2014, the U.S. limitation achieved through the transmission; 870 miles per year have domestic supply chain could produce application of the building blocks in the 10,000 blades (6.2 gigawatts) and 4300 727 LBNL, Wind Technologies Market Report 728 Refer to the GHG Mitigation Measures TSD for 2013, August 2014, p. 43, Available at: http:// towers (8 gigawatts) annually. It is not further analysis and IPM run results. emp.lbl.gov/sites/all/files/2013_Wind_ anticipated that expanded domestic 729 See Section VIII.K. for a description of Technologies_Market_Report_Final3.pdf. manufacturing will be constrained by qualifying RE technologies for compliance.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00150 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64811

least stringent region. By definition, in units, and their reduction potential, in discussed in the next section. The EPA the other two regions the BSER is less a state rather than providing technology- has determined that the statewide rate- stringent than the simple combination specific guidelines. While many based and mass-based CO2 goals are of the three building blocks, rendering commenters appreciated the flexibility expressions of the emission a portion of the emission reduction this state-focused structure provided, performance rates equivalent to potential quantified by the building some noted two concerns with this application of the emission performance blocks unnecessary to achieving the approach: (1) It would potentially create rates to affected EGUs within a state. interim and final CO2 emission different incentives for the same The EPA is finalizing the performance performance rates. For example, the generating technology class depending rates in a manner consistent with the EPA has calculated that in excess of on the state in which that generator was proposal, with appropriate adjustments 160,000,000 megawatt-hours of building located, and (2) it deviated from the based on comments. Stakeholders had block 3 potential is not required to EPA’s previous interpretation of the the opportunity to demonstrate during achieve the final CO2 emission 111(d) regulatory guidelines by not the comment period that application of performance rates in 2030—and would providing technology-specific standards one or more of the building blocks be accessible to affected EGUs for of performance. In response to these would not be expected to produce the compliance.730 Therefore, it is comments and our further level of emission reduction quantified reasonable to expect that it would cost consideration, the final rule establishes by the EPA because implementation of less to achieve the component of subcategory-specific emission the building block at the levels building block 3 potential that is performance rates that are identical envisioned by the EPA was technically reflected in the calculation of the final across units within a subcategory infeasible, or because the costs of doing CO2 emission performance rates, as regardless of where a unit is located so were significantly higher than compared to the results of this analysis within the contiguous U.S. These projected by the EPA. The EPA has which assumed achievement of the subcategory-specific emission considered all of this input in setting entire quantified building block 3 performance rates are then translated final performance rates. potential. The EPA believes that these into state-specific goals which, as in the The remainder of this section factors provide significant opportunities proposal, reflect the particular energy addresses two sets of topics. First, we for achievement of the building block 3 mix present in each state. That discuss several issues related to the generation levels at lower costs than translation is presented in section VII. form of the performance rates. Second, estimated in this analysis. These performance rates reflect the we describe the performance rates, average emission rate requirement for computation procedure, and VI. Subcategory-Specific CO Emission 2 each subcategory. Similar to the adjustments made between proposal Performance Rates proposal, they are presented as adjusted and final based on stakeholder feedback A. Overview average emission rates that reflect other in the comment period. In this section, the EPA sets out generation components of BSER (e.g., Some of the topics addressed in this renewable) in addition to the fossil section are addressed in greater detail in subcategory-specific CO2 emission performance rates to guide states in component. These performance rates supplemental documents available in development of their state plans. The must be achieved by 2030 and sustained the docket for this rulemaking, emission performance rates reflect the thereafter. The interim performance including the CO2 Emission emission rates for two generating rates apply over a 2022–2029 interim Performance Rate and Goal subcategories affected by the rule (fossil period and would be achieved on Computation TSD for CPP Final Rule steam generation and gas-fired average through reasonable and the Greenhouse Gas Mitigation combustion turbines).731 These final implementation of the best system of Measures TSD. Specific topics emission performance rates reflect the emission reduction (based on all three addressed in the various TSDs are noted building blocks) described above. In EPA’s quantification of the BSER based throughout the discussion below. other words, the interim performance on the three building blocks described rates are consistent with a reasonable B. Emission Performance Rate in section V above. This procedure deployment schedule of BSER Requirements follows a similar logic to BSER technologies as they scale up to their The EPA has developed a single quantification at proposal, but it keeps full BSER potential by 2030. The performance rate requirement for the emission performance rates separate performance rates are meant to reflect existing fossil steam units in the for fossil steam and NGCC subcategories emission performance required across contiguous U.S., and a single rate for instead of immediately blending them all affected EGUs when averaged existing gas turbines in the contiguous together into a single value for all together and inclusive of lower-emitting U.S., reflecting application of the BSER, affected EGUs. Commenters noted that BSER components. based on all three building blocks the proposed rule established guidelines The performance rates are expressed described earlier, to pertinent data. The that were based on the aggregation of 732 in the form of adjusted output- rates are intended to represent CO2 weighted-average CO2 emission rates for emission rates achievable by 2030 after 730 For additional discussion on how this concept impacts building block 3 generation levels, refer to affected EGUs. However, states are a 2022–2029 interim period on an the GHG Mitigation Measures TSD and the CO2 authorized to use a converted statewide output-weighted-average basis by all Emission Performance Rate and Goal Computation rate-based or mass-based goal as affected EGUs, with certain computation TSD for Final CPP. adjustments described below to reflect 731 The only natural gas fired EGUs currently 732 As described below, the emission performance the potential to achieve mass emission considered affected units under the 111(d) rates include adjustments to incorporate the applicability criteria are NGCC units capable of potential effects of emission reduction measures reductions by avoiding fossil fuel-fired supplying more than 25 MW of electrical output to that address power sector CO2 emissions primarily generation. the grid. The data and rates for these units represent by reducing the amount of electricity produced at all emissions and MWh output associated with both a state’s affected EGUs (associated with, for 1. Final Emission Performance Rate the combustion turbines as well as all associated example, increasing the amount of new low- or Requirements heat recovery steam generating units. The zero-carbon generation rather than by reducing their remainder of the section will use the term ‘‘NGCC’’ CO2 emission rates per unit of energy output The emission performance rates are to collectively refer to these natural gas fired EGUs. produced). set forth in Table 11 below, followed by

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00151 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64812 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

a description of the computation identified for the BSER increases over The second aspect noted above methodology. time, as explained in section V. concerns the expression of the goals in terms of net energy output 733—that is, C. Form of the Emission Performance TABLE 11—EMISSION PERFORMANCE energy output encompassing net MWh Rates RATES of generation measured at the point of [Adjusted output-weighted-average pounds of 1. Rate-Based Guidelines delivery to the transmission grid rather CO2 per net MWh from all affected fossil than gross MWh of generation measured fuel-fired EGUs] The interim and final emission at the EGU’s generator. The difference performance rates for fossil steam and between net and gross generation is the NGCC units are presented in the form of Subcategory Interim Final rate electricity used at a plant to operate rate adjusted output-weighted-average CO2 auxiliary equipment such as fans, emission rates that the affected fossil Fossil Fuel-Fired pumps, motors, and pollution control fuel-fired units could achieve, through devices. Because improvements in the Electric Steam application of the measures comprising Generating Units ... 1,534 1,305 efficiency of these devices represent Stationary Combus- the BSER (or alternative control opportunities to reduce carbon intensity tion Turbines ...... 832 771 methods). Several aspects of this form of at existing affected EGUs that would not emission rate are worth noting at the be captured in measurements of outset: The use of emission rates The emission performance rates are emissions per gross MWh, goals are expressed in terms of net rather than expressed as adjusted output-weighted- expressed in terms of net generation. As gross energy output; the use of output- average emission rates for each noted by commenters, EGUs have weighted-average emission rates for all subcategory. As discussed later in this familiarity and in some places already affected EGUs; the use of adjustments to section, the emission rate computation have in place equipment necessary to accommodate incremental NGCC includes an adjustment designed to collect and report hourly net generation and RE measures that reduce 734 reflect mass emission reductions generation. CO associated with lower-emitting BSER 2 emissions by reducing the quantity c. Output-weighted performance rates components. The adjustment is made by of fossil fuel-fired generation and for all affected EGUs. estimating the annual net generation associated emissions; and the This final rule provides an expression associated with an achievable amount of adjustability of the goals based on the of the BSER as subcategory-specific qualifying incremental lower-carbon severability of the underlying building emission performance rates rather than and zero-carbon generation and blocks. the state goals provided at proposal. substituting those MWhs for the a. Rationale for rate-based guidelines. Whereas the proposal also estimated the BSER impact on fossil steam and NGCC baseline electricity generation and CO First, the EPA sets an emission rate 2 emissions and generation, it went one emissions from the higher-emitting requirement for each subcategory by step further by averaging these two affected EGUs. Under the final rule identifying the technology-specific technology rates into a single rate for approach, regionally identified building reductions available under the building each state. Under this final rule, the block 3 potential generation replaces blocks. We then give each state the EPA is identifying the fossil steam rate fossil steam and NGCC generation on a choice to apply the emission and the NGCC rate separately instead of pro-rata basis corresponding to the performance rates directly to the only presenting them in a blended baseline mix of fossil generation in each affected EGUs within the state or fashion at the state level.735 These two region. provides the opportunity to use the statewide rate-based goal or the emission performance rates are the 2. Interim Emission Performance Rates equivalent mass-based form translated expression of the BSER for the final rule for affected EGUs located within the Some commenters suggested that the from the emission performance rates for state plan purposes. The emission contiguous U.S. interim period starting in 2020 provided The modification from a blended performance rates reflect the BSER, and too little time for implementation of emission rate in the proposed rule to a the statewide rate-based goal and measures required to demonstrate subcategory-specific emission compliance during the interim period. statewide mass-based goal are performance rate for affected EGU As discussed in section V.A.3.g of this alternative metrics for realizing the categories in the final rule was made in preamble, the EPA has determined that emission performance rates at the response to comments that technology an interim period beginning in 2022 aggregate affected fleet level for a state. provides sufficient time for states to Stakeholders have expressed support 733 As discussed below in Section VIII on state undertake necessary planning exercises for having the flexibility to choose from plans, we are similarly determining that states and for the implementation of measures among the multiple options for crafting choosing a rate-based form of emission performance level for their plans should establish a requirement towards achieving the performance an implementation plan to realize the for affected EGUs to report hourly net energy rates. The EPA determined the interim BSER. The EPA is providing emission output. rates in a manner similar to proposal, performance rate-based guidelines that 734 Specifically, commenters noted that while net with an adaptation to address the apply uniformly to technology generation is not reported to the EPA under 40 CFR revised timing of the interim subcategories nationwide, and the EPA part 75, affected EGUs are generally required to report gross and net generation on a monthly basis compliance period (beginning in 2022 is providing corresponding state to EIA through form 923 submittal. rather than in 2020 as proposed). They emission rate goals and state mass goals 735 However, as discussed in the next section, in reflect the averaging of estimated to further enhance compliance order to provide maximum flexibility to states, the emission performance rates for each flexibility for each state. This approach EPA averages these two emission rates together for each state using their adjusted 2012 baseline year in the interim period (i.e., 2022– allows each state to adopt a plan that it generation share to arrive at a single statewide 2029). considers optimal and is consistent with emission performance goal. The state has the option The interim performance rates are less the state flexibility principle that is to comply with this statewide goal through a stringent than the final 2030 emission central to the EPA’s development of this compliance pathway of its choice. This compliance pathway may or may not involve requiring its performance rates because the amount program. affected units to meet the emission performance of emission reduction potential b. Net vs. gross MWh. rates.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00152 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64813

subcategory-specific emission rates were block 1 in isolation, which would not be with the proposal and publically more analogous to prior 111(d) efforts implemented independently. The available reported data.737 and more consistent with the statute. performance rates and statewide goals Since the final rule’s applicability The EPA received significant comments that would result from any combination includes under construction units, the suggesting a technology subcategory- of the building blocks could be EPA also identified units that had not specific rate is consistent with past computed using the formulas and data yet commenced operation by the 2012 section 111(d) regulations. However, baseline period, but that commenced included in the CO2 Emission many commenters also supported the Performance Rate and Goal construction before January 8, 2014. The EPA received significant comment on flexibility provided to states through a Computation TSD for CPP Final Rule state goal metric provided at proposal. the proposal’s sole use of the National and its appendices using the Therefore, the EPA does provide Electric Energy Data System (NEEDS) to methodology described below and alternative statewide rate-based and identify these under construction units. mass-based goals in the next section. elaborated on in that TSD. Commenters suggested that the EPA also The EPA’s main consideration has D. Emission Performance Rate-Setting utilize EIA and 2012 proposed unit- been to ensure that the expression of the Equation and Computation Procedure level files to help better identify under BSER reflects opportunities to manage construction units. In some cases, CO2 emissions by shifting generation The methodology used to compute the NEEDS did not reflect units that had among different types of affected EGUs. performance rates is summarized on a commenced construction. Therefore, the Both the performance rates in this final step-by-step basis below in section 3. EPA updated its approach to identifying rule and the state goals at proposal rely The methodology is described in more units that had commenced construction on the adjusted emission rate metric to detail in the CO2 Emission Performance prior to January 8, 2014, but that had reflect that potential shifting. Rate and Goal Computation TSD for CPP not commenced operation in 2012. In Specifically, because CO2 emission rates Final Rule, which includes a numerical the final rule, the EPA uses EIA data, differ widely across the fleet of affected example illustrating the full procedure. comments, as well as NEEDS data to EGUs, and because transmission The quantification of the building identify these under construction 738 739 740 interconnections typically provide blocks used in the computation units. These units that were operating by system operators with choices as to procedure is discussed in Section V which EGU should be called upon to 2012 along with those that had not above and in the Greenhouse Gas produce the next MWh of generation commenced operation by 2012 but had Mitigation Measures TSD. needed to meet demand, opportunities commenced construction by January 8, exist to manage utilization of high 1. Inventory of Likely Affected EGUs 2014, reflect the EPA baseline inventory carbon-intensity EGUs based on the of likely affected EGUs. The CO2 availability of less carbon-intensive In order to calculate the subcategory- Emission Performance Rate and Goal generating capacity. For states and specific emission performance rates Computation TSD for CPP Final Rule generators, this means that CO2 reflecting the BSER, the EPA first explains the prime mover, capacity, and emission reductions can be achieved by needed to develop a baseline inventory fuel criteria used to identify the likely shifting generation from EGUs with of likely affected EGUs in order to affected EGUs.741 higher CO2 emission rates, such as coal- estimate the impact of the BSER. The The EPA received significant fired EGUs, to EGUs with lower CO2 EPA developed an inventory of likely comment that units that came online emission rates, such as NGCC units. Our affected units that were operating in during the baseline year (e.g., 2012) analysis indicates that shifting 2012 or that began construction prior to should be treated as under construction generation among EGUs offers January 8, 2014 and that appeared to rather than operating units in 2012 for opportunities to achieve large amounts meet the final rule’s applicability purposes of estimating baseline values, of CO2 emission reductions at criteria.736 This inventory does not because their 2012 operation may be reasonable costs. The realization of constitute a final applicability these opportunities can be reflected in 737 The EPA notes that in some cases, it may not determination, but best reflects the yet be possible to determine the status of an EGU an emission rate established in the form EPA’s estimate of units subject to the of an output-weighted-average emission as affected or unaffected without additional data. 111(d) applicability criteria as laid out There are potentially some units excluded or rate where the weighting reflects the in Section IV. The EPA identified a list included in the baseline that will ultimately have varying levels of replacement generation a different status following an applicability of likely affected units at proposal technologies. determination. However, these cases are limited, d. Severability of building blocks. comprised of approximately 3,000 and the effect of any collective changes to the Section V above discusses the EGUs. The agency took comment on this affected fleet inventory will not yield a bias in the list and has made a number of updates BSER computation at the regional level. severability of the three building blocks 738 The NEEDS database was also updated to upon which the CO2 emission to the inventory in response to those reflect the latest data and commenter input on performance rates are based. Because comments and in regards to under construction units. the building blocks can be implemented applicability criteria changes resulting 739 For purposes of determining emission from comments. However, the inventory performance rates, the EPA classifies any unit that independently of one another and the had begun construction prior to Jan. 8, 2014, but emission performance rates reflect the does not reflect a final applicability had not commenced operation by Dec. 31, 2011 as sum of the emission reductions from all determination, and where a unit’s status ‘‘under construction’’. Many of these ‘‘under of the building blocks, if any of the was unclear, the EPA generally treated construction’’ units have commenced operation at some point during 2012 or prior to signature of this building blocks is found to be an invalid the unit’s status in a manner consistent final rule. basis for the ‘‘best system of emission 740 ‘‘Commence’’ and ‘‘construction’’ are defined reduction . . . adequately 736 The EPA’s responsibility is to determine the in 40 CFR 60.2. demonstrated,’’ the rates would be BSER for all affected EGUs. Some of these under 741 The baseline inventory relies on historical adjusted to reflect the emissions construction units may not enter operation until data and does not incorporate anticipated future 2015 or later, but they are likely affected units and retirements. Most commenters supported this reductions from the remaining building therefore appropriate to reflect in the baseline and treatment as they viewed those scheduled blocks. The sole exception, as described corresponding subcategory-specific emission retirements (and corresponding emission above, is the application of building performance rates and state goals. reductions) as an alternative compliance flexibility.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00153 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64814 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

misrepresentative of anticipated future- of years, for informing the baseline. (4) Due to the region-based approach to year operation due to partial year Then, we explain the adjustments that quantify building blocks and the BSER as operation in 2012. The EPA has made we are making to the 2012 data along subcategory-specific emission performance an adjustment to flag these units as with our rationale for such adjustments, rates, variations in unit-level data do not significantly impact the calculation of having commenced operation during in response to comments we received. emission performance rates. For instance, if 2012 and treat them as under Some commenters supported the one fossil unit is operating less in a given construction units, consistent with EPA’s use of 2012 data to inform year due to an outage, another fossil unit in commenters’ suggestion; for BSER performance rates, and the EPA agrees the same region is generally operating more. computational purposes, generation and that 2012 data with targeted Therefore, at the regional level, fossil emissions for these units are estimated adjustments, relative to other historical generation and emissions do not vary to the based on a representative first full year years, best reflects the power sector and same degree that unit-level data varies. of operation for that technology class. best informs the performance rates that Moreover, the variation at the regional level pertain to the BSER. The EPA believes that does exist in 2012 relative to previous 2. Data Year years is not necessarily unrepresentative that starting with 2012 data is more In the proposed rule, the EPA variation, but illustrates trends in the power accurate and better informs the BSER sector infrastructure that are desirable to considered using a historical-year data than an earlier historical year or capture for purposes of determining a set or a projected-year data set as a historical multi-year average for the representative year from which further starting point for applying the following reasons: improvements in CO2 emissions performance technology assumptions identified can be made. Because the EPA is moving under BSER. The EPA proposed using (1) Of the historical data fully available at from a state approach at proposal to a the time the proposal analysis began, 2012 regional approach for calculating the 2012 data as it was the most recent data was the most recent and best reflects the expression of the BSER in this final rule, year for which complete data were power fleet. Approximately 43 GW of new unit-level operational variation from year to available when the EPA undertook capacity came online in 2010 and 2011. In year becomes even less relevant to the analysis for the proposed rule and it other words, there was 43 GW of capacity online as of 2012 that had not been in service calculation of regional emission performance reflected actual performance at the state rates. level. The EPA took comment on at some point during the 2010–2011 period. Likewise, approximately 17 GW of capacity (5) Some commenters suggested the EPA alternative data sets. In particular, the use an earlier baseline year as a means of EPA issued a NODA on October 30, that were operable in 2010 and/or 2011 were retired prior to 2012.743 Using state-level, recognizing early action. They noted that an 2014 (79 FR 64543) in which we prior year data, either on its own, or as part earlier baseline would reflect a higher- provided 2010 and 2011 historic data of a multi-year baseline, is not as emitting fleet and therefore when the same for consideration. representative of the current power fleet as level of building block MWhs are applied, The EPA received a significant the 2012 data, which better reflects they would result in a higher (i.e., less number of comments supporting the use significant changes in power sector stringent) state goal. The EPA disagrees with of historical data as the basis from infrastructure. this view for several reasons. First, the which to quantify performance rates (2) A three-year baseline would not address objective of selecting a baseline to inform some of the substantive concerns raised by BSER is to have one that best reflects the reflecting BSER. Some commenters power sector and consequently the best supported the 2012 data year as the best commenters. Many commenters pointed out that using a three-year baseline would not system of emission reductions of which the reflection of the power fleet, and some address their critical concern about variation power fleet is capable. Using an earlier suggested that the EPA use a different in the hydrological cycle due to snow pack baseline that ‘‘inflates’’ the starting point year or a historical average to control for (particularly in the Northwest), because the would undermine this objective, not serve it. data anomalies in 2012. Moreover, some snow pack was significantly above average in Second, the EPA disagrees with the premise commenters pointed out that using both 2011 and 2012. The EPA agrees with of this comment—that the baseline would 2010, 2011, 2012 data, or an average of commenters that we can better address their change and building block potentials would the three would not address their baseline data concerns regarding an average stay the same. For instance, building block 2 concerns about recent year anomalies in hydro year by identifying those states with a functions based on incremental generation potential (incremental generation = potential hydro generation due to high snow significant share of hydro generation and variation in that hydro generation, and generation¥baseline generation). This pack. Some commenters also suggested making targeted adjustments to those states’ incremental value would increase if an the EPA use a baseline including years affected fossil generation levels in order to earlier baseline period was used that had less prior to 2012, not to increase reflect a more typical snow-pack year. This existing NGCC generation. representativeness of the power sector, procedure is described in more detail below (6) Some commenters pointed out that the but as a means of recognizing early and in theTSDs. EPA relied on multi-year historical data in action. (3) In addition to being, in the EPA’s view, allowance allocation in previous rulemakings In this final rule, the EPA is taking an a less representative baseline of the existing (e.g., CAIR and/or CSAPR allocations). approach to the baseline year where we power fleet, a multi-year baseline would also However, that comparison is not relevant to still largely rely on reported 2012 data likely entail complexity when determining the quantification of emission reduction as the best and most recent available how to average together yearly fleet data potential under 111(d). In those previous while appropriately accounting for fleet instances, the EPA was considering typical data representing the power sector from changes occurring during those years. The unit-level behavior for allowance allocation which to apply the BSER, but also 2012 baseline starting point maximizes the purposes—not for determining the emission including targeted baseline adjustments EPA’s reliance on latest reported operating reduction requirements of the program. to address commenter concerns with data and minimizes the need for fleet Those allowance allocation determinations 2012 data.742 Below, we explain why— capacity adjustments. For instance, because were independent of and subsequent to the at the nationwide level—2012 data are of year-to-year fleet turnover, the averaging of determination of emission reduction preferable, more objective, and more multiple baseline years would require requirements in those rulemakings. accurate than a prior year, or an average additional assumptions in regards to which (7) The EPA received significant comment generation to consider from a fleet that is that 2012 was not a representative year for changing in a given state or region (or even 742 natural gas prices, and thus the EPA should The EPA recognizes that more recent where units are switching fuel sources such emissions and generation data have become use another year. The EPA disagrees with available since 2012, but 2012 data constituted the as a coal-to-gas conversion). this comment, and does not view it as most recent year for which full data was available grounds for a change to the baseline period. at the time the EPA began its analysis for proposal. 743 EIA Form 860, 2012. While the EPA does recognize that Henry

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00154 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64815

Hub natural gas prices were lower in 2012 no similar adjustment was needed to account yet online, then another unit is likely over- relative to previous years, this does not for weather patterns with these technologies. represented as it is operating more than it invalidate the suitability of the data year Unlike market conditions (e.g., changes in otherwise would when the second unit selection. The EPA’s objective in selecting a natural gas prices) that may produce different commences operation. Therefore, the baseline is to identify potential reductions generation profiles year-to-year but that do resulting state-level and regional-level when BSER technologies are applied; year-to- not change the overall generating potential of aggregate annual generation level used in year variation in market prices for natural gas the state’s power fleet, variation in the determining the BSER may be considered to does not frustrate this effort. For instance, a hydrologic cycle does fundamentally change be representative and there is not necessarily region may have generated only 5 MWh of the generating potential of the state’s power a need for any adjustment. NGCC generation in 2011 when gas prices fleet in hydro-intensive states as they no However, the EPA recognizes that the over- represented and under-represented units do were higher, and 10 MWh of NGCC longer have the same generating potential in not necessarily fall within the same state, and generation in 2012 when gas prices dropped. an average year as they had in a ‘‘high hydro’’ year. The CO2 Emission Performance Rate therefore this potential difference in the state However, this does not change the outcome location of the affected units could have an of the quantification of the BSER, because the and Goal Computation TSD for CPP Final Rule provides analysis and explains the impact when estimating appropriate building block is based on the emission adjustment that the EPA made to the state- statewide goals. To address this comment, reduction potential of the fleet. That level 2012 data for Idaho, Maine, Montana, the EPA adjusted the 2012 generation data for potential (e.g., a fuller realization of the Oregon, South Dakota, and Washington to fossil units coming online during 2012 to a existing NGCC generation potential better reflect fossil generation levels when more representative annual operating level equivalent to 15 MWh) does not change hydro generation performed at its average for that type of unit reflecting its incremental regardless of the year used for baseline NGCC level as observed over a 1990–2012 impact on generation and emissions. This generation. Therefore, a different data year timeframe. The EPA agrees with commenters effectively resulted in increased baseline may change a baseline data point, but it that using a 2010–2012 baseline would not emissions and generation assumed for those would not change the total potential NGCC address the concern as 2011 was also an units beyond their reported partial-year generation for quantifying the emission outlier year relative to historical snow-pack operations in 2012. Conceptually, the performance rates in these circumstances. and hydro generation. assumption of full-year operation at units (2) Extended unit outages due to that came online partway through 2012 could In summary, the EPA believes that maintenance. pair with an assumed reduction in the continuing to rely on 2012 data while Generally, because of the regional-level operation of other units somewhere in the incorporating select data adjustments as approach to calculate performance rates, the same region. However, the EPA made no detailed below is not only a reasonable EPA does not believe that unit-level corresponding deduction to represent this likely decreased utilization at other affected variations in operation influence the choice and adequately supported, but a units because it was impossible to project the subcategory-specific performance rates more reliable and preferable starting state location of such units with certainty reflecting BSER. For instance, as some units point for determining the BSER and the assumed utilization level was meant ramp down, and others ramp up to replace requirements. to reflect the incremental impact on the their load at the regional level, total fossil baseline. As a result, this data adjustment generation changes little due to these fossil- 3. Adjustments That the EPA Made to increases the total generation and emissions for-fossil substitutions. Unit-level variation the 2012 Data for units reporting in the 2012 baseline does not inherently entail region-wide beyond the 2012 reported levels. The EPA made corrections to unit- variation. Additionally, as done in proposal, the EPA level 2012 data based on commenter However, the EPA did receive comment continued to identify under construction feedback. In addition, we also made that in limited cases, this could have a units that did not begin operation in 2012, some adjustments to 2012 data, not to substantial impact on an individual state if but had commenced construction prior to it chooses to use a rate-based or mass-based address a correction, but to address a January 8, 2014 and would commence statewide goal. Even though the EPA is operation sometime after 2012. As described concern about the representativeness of calculating subcategory-specific performance the data. Although the EPA determined in the next section, the EPA estimated rates that it believes are not affected by this baseline generation and emissions for these that the 2012 data year better informed type of unit-level variation, it still evaluated units as they had no 2012 reported data. its BSER determination than a preceding the possible impacts it may have when year or a multi-year average, converting to state goals in the next section. In summary, this final rule continues commenters did identify some The EPA examined units nationwide with to rely on the latest reported 2012 data limitations that we are addressing 2012 outages to determine where an as the foundation for quantifying the through targeted adjustments. These are individual unit-level outage might yield a BSER. However, the EPA has made significant difference in state goal discussed below: limited adjustments, in addition to computation. When applying this test to all corrections identified by commenters, to (1) Adjustments to state-level data to of the units informing the computation of the the 2012 data to address some of the BSER, emission performance rates, and account for annual variation in the relevant concerns raised by hydrologic cycle as it relates to fossil statewide goals, the EPA determined that the generation. only unit with a 2012 outage that (1) commenters. Therefore, the baseline is Hydropower plays a unique role in a decreased its output relative to preceding and informed by 2012 data, but not limited handful of states in that (1) it is a significant subsequent years by 75 percent or more to 2012 data.745 (signifying an outage), and (2) could portion of their generation portfolio, (2) it 4. Equations varies on an annual basis, and (3) 2012 was potentially impact the state’s goal as it an outlier year for snow-pack (meaning constituted more than 10 percent of the In this section we describe how we hydropower was above and fossil generation state’s generation was the Sherburne County develop the equations used to determine was below its historical average).The EPA Unit 3 in Minnesota. The EPA therefore the emission performance rates for fossil notes that these three conditions are not adjusted this state’s baseline coal steam steam and NGCC units that express and present in other weather-based RE generation upwards to reflect a more implement BSER. More detailed technologies like solar or wind.744 Therefore, representative year for the state in which this 900 MW unit operates. 745 Updated unit-level data reflecting corrections 744 (3) Many commenters also noted that While solar and wind generation may vary on because the EPA uses annual data, 2012 was identified by commenters to the underlying 2012 an hourly or daily basis, their annual generation file are provided in Appendix 1 of the CO2 profiles are subject to notably less variation not representative for units coming online Emission Performance Rate and Goal Computation compared to hydropower. The EPA’s calculation of part way through the year. The EPA relies on TSD for CPP Final Rule. The adjustments made to the BSER relies on annual generation data, not on annual data, so if a unit is underrepresented the aggregate data to address representativeness hourly or daily generation data. in a certain part of the year because it is not concerns are provided in Appendix 3.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00155 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64816 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

information regarding rate computation, the particulate matter created by these measures at the plant (where either rate including example calculations, can be control devices were not appropriately or generation may be reduced) and some found in the CO2 Emission Performance accounted for when developing the form of credit for lower-emitting Rate and Goal Computation TSD for CPP standard intended to address the generation (or demand side measures) Final Rule, which is available in the primary emissions of particulate, this outside of the plant. In this context, the docket for this action. Here we first could create an unreasonably stringent emission performance rates must present the general principles we follow PM standard. In the current context, this provide appropriate incentives for when developing equations to express means recognizing that increasing affected entities to achieve the emission the BSER; then, we summarize the steps NGCC capacity utilization in accordance reductions encompassed in the BSER, taken to assemble baseline data to with building block 2 both offsets higher including through state plans that reflect 2012 baseline emissions and emitting steam generation and increases provide crediting for lower-emitting generation, and apply the building emissions at the NGCC units generation. Third, and as set forth blocks that constitute the BSER to themselves, which are also affected below, we must account for the EPA’s derive performance rates that will be entities that must demonstrate determination that pro rata used by states to implement BSER. compliance with the BSER. Thus, it is implementation of building block 3 is Section VII then explains how these essential that we apply the building the best reflection of the potential for RE nationwide performance rates are blocks in a way that avoids creating a to displace both fossil steam and NGCC, reconstituted into a statewide goal level of stringency in the performance and the dual role of NGCC units as both metric similar to the proposal in order standards for affected EGUs that goes affected sources and a BSER compliance to allow a state (at its discretion) to use beyond what we have determined to be technology. a statewide goal as a mechanism for the BSER—while at the same time This set of considerations was central demonstrating compliance at the ensuring that equations apply the to the development of the BSER aggregate state level in a state plan, as building blocks to generate performance equations that the EPA describes next. an alternative to applying the emission standards that represent the full They were particularly important for performance rates to its affected EGUs application of the BSER to the affected steps five through seven below which directly. EGUs. address building blocks 2 and 3, When developing equations to Under section 111, the EPA adopts building blocks that have both implement BSER, we adhere to a emission performance standards that are significant overlap with each other and number of basic principles. First, we based on the BSER. The emission which impact steam and NGCC units in ensure that the equations are consistent performance rates reflect our an integrated way. with the BSER itself, and in particular, recognition of the value of giving reflect the redistribution of generation sources the flexibility to adopt Step-by-Step Discussion of Equations among fossil steam, NGCC and equivalent emissions reduction Step one (compilation of baseline renewables embodied in building blocks strategies and measures that for them data). On a unit-level basis, the EPA 2 and 3. In doing this, we account for may be preferable (in a specific obtained total annual quantities of CO2 the interactions between building blocks circumstance) to the technologies and emissions, net generation (MWh), and in a way that is consistent with the measures that we define as the BSER. capacity (MW) from reported 2012 data assessment of incremental building An important function of the emission for likely affected EGUs that had block generation potential and the performance rates representing the commenced operation prior to 2012.746 compliance framework for Emission BSER is to provide the flexibility The EPA made changes to the historical Reduction Credits (ERCs). In particular, needed to allow alternative compliance unit-level data based on comments we must ensure that each increment of options, including the development of received at proposal. For each state and building block 3 emission reduction new technologies or the deployment of region, the agency aggregated the 2012 potential is applied to either fossil effective technologies outside of the operating data for all coal-fired steam steam or NGCC units but not both. The BSER technologies. In the guidelines we EGUs as one group, all oil- and gas-fired equations we develop must also take issued under section 111(d) for landfill steam EGUs as a second group, and all account of the dual status of existing gas, for example, we adopted the NGCC units as a third group. The EPA NGCC units, which are simultaneously primary standard based on flaring of any adjusted these state values upwards in affected units and provide generation captured landfill gas, but we also that is an element of the BSER itself. developed equations that led to an 746 EGUs whose capacity or fossil fuel combustion In addition, we are applying the expression of the BSER that allowed for were insufficient to qualify them as likely affected BSER, as we have done in calculating the alternative of capturing the gas and EGUs were not included in the subcategory-specific other section 111(d) standards, to a combusting it in an electrical generating rate and goal computations. Most simple cycle defined population of existing affected combustion turbines (CTs) were excluded on this unit. basis at proposal, and all simple cycle CTs were sources, represented in this case by the Finally, in deriving the emission excluded at final reflecting changes to the generation of the source category in the performance rates, there are a number of applicability language. IGCC’s were designated as 2012 adjusted baseline. This provides considerations we took into account. ‘‘other’’ generation at proposal, but they are an empirical historical baseline against First, it is important that the baseline grouped with coal units for purposes the final rule category-specific rates. Useful thermal output which we define the performance rates from which the rates are derived be (UTO) was also translated to a MWh equivalent and and their state goal equivalents. In doing transparent and based on observable, included in state goals at proposal, resulting in so, we must account for any offsetting historical data. Second, the emission more stringent rates for states with more increases in emissions that result from performance rates must reflect the cogeneration sources, but UTO is not included in this final rule emission performance rate or state applying the BSER control measures, as emission reductions achievable through goal calculations as a result of comments regarding we have done in setting other standards. the best system of emission reduction. potentially adverse impacts on cogeneration units For example, when determining BSER Because the BSER includes shifting of and uncertainty of thermal load outputs. As for particulate matter control, a number emissions from higher-emitting to described in the state plan section of the preamble, units may still quantify and convert UTO (i.e., of pollution control devices (such as lower-emitting sources, state taking credit for waste heat capture) when sorbent injection technologies) compliance frameworks will likely demonstrating compliance. See the applicability themselves create particulate matter. If involve a combination of physical criteria described in Section IV.D above.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00156 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64817

a limited number of instances to reflect average for that technology. This is respectively, while the coal generation the hydropower and unit outage similar to the adjustment made at level was held constant, reflecting the concerns raised in comments and proposal for under construction units, EPA’s assessment of the average described above. As discussed above, with the main difference being units opportunities in each region to reduce the EPA first only aggregated the that commenced operation in 2012 are CO2 emission rates across the existing reported data for units that commenced now also treated as under construction fleet of coal-fired steam EGUs through operation prior to 2012. For those likely for baseline data purposes in the final heat rate improvements that are affected units that commenced rule. technically achievable at a reasonable operation during 2012, the EPA treated The estimated emissions and cost. The EPA then averaged together that capacity consistent with its generation for under construction units the region’s baseline oil- and natural framework for under construction were added to the 2012 reported gas-fired steam rate with its building affected units, which were added next. emissions and generation data for the block 1 adjusted coal steam rate to get This was done in response to comments affected units that had already a fossil steam rate post-building block recognizing the fact that the year during commenced operation prior to 2012 to 1.750 751 which a unit commences operation may derive an adjusted historical baseline Step five (application of building not have been representative of its total for each state that was reflective of block 3). At proposal, the EPA potential generation and emissions. all likely affected 111(d) sources.749 incorporated incremental RE MWhs For the under construction units (i.e., Step two (aggregation to the regional (where incremental means the amount those under construction prior to level). The EPA took comment on above the adjusted 2012 baseline) by January 8, 2014 but which had not applying building blocks at the regional adding them to the denominator of the commenced operation by December 31, level, and received significant comment emission rate goal. In response to 2011), the EPA estimated their supporting such an approach. Therefore, comments on this approach, the EPA incremental impact on the baseline whereas the proposal aggregated the issued a NODA discussing an generation and emissions using their baseline data to the state level, the final alternative methodology of capacity. The EPA assumed a 55 percent rule further aggregated it to the regional incorporating building block 3 in a capacity factor for under construction level prior to building block application. manner more analogous to building NGCC units and a 60 percent capacity The regions reflect the Eastern, Western, block 2 treatment, where the factor for under construction fossil and Texas Interconnections. The shift to incremental MWhs identified for the steam units, which are consistent with a regional framework was based on building block replace baseline fossil the values and methodology the EPA comments suggesting that the EPA MWhs on a one-to-one basis. The EPA proposed for under construction would better capture the interstate is adopting this replacement units.747 These values are informed by impacts of the building blocks and methodology for building block 3 in the the 2012 capacity factors for other units reflect the interconnected nature of the final rule consistent with comments in these technology classes that recently electric grid under a regional structure. noting that such a computational commenced operation.748 Using these The basis for the regions is defined and procedure better reflects the reduction capacity factors along with the capacity discussed in Section V.A.3. potential of that building block. for the units, the EPA estimated an Step three (identification of source Under this methodology, all of annual baseline generation value for category baseline emission rates). As building block 2 incremental NGCC these units. The agency then estimated discussed in the beginning of this potential and part of building block 3 annual baseline CO2 emissions for these section, the EPA took a technology- incremental RE potential were under construction units using the specific approach to quantifying ultimately applied to replace higher- average emission rate of generating units guidelines. Therefore, whereas the emitting fossil steam generation and of the same technology in the state proposal first averaged the fossil steam emissions, while the remaining building where the under construction unit is rate and NGCC rate together before block 3 potential was applied to replace located. Where no generators of the applying the building blocks and NGCC generation and emissions. same technology existed in a given state, defining state goals, the final rule Commenters noted that under this the EPA used the national baseline applied the building blocks at the approach building block 3 should be regional level to give a separate fossil applied first, or the EPA would 747 The EPA notes that we did not identify any steam rate and NGCC rate for each understate the potential of building under construction coal units at proposal, but we region. The starting point for calculating block 2 by subtracting out some NGCC are using a methodology in this final rule for newly the subcategory-specific emission generation after the 75 percent categorized under construction coal units similar to our under construction assessment of NGCC at performance rates was the baseline utilization level of NGCC had been proposal. regional emission rates for both fossil applied to replace fossil steam. The EPA 748 The EPA received comment on the assumed steam and NGCC in the year 2012 with agrees and calculated the building block 55 percent capacity factor for under construction the modifications discussed above. 3 impacts first in developing the NGCC EGUs. Some comments suggested the value Step four (application of building was too large of an estimation for incremental emission performance rates. generation as some of that 55 percent utilization block 1). The baseline CO2 emissions To implement this, first, building would have a replacement impact on 2012 amount for the coal-fired steam EGU block 3 replacement potential was operating generation. Others suggested it should be fleet in each region was reduced by 2.1, identified for each region to arrive at a larger as a particular planned under construction 2.3, and 4.3 percent in the Western, total amount of incremental zero- unit was anticipated to have a higher utilization rate. The EPA reviewed operating patterns of EGUs Texas, and Eastern Interconnections that came online, and determined a 55 percent and 750 Building block 1 analysis acknowledges some 60 percent capacity factor assumption for under 749 The EPA received some comments suggesting variation in heat rate improvement potential at construction NGCC and coal EGUs respectively are that under construction units should not be different units. The implementation of this building a reasonable estimate for informing the incremental included in the quantification of BSER and/or rate block reflects a heat rate improvement on average emissions and generation from under construction calculations, and other comments supporting their across a region’s coal fleet, not necessarily a heat units. It recognizes that some of these units may inclusion. The EPA determined that including it rate improvement at every unit. indeed operate at a higher utilization level, but also was consistent with our responsibility under the 751 Baseline OG steam emissions are added to recognizes that some of the generation may have a 111(d) statute to define a Best System of Emission adjusted coal emissions and divided by baseline OG replacement effect instead of an incremental one. Reduction for existing units. steam generation and baseline coal generation.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00157 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64818 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

emitting generation hours available to after application of the building blocks. performance rates are derived be replace fossil generation in the region. But the emission performance rates transparent and based on observable Because renewable generation can must account for CO2 emissions and historical data. The first approach, replace both fossil steam and NGCC on generation from incremental gas and however, depends on the level of the grid, the EPA determined that it was renewable generation that comprise incremental NGCC generation relative to appropriate to apply these incremental building blocks 2 and 3, to reflect and what is available after the zero-emitting generation hours to enable the emission reductions implementation of building block 3. replace generation and associated achievable under the best system of This level of NGCC generation (obtained emissions from each of the fossil steam emission reduction, and ensure that the after replacing baseline levels of and NGCC fleets in the region on a pro- shared implementation of the BSER by generation with NGCC’s pro rata share rata basis in the following manner.752 steam and NGCC generation is reflected of incremental RE generation) only The EPA determined the percent of in the rates. exists as an intermediate step in the fossil steam generation and the percent Step seven (accounting for and BSER calculation. It is not based on an of NGCC generation of total affected facilitating the emission reductions observable or concrete level of fossil generation in each region’s achievable through the implementation generation. baseline. We then assigned those of the best system of emission In Section VIII we discuss methods percentages of the incremental zero- reduction). for creating ERCs for implementing emitting MWhs to each of those This step quantifies the aggregate shifting of generation from steam to technology source categories.753 The emission changes associated with the NGCC, and this discussion illustrates incremental zero-emitting generation emission rate improvement and the value of relying on an observable assigned to each technology replaced generation replacement patterns and concrete baseline. In that section we the same amount of fossil generation described in steps four, five, and six to suggest that incentivizing and from that technology’s baseline value. arrive at an adjusted fossil steam facilitating the purchase of ERCs as a Step six (application of building block emission rate and an adjusted NGCC compliance option for steam units could 2). If the remaining generation level for emission rate for each region that will, be implemented through the use of a the NGCC fleet in a region, taking into as discussed above, (1) enable the factor that creates a fraction of an account the previous step’s replacement implementation of all three building allowable credit for each hour that an of NGCC generation, was less than 75 blocks, (2) be based on observable, NGCC operates. This factor is derived percent of the fleet’s potential concrete baselines, and (3) reflect the from the incremental generation of summertime generating capacity (the BSER. NGCC post-building block 2, relative to potential capacity factor the EPA First, in developing the emission the baseline. While a different factor determined to represent the BSER), then performance rates, the EPA had to could be derived from the hypothetical the NGCC generation in the region was answer the question of how to reflect intermediate level resulting from the pro assumed to increase to levels equal to the building blocks in the equations rata application of zero emitting the lesser of (1) its potential at a 75 defining the rates in a manner that generation to NGCC in building block 3 754 would enable the generation shifts that percent capacity factor or (2) a (by transferring the full amount of are essential components of the BSER. generation level above which there is no NGCC emissions and generation In the case of building block 3, the EPA longer fossil steam generation remaining replacing steam generation in building accomplished this by incorporating the within the same region to replace. In block 2), the EPA believes that pro rata share of incremental (above other words, the regional NGCC grounding baselines in historical data baseline) zero emitting generation into capacity factor was only assumed to (such as those used to derive the 2012 the emission rates for each group of reach 75 percent if there was sufficient baseline) is both more transparent and affected EGUs, thus ensuring that these higher-emitting fossil steam generation easier to understand in a way that is EGUs would have to include a that it could replace after step five. The more useful to states and utilities, in corresponding amount of zero-emitting increase in NGCC generation at this step contrast to the practical challenges of generation in their compliance compared to the post-building block 3 relying on a calculated level that calculations, either through the level was matched by an equal decrease corresponds to an interim step within acquisition of credits or through some in fossil steam generation reflecting the the emission performance rate other mechanism as determined by their 1 for 1 MWh hour replacement. At this calculation. As long as the crediting point, the generation for both steam and state in its implementation plan. For building block 2, a similar framework for creating ERCs is NGCC reflect the final distribution of consistent with the amount of gas generation between the subcategories mechanism is needed. Accordingly, a portion of the NGCC generation and emissions and generation that is emissions used to replace fossil steam transferred to the coal rate, either the 752 The EPA took comment on a pro-rata or an chosen option or the option of intensity-based replacement approach. In this final must be averaged into the steam rate, rule, the EPA agrees with commenters that a pro- analogous to what was done with transferring the entire quantity of gas rata approach is a better reflection of the BSER. building block 3. The EPA considered emissions and generation that occurred Incremental RE generation has, and is likely to two approaches to define the quantity of in step six to the coal rate would continue, to replace both steam and gas turbine provide an incentive for the power generation and the BSER captures this through a NGCC generation and emissions to be pro-rata distribution of identified building block 3 averaged into the steam rate: (1) market to implement the shift in 755 potential. Incremental NGCC generation after the generation from coal to gas. 753 For example, if 100 MWh of incremental zero implementation of building block 3 and emitting generation is available in a given region 755 The EPA recognizes that real world market and that region had 70 percent of its affected fossil (2) incremental NGCC generation from dynamics will necessarily differ from the BSER generation coming from fossil steam units in the baseline levels. For the reasons below, assumptions, and has designed the emission baseline and 30 percent from NGCC units—then 70 the EPA has determined that the second guidelines to provide flexibility beyond the MWhs of the incremental zero-emitting generation approach better reflects the emission reduction opportunities identified in the are applied to baseline fossil steam generation and BSER. The essential criteria, however, are that the 30 MWhs are applied to baseline NGCC generation. considerations discussed above. emission rates and crediting framework are 754 In early years, will be less than 75 percent due As discussed above, it is beneficial consistent with the BSER and provide the to building block 2 gradual deployment. that the baseline from which emission incentives needed to facilitate the emission

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00158 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64819

Also as discussed above, it is post-step six NGCC generation) by the 2030.758 The resulting annual rates vary important that the compliance equations baseline NGCC rate for that region.756 because the amount of building block 2 reflect the BSER pro rata allocation of This constitutes the numerator of the and 3 potential in each year varies. The RE to fossil steam and NGCC generation. fossil steam emission rate. rates for years 2022–2029 were averaged The first approach to define the quantity For the fossil steam denominator, the together to calculate an interim rate, and of NGCC generation and emission to be EPA added the remaining fossil steam the 2030 value becomes the final averaged into the steam rate would generation (post-step six), the emission performance rate for that year require the steam rate to take into incremental NGCC generation defined forward. As described in the account the total additional NGCC above, and the amount of zero emitting corresponding TSD, the EPA rounded generation that results from the building block 3 MWhs apportioned to the interim and final subcategory- application of building block 3 before fossil steam generation in the region specific emission performance rates up building block 2 has been applied. This (step five). Dividing the fossil steam to the nearest integer to ensure that they approach would reflect in the numerator described above by this fossil did not slightly overstate BSER potential compliance rate for steam units a greater steam denominator resulted in a through use of conventional rounding. share of the implementation of building regional adjusted fossil steam rate Unless otherwise stated, conventional block 3. Ensuring that emission reflecting the three building blocks. rounding is used elsewhere during the performance rates for both steam and For the NGCC performance rate, the calculation process. gas units reflect the emission reduction EPA calculated a numerator in a similar potential of building block 3 is integral It bears emphasis that the procedure manner. First, we took the remaining described above was used only to to the building block 3 methodology and NGCC generation (post step six) and also recognizes that application of determine emission performance rates, multiplied it by the regional baseline and the particular data inputs used in building block 3 on a pro-rata basis was NGCC rate to calculate the total intended to achieve emission reductions the procedure are not intended to emissions in the numerator. For the represent specific requirements that from both NGCC and fossil steam denominator, the EPA added the would apply to any individual EGU or commensurate with their emissions remaining NGCC generation (post step to the collection of EGUs in any state. reduction opportunities. six) to the amount of zero-emitting The specific requirements applicable to If the EPA were to use the increment building block 3 generation assigned to individual EGUs, to the EGUs in a given of NGCC emissions and generation that technology in step five. Dividing state collectively, or to other affected derived at the intermediary step after the emissions by this total generation entities in the state, would be based on the application of building block 3, value (inclusive of the RE generation the emission standards established rather than the increment relative to the apportioned to NGCC) provided a through that state’s plan. The details of 2012 baseline, the effect would be to regional adjusted NGCC rate.757 largely assign to fossil steam the how states could demonstrate Step eight (determining the building block 3 generation shift compliance with the emission nationwide subcategory-specific apportioned to NGCC. That, in turn, performance rates or statewide goals emission performance rate). would have undermined the fact that through different state plan approaches Following step seven, we evaluated building block 3 was determined to be that recognize emission reductions the resulting adjusted fossil steam rates a BSER measure applicable to the entire achieved through all the building blocks and NGCC rates for each region and source category, comprising NGCC as are discussed further in section VIII on identified the highest (least stringent) well as fossil steam, and would have state plans. emission rate among the three regions conflicted with the preceding steps we for each technology category. This Finally, the procedures and are taking to develop the equations. becomes the nationwide emission assumptions in the equation to calculate Instead, by using only the incremental performance rate for that technology emission performance rates are not NGCC generation relative to the class. This ensures that the same rates intended to reflect a compliance baseline, the EPA has ensured that the are applied to facilities in each region scenario in a future year, but rather logic behind the pro rata displacement and that these rates are achievable by reflect a representative year in which of fossil generation by RE generation is facilities in all three regions. the building blocks are applied. The reflected in the emission rates. Having power sector fleet will continue to turn established the appropriate way to Finally, the EPA repeated steps four through eight for each year 2022– over, and in some cases has already measure the amount of incremental gas experienced turnover beyond the generation placed in the fossil steam 756 baseline period. However, while the rate, the EPA is able to calculate the See CO2 Emission Performance Rate and Goal Computation TSD for CPP Final Rule for an system’s fleet may change, the EPA subcategory-specific emission illustration of this step. The EPA defined the believes this turnover will only further performance rates. For the numerator of ‘‘incremental NGCC generation’’ in this step in a promote the feasibility of the emission the fossil steam rate, the EPA multiplied manner consistent with its measurement and use performance rates. Fleet turnover has the remaining fossil steam generation described in section VIII of this preamble. 757 trended towards, and is expected to See CO2 Emission Performance Rate and Goal (post-step six) by the fossil steam rate Computation TSD for CPP Final Rule for an continue to trend towards, lower- reflecting the heat rate improvement illustration of this step. We note that the entire emitting generation sources that will from building block 1 (step four). We NGCC generation level (inclusive of the amount make reductions more readily available. then added in the emissions associated assigned to the fossil steam rate) expected post building block application is included in the NGCC with the incremental NGCC generation rate calculation. Including the entire NGCC 758 At proposal, the EPA repeated this step over from step six by multiplying the generation in the NGCC rate recognizes the a 10 year period. The building blocks and incremental NGCC generation as simultaneous compliance responsibility of affected corresponding BSER emission rates increased for discussed above (difference between the NGCC units while the fossil steam rate recognizes ten consecutive years (2020–2029) in the EPA’s rate its mitigation potential through incorporation of the calculation. In this final rule, the EPA has baseline NGCC generation level and incremental NGCC generation component. Failing maintained the same 2030 compliance period for to do so would result in a NGCC rate lower than final rates but adjusted the start date to 2022 based reduction measures reflected in the BSER and that expected after full implementation of the on comments. Therefore, the deployment of together produce an achievable compliance building blocks and create a compliance building blocks is spread over a nine year period framework for sources. inconsistency when reporting all generation. (2022–2030) instead of the proposed 10 year period.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00159 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64820 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

VII. State-Specific CO2 Goals emission standards that reflect the of these comments, the EPA has BSER. considered the appropriateness of rate- A. Overview In the June 2014 proposal, the EPA based and mass-based goals as an In section VI of this preamble, the proposed a set of state-specific emission expression of BSER and their EPA provides the methodology for rate-based CO2 goals (in lbs of CO2 per equivalence to the quantitative computing subcategory-specific CO2 MWh of electricity generated). In expression of BSER through the two CO2 emission performance rates, based on addition, the EPA proposed emission emission performance rates. the BSER. The subcategory-specific CO2 rate-based CO2 goals for areas of Indian Based on the comments received, the emission performance rates are the country and U.S. territories with EPA is providing a straightforward quantitative expression of the BSER as affected EGUs in a supplemental translation methodology from the CO2 determined by the EPA. In this section, proposal on November 4, 2014. To emission performance rates to yield we provide state rate-based goals and provide flexibility to states, territories, statewide rate-based and mass-based mass-based goals that can be used in the tribes and implementing authorities, the CO2 emission performance goals alternative, by states, as an equivalent proposals authorized each described in this section. The EPA is quantitative expression of the BSER in implementing authority to translate the providing state mass-based goals in this establishing standards of performance form of the goal to a mass-based form final rule in place of having states for affected EGUs in state plans. In this (i.e., goals expressed in terms of total determine the mass themselves. The section, the EPA also describes reasons tons of CO2 per year from affected mass-based goals are the result of a for providing state-specific rate-based EGUs), as long as the translated goal was mathematical derivation that provides goals and mass-based goals equivalent equivalent to the rate-based goal. Upon goals that are an equivalent expression to the emission performance rates, issuance of the proposed rule, the EPA of the BSER. Section VIII below supported by the many requests from continued the extensive outreach effort discusses mechanisms for states to plan commenters for the provision of these to stakeholders and members of the for and demonstrate achievement of the alternative expressions of the BSER public that the EPA had engaged in for statewide CO2 emission performance established by the EPA. We further many months preceding the proposal. goals. ensure this equivalence, and therefore We also issued a notice of data CAA section 111(d) requires states to reflection of the BSER, by requiring that availability (79 FR 67406, November 13, submit a plan that establishes standards of performance for affected EGUs that rate-based state goals and mass-based 2014) and technical support document implement the BSER. States meet the state goals fully implement the BSER, (Docket ID: EPA–HQ–OAR–2013–0602– statutory requirements of CAA section including by ensuring that affected 22187) to further clarify potential 111(d) and the requirements of the final EGUs operating under mass-based methods for the translation to a mass- emission guidelines by submitting emission standards are not incented by based equivalent. The outreach emission standards for affected EGUs dint of the mass-emissions constraint to provided additional opportunities for all that meet the performance rates, which shift generation to unaffected fossil fuel- jurisdictions with affected EGUs—both individually and in regional groups—as reflect the application of the BSER as fired sources to an extent that deviates well as numerous industry groups and determined by the EPA. Therefore, as a from, or negates, the implementation of non-governmental organizations, to first step for states that choose to submit the BSER. meet with the EPA and ask clarifying plans that meet the rate-based or mass- The EPA is reconstituting the questions about, and give initial based goals, the goals must be emission performance rates discussed in reactions to, the proposed components, determined to have equivalence as an section VI into statewide CO2 emission requirements and timing of the application of the BSER. For the rate- performance goals for each state for the rulemaking. As a result of the outreach based and mass-based state goals purpose of facilitating states’ and notice of data availability, the EPA provided here, this equivalence is development of state plans received informed substantive evident in the mathematical derivation encompassing maximum flexibilities in comments for the EPA to consider for of the goals, as is described in sections implementing the BSER. This state- the final rule. VII.B and VII.C below. specific goal is not a compliance Numerous commenters encouraged Further (as described in section requirement, but rather an alternative and supported the EPA’s efforts to allow VIII.J), the state plan must demonstrate yet equivalent expression of the BSER states the maximum possible degree of that it has measures in place to ensure that the state may choose to use to flexibility in developing plans for their that any alternative to the performance establish emission standards for its affected EGUs, either as a mass-based or rates (i.e., rate-based or mass-based state affected EGUs. The state goal is the rate-based CO2 goal. States and other goals that it uses to establish standards equivalent of the technology-specific stakeholders supported the option to of performance) does not result in CO2 emission performance rates and translate rate-based goals to mass-based affected EGUs’ failing to implement represents the equivalent of the state’s goals for state plans and requested a either the BSER measure themselves or applying the emission performance rates simple and transparent method for alternative methods of compliance with directly to its affected EGUs in the form determining mass-based statewide CO2 emission standards that achieve of standards of performance. As goals that are equivalent to statewide equivalent reductions in emissions or discussed further in section VIII on state rate-based CO2 goals and thus reflective carbon intensity. The EPA has identified plans, the states are charged with setting of the BSER. We received substantial one way in which affected EGUs could emission standards for the affected comments on the potential fail to meet, at a minimum, of the EGUs in their respective jurisdictions methodologies for the translation of emission performance levels that would such that the affected EGUs operating rate-based goals to mass-based goals. result from implementing the BSER, under those standards together satisfy Several commenters requested that the which state plans must do. the requirements of the final emission EPA provide the translation to a Specifically, the EPA has determined guidelines and statute by meeting the statewide mass-based goals directly that the three building blocks are the emission performance rates or while others requested flexibility to BSER, including shifting generation equivalent statewide emission translate to mass using a variety of from an affected EGU to a lower- performance goals, and thereby meet methodologies and tools. In the context emitting affected EGU or to a non-

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00160 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64821

emitting EGU and that states are implementation to assure those appropriate way to combine the rates. required to establish standards of incentives are realigned.760 First, as explained in Section VI, the performance that require affected EGUs EPA believes there are significant B. Reconstituting Statewide Rate-Based to achieve, at a minimum, the emission advantages to using real world data to CO2 Emission Performance Goals From set a baseline rather than using performance levels that reflect the BSER the Subcategory-Specific Emission projected data. The adjusted 2012 data (recognizing that affected sources may Performance Rates choose from a range of equivalent is the logical starting point because it is actions (e.g., undertaking the measures In order to provide states flexibility the data that all of the emission included in the building blocks, shifting for planning purposes, the EPA is performance rates (discussed in Section generation to low-emitting or zero- providing a state-specific averaging of VI) are based upon. Furthermore, it is emitting resources not included in the the subcategory-specific emission clear that generation shifts as projected building blocks or achieving demand- performance rates to determine a under the BSER are not the appropriate side EE or transmission efficiency— statewide goal. While the emission baseline. The emission performance either through operational undertakings, performance rates reflect the rates already factor in the BSER direct investment or emissions trading). quantification of performance based on assumptions about changes in the BSER and embody the reductions Substantial shifting of generation from generation (e.g., implementation of estimated under building blocks 1, 2, affected EGUs to new fossil fuel-fired building block 2 significantly lowers the and 3, the state goals reflect an EGUs, such as new NGCC units, emission performance rate for fossil- equivalent approach through which represents a deviation from steam units). If, on top of that, changes states may choose to adopt and implementing the BSER or its in generation were factored into the implement those subcategory-specific compliance equivalent. calculation of a combined rate, those performance rates. changes in generation would be factored Since the two subcategory-specific The EPA quantified the potential into the combined rate twice (once emission performance rates represent reductions of the BSER in the when calculating the individual the BSER, states that established subcategory-specific emission emission performance rates and a standards of performance at or below performance rates established in section second time, when incorporating those those rates, by definition, would be VI. These rates themselves reflect the rates into a combined state rate). implementing state plans that created reduction potential expected in This step is repeated for each year no risk that affected EGUs would shift emission rates under the BSER for each from 2022–2029 using the emission generation to new fossil-fired EGUs to year from 2022 to 2030. To establish performance rates calculated for each of an extent that would deviate from the state goals, the EPA applied these rates those years in the previous section. The BSER. Similarly, the EPA has to the baseline generation levels to EPA also repeats this step for the determined that states using rate-based estimate the affected fleet emission rate interim state goal using the interim goals as the foundation for plans that would occur if all affected EGUs in subcategory rates. The EPA then implementing the BSER are unlikely to the fleet met the subcategory-specific averages together the annual amounts in foster generation shifts to new fossil rates. This step respects the flexibility of increments of 3 years, 3 years, and 2 fuel-fired sources to an extent that sources to meet the rates in any manner years for 2022–2024, 2025–2027, and would deviate from the BSER. In that they see fit (e.g., on-site abatement 2028–2029 to estimate emission rate contrast, however, EPA analysis has technology, fuel switching, co-firing, averages for those periods that can identified a concern that a mass-based credit purchase, etc.), and does not limit provide one illustrative pathway for state plan that failed to include them to their building block states to consider in meeting their appropriate measures to address leakage assumptions. For example, the EPA interim goals. These 3- and 2-year could result in failure to achieve derived the statewide rate-based CO2 increment are not regulatory guidelines emission performance levels consistent emission performance goals for 2030 by or equivalents for interim goals, but with the BSER.759 Section VII.B multiplying the fossil steam emission rather benchmarks for demonstrating describes how the form of the rate-based performance rate for 2030 by the plan performance as discussed in state goals minimizes the risk of baseline fossil steam generation in a Section VIII.F illustrative of a potential generation shifts to new fossil fuel-fired state and multiplying the NGCC gradual reduction compliance strategy sources, or ‘‘leakage,’’ by providing emission performance rate for 2030 by that states may use to reach their affected EGUs with a sufficient the baseline NGCC generation in a state. interim and final state goals. incentive to run, similar to the The resulting emissions for fossil steam As described in the steps above, the performance rates. Section VII.D. and NGCC are then added together for statewide goals represent an equivalent discusses how there is a potential for each state. This emission total is arithmetic combination of the leakage under mass-based state goals divided by that state’s baseline subcategory-specific emission because affected EGUs are incented to generation values from the likely performance rates, weighted by the operate in a manner—in particular, by affected EGUs in order to develop a historical baseline generation levels shifting generation to new NGCC units state’s rate-based CO2 emission upon which the BSER is premised. In (as opposed to shifting generation as performance goal for 2030. This blended particular, as discussed above, the contemplated by the BSER or rate reflects the collective emission rate method for deriving these goals assures undertaking equivalent alternative a state may expect to achieve when its equivalent flexibility by applying the compliance actions)—that would result baseline fleet of likely affected EGUs CO2 emission performance rates to the in negating the equivalence with the continues to operate at baseline levels baseline levels, which respects the emission performance rates and thus the while meeting its subcategory-specific flexibility of affected EGUs to meet the BSER, and specifies that requirements emission performance rates reflecting rates in whatever way they wish. This are needed in mass-based the BSER. The EPA believes that using corresponding treatment of affected the adjusted 2012 baseline is the most EGUs based on the adjusted 2012 759 See Chapter 3 of the Regulatory Impact baseline ensures sufficient incentive to Analysis for more information on this analysis, 760 The specific mass-based plan requirements are affected existing EGUs to generate and which is available in the docket. explained in detail in section VIII.J. thus avoid leakage, similar to the CO2

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00161 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64822 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

emission performance rates (this is emissions to generation as quantified by rate-based state goals were published in further discussed in section VII.D the subcategory-specific emission the proposed rule, and commenters not below). Consequently, the statewide performance rates. Due to the nature of only supported having the flexibility to goals are equivalent to the CO2 emission the emission performance rate use rate-based goals or mass-based goals performance rates and are thus an methodology, which selects the highest as part of state plans, but also requested equivalent expression of the BSER. The of the three interconnection-based that the EPA include mass-based goals rate-based statewide goals are provided values for each source category as the in this final rule. But to ensure the below in Table 12. CO2 emission performance rate, there equivalence of mass-based state goals, are cost-effective lower-emitting we must consider how the form of the C. Quantifying Mass-Based CO2 goal affects its implementation and how Emission Performance Goals From the generation opportunities quantified under the building blocks that are not the incentives it provides to affected Statewide Rate-Based CO2 Emission EGUs on the interstate grid affect Performance Goals necessary for affected EGUs in the Western and Texas interconnections to whether or not the BSER is fully The EPA is also establishing mass- demonstrate compliance at historical implemented. based statewide CO2 emission generation levels. The EPA recognizes Because of the integrated nature of the performance goals for each state, which that these lower-emitting generation utility power sector, the form of the are provided below in Table 13. For opportunities are available to affected emission performance requirements for state plans choosing to meet a mass- EGUs at a national level as a means to existing sources may ultimately impact based goal, such a goal must be increase their own output (and, as a the relative incentives to generate and equivalent to the CO2 emission result, their own emissions) while emit at affected EGUs as opposed to performance rates in their application of maintaining the relevant emission shifting generation to new sources, with the BSER, as required by the statute and performance rate. To afford affected potential implications for whether a the final emission guidelines. In the EGUs subject to a mass-based goal given set of standards of performance is, following discussion we describe the similar compliance flexibility as EGUs at a minimum, consistent with the mathematical calculations that provide subject to a rate-based goal, the EPA has BSER, in the context of overall an equivalent expression of the BSER. In quantified the emissions associated with emissions from the sector. In this evaluating the equivalence of the form the potential realization of these lower- context, we, again, define as ‘‘leakage’’ of mass goals, the EPA must also emitting generation opportunities and the potential of an alternative form of recognize the impact that the form of the incorporated those additional tons into implementation of the BSER (e.g., the standard has on the relative incentives each state’s mass-based goal.761 Because rate-based and mass-based state goals) to that the implementation of these goals the derivation of these mass-based goals create a larger incentive for affected provides to affected and unaffected respects the arithmetic of the EGUs to shift generation to new fossil EGUs. This section specifies how we subcategory-specific emission fuel-fired EGUs relative to what would have established a quantitative basis for performance rates and the flexibility of occur when the implementation of the mass goals that is equivalent to CO 2 affected EGUs to achieve those rates BSER took the form of standards of emission performance rates. The next while utilizing up to the full potential performance incorporating the section (section VII.D) specifies how we quantified in the building blocks, the subcategory-specific emission require state plans to ensure derivation of these mass-based state performance rates representing the equivalence to the CO emission 2 goals offers an equivalent expression of BSER. In the proposal, the EPA performance rates through certain recognized that the statutory requirements that realign the potential BSER in mass form. The mass goals for existing sources construction regarding the BSER is to difference in incentives provided to reduce emissions, which can be affected and unaffected EGUs to are presented in Table 13. Although their derivation is equivalent to the achieved through shifts of generation. generate under a mass-based Movement of generation between and implementation compared to a rate- subcategory-specific emission performance rates, in order to maintain among sources is needed to produce based implementation that could result overall reductions, particularly in leakage. this equivalence in the establishment of emission standards in state plans mass movement from higher-emitting affected The starting place for quantifying EGUs to lower-emitting affected EGUs, mass-based statewide CO2 emission goals must be implemented in combination with requirements that and from all affected EGUs to zero- performance goals is the emission emitting RE. In all of these cases, the amounts directly represented in the align the incentives provided to affected and unaffected EGUs, specifically in fossil sources involved in these numerator of the statewide rate-based generation shifts are subject to CO emission performance goals. Each order to prevent leakage. 2 obligations under this final rule.762 state-specific emission amount is the D. Addressing Potential Leakage in However, leakage, where shifts in product of the fossil steam emission Determining the Equivalence of State- generation to unaffected fossil fuel-fired performance rate and historical fossil Specific CO2 Emission Performance sources result in increased emissions, steam generation, added to the product Goals relative to what would have happened of the NGCC emission performance rate and historical NGCC generation. The As described in section VI, the subcategory-specific emission 762 The final rule includes state plan conditions resulting emission amounts for each to prevent perverse incentives that could otherwise state represent the emissions associated performance rates reflect the BSER as result in greater overall emissions when generation with rate-based compliance at historical determined by the EPA. This final rule shifts across affected EGUs. For example, states that generation levels. allows states to establish emission wish to engage in rate-based trading through an standards that meet either rate-based or emission standards plan type must adopt plans However, under a rate-based state designed to achieve either a common rate-based plan, all affected EGUs have the mass-based state goals. As stated above, state goal or the subcategory-specific emission opportunity to increase utilization, performance rates (see section VIII.L). Such a state 761 provided that sufficient emission For more detail on this methodology, please plan condition avoids encouraging generation to refer to the CO2 Emission Performance Rate and shift from a state with a relatively lower state goal reduction measures are available to Goal Computation TSD for CPP Final Rule, which to a state with a relatively higher state goal solely maintain the necessary ratio of is available in the docket. as a response to the form of CPP implementation.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00162 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64823

had generation shifts consistent with the generation over new NGCC generation. Further supporting the need for this BSER occurred, is contrary to this Both of these features, which exist in requirement, the EPA has evaluated the construction. Therefore, if the form of the context of implementation with a mass goals in concert with some of the the standard does not address leakage or state rate-based goal or CO2 emission options to minimize leakage described incents the kinds of generation shifts performance rates, provide significant in that section. As mentioned above, the that we identify as leakage, the states incentives to ensure that, consistent EPA analysis identified a concern must otherwise address leakage in order with the BSER, shifting of generation regarding leakage in a mass-based to ensure that the standards of does not occur between existing fossil approach, namely that the mass-based performance applied to the affected fuel-fired units and new NGCC units. implementation without measures to EGUs are, in the aggregate, at least Mass-based goals for existing sources, address leakage produced higher equivalent with the emission however, incur a leakage risk to the generation from new NGCC units and performance rates, and therefore extent that they incent generation shifts lower emission performance when appropriately reflect the BSER as from affected EGUs to unaffected fossil compared to a rate-based required by the statute. Commenters fuel-fired sources in a way that negates implementation. Further analysis where noted that shifting generation and the reliance on the BSER. In contrast to implementation of the mass-based goals emissions from existing sources to new various forms of rate-based was coupled with measures to address sources undermined the intent of this implementation, mass-based leakage produce utility power sector rule and the overall emission reduction implementation in a state plan can emissions performance that is similar to goals, and that requiring states to unintentionally incentivize increased emissions performance under the rate address leakage is consistent with the generation from unaffected new EGUs as goals.763 obligation that states establish standards a substitute action for reducing E. State Plan Adjustments of State Goals of performance that, in the aggregate, at emissions at units subject to the existing a minimum, reflect the BSER for source mass goal in ways that would The EPA notes that it is the emission affected EGUs operating in the negate the implementation of the BSER performance rates in section VI that interconnected electricity sector. and would result in increased constitute the application of the BSER to This section specifically addresses the emissions. This occurs because, unlike the affected EGUs and serve as the chief need for state plans designed to achieve in a rate-based system where rate-based regulatory requirement of this either rate- or mass-based state goals to averaging lowers the cost of generation rulemaking. The statewide CO2 rate- ensure that their plans succeed in from existing NGCC units relative to based and mass-based emission implementing standards of performance generation from new NGCC units, in a performance goals provided here are that reflect the BSER by minimizing the mass-based system the allowance price metrics that states may choose to adopt difference in incentives provided to increases the cost of generation from when demonstrating compliance at the affected EGUs and new sources to existing NGCC units relative to state level, and states may consider generate in order to maintain equivalent generation from new NGCC units. The these goals when determining how to emission performance with the CO 2 extent to which electricity providers opt set unit-level compliance requirements. emission performance rates. The EPA believes that the regional Rate-based goals do not in our view to rely on this increase in unaffected new source utilization as a substitute for nature of determining the emission implicate leakage to an extent that performance rates encompasses a large would negate or limit the improving the emissions performance across existing sources would be population size and makes it robust implementation of the BSER because against unit-level variation and unit- under a rate-based state goal, similar to fundamentally inconsistent with relying on the BSER to reduce emissions as the level inventory discrepancies. The EPA the subcategory-specific emission does acknowledge that state-level rate- performance rates, existing lower- basis of the subcategory-specific emission performance rates. based goals or mass-based goals may be emitting affected EGUs, primarily NGCC sensitive to applicability changes within As a result, notwithstanding the fact units, are incentivized to increase their a state’s affected population. In the that mass goals for existing sources are utilization in order to improve the proposal, the EPA used a baseline that quantified in a way that is an equivalent average emission rates of affected EGUs aggregated data for what it believed to expression of the BSER, the form of overall. New units that are not subject be affected units and asked states, mass goals is only equivalent if leakage to the rate-based state goal, and that are companies and other stakeholders to is satisfactorily addressed in the state not an allowable measure for adjusting provide corrections in their comments. plan’s establishment of emission an EGU’s CO2 emission rate, will not We received input from many standards and implementation have this incentive to increase commenters and have corrected measures. The EPA is therefore utilization, and as a result, the information as appropriate. Therefore, requiring that states adopting a mass- imposition of a rate-based goal on we believe the baseline to be accurate. based state plan include requirements affected EGUs is unlikely to encourage However, if subsequent applicability that address leakage, or otherwise increased generation and emissions review or formal applicability provide additional justification that from unaffected new EGUs. The form of determinations change the status of leakage would not occur under the the rate-based state goals provides an units in regards to being affected or state’s implementation of mass-based equivalent or greater incentive to unaffected by this rulemaking, states affected existing EGUs as they are emission standards. This requirement can, via state plan submittal or revision, provided in the CO emission enables states to establish standards of 2 adjust their statewide rate or mass goal performance rates, and similarly avoid performance that meet a mass-based to reflect this change of status. goal equivalent to the performance rates the potential for leakage. Under both This adjustment flexibility provision and therefore reflect the BSER, as approaches, existing NGCC units can is based on comments received at required by section 111(d). The required generate ERCs. These ERCs provide an proposal. For example, some economic incentive to utilize existing demonstration and options for state NGCC units rather than new NGCC plans to minimize leakage are discussed 763 See Chapter 3 of the Regulatory Impact units. Further, ERCs from incremental in detail in section VIII.J of this Analysis for more information on this analysis, RE incentivize new renewable preamble. which is available in the docket.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00163 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64824 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

stakeholders noted that the affected performance rates discussed in the its state plan. The EPA will evaluate the status of particular units was unclear. previous section. However, variations in appropriateness of such an adjusted The EPA recognizes that all the baseline data or inventory may have an value based on the state’s demonstration necessary data to determine the affected impact on the state-level rate-based or and evaluate the approvability of a plan status of some units may not be mass-based goals provided in this or plan revision accordingly. available at this time. As stated above, section. Therefore, the EPA is allowing Rate-based statewide CO emission the EPA does not believe unit-level the flexibility for states to demonstrate 2 variation or inclusion/exclusion the need for this type of adjustment performance goals are listed below in disparities between baseline inventory under the justifications above and Table 12. Mass-based statewide CO2 and affected units will impact the utilize an adjusted value for compliance emission performance goals are found in regionally determined emission purposes when submitting or revising Table 13.

764 TABLE 12—STATEWIDE RATE-BASED CO2 EMISSION PERFORMANCE GOALS

[Adjusted output-weighted-average pounds of CO2 per net MWh from all affected fossil fuel-fired EGUs]

Interim goal— Interim goal— Interim goal— State name Step 1 Step 2 Step 3 Interim goal Final goal

Alabama ...... 1,244 1,133 1,060 1,157 1,018 Arizona * ...... 1,263 1,149 1,074 1,173 1,031 Arkansas ...... 1,411 1,276 1,185 1,304 1,130 California ...... 961 890 848 907 828 Colorado ...... 1,476 1,332 1,233 1,362 1,174 Connecticut ...... 899 836 801 852 786 Delaware ...... 1,093 1,003 946 1,023 916 Florida ...... 1,097 1,006 949 1,026 919 Georgia ...... 1,290 1,173 1,094 1,198 1,049 Idaho ...... 877 817 784 832 771 Illinois ...... 1,582 1,423 1,313 1,456 1,245 Indiana ...... 1,578 1,419 1,309 1,451 1,242 Iowa ...... 1,638 1,472 1,355 1,505 1,283 Kansas ...... 1,654 1,485 1,366 1,519 1,293 Kentucky ...... 1,643 1,476 1,358 1,509 1,286 Lands of the Fort Mojave Tribe ...... 877 817 784 832 771 Lands of the Navajo Nation ...... 1,671 1,500 1,380 1,534 1,305 Lands of the Uintah and Ouray Res- ervation ...... 1,671 1,500 1,380 1,534 1,305 Louisiana ...... 1,398 1,265 1,175 1,293 1,121 Maine ...... 888 827 793 842 779 Maryland ...... 1,644 1,476 1,359 1,510 1,287 Massachusetts ...... 956 885 844 902 824 Michigan ...... 1,468 1,325 1,228 1,355 1,169 Minnesota ...... 1,535 1,383 1,277 1,414 1,213 Mississippi ...... 1,136 1,040 978 1,061 945 Missouri ...... 1,621 1,457 1,342 1,490 1,272 Montana ...... 1,671 1,500 1,380 1,534 1,305 Nebraska ...... 1,658 1,488 1,369 1,522 1,296 Nevada ...... 1,001 924 877 942 855 New Hampshire ...... 1,006 929 881 947 858 New Jersey ...... 937 869 829 885 812 New Mexico * ...... 1,435 1,297 1,203 1,325 1,146 New York ...... 1,095 1,005 948 1,025 918 North Carolina ...... 1,419 1,283 1,191 1,311 1,136 North Dakota ...... 1,671 1,500 1,380 1,534 1,305 Ohio ...... 1,501 1,353 1,252 1,383 1,190 Oklahoma ...... 1,319 1,197 1,116 1,223 1,068 Oregon ...... 1,026 945 896 964 871 Pennsylvania ...... 1,359 1,232 1,146 1,258 1,095 Rhode Island ...... 877 817 784 832 771 South Carolina ...... 1,449 1,309 1,213 1,338 1,156 South Dakota ...... 1,465 1,323 1,225 1,352 1,167 Tennessee ...... 1,531 1,380 1,275 1,411 1,211 Texas ...... 1,279 1,163 1,086 1,188 1,042 Utah * ...... 1,483 1,339 1,239 1,368 1,179 Virginia ...... 1,120 1,026 966 1,047 934 Washington ...... 1,192 1,088 1,021 1,111 983 West Virginia ...... 1,671 1,500 1,380 1,534 1,305 Wisconsin ...... 1,479 1,335 1,236 1,364 1,176 Wyoming ...... 1,662 1,492 1,373 1,526 1,299 * Excludes EGUs located in Indian country within the state.

764 The EPA has not developed statewide rate- goals for Vermont and the District of Columbia because current information indicates those based or mass-based CO2 emission performance jurisdictions have no affected EGUs.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00164 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64825

TABLE 13—STATEWIDE MASS-BASED CO2 EMISSION PERFORMANCE GOALS

[Adjusted output-weighted-average tons of CO2 from all affected fossil fuel-fired EGUs]

Interim goal— Interim goal— Interim goal— State Step 1 Step 2 Step 3 Interim goal Final goal

Alabama ...... 66,164,470 60,918,973 58,215,989 62,210,288 56,880,474 Arizona* ...... 35,189,232 32,371,942 30,906,226 33,061,997 30,170,750 Arkansas ...... 36,032,671 32,953,521 31,253,744 33,683,258 30,322,632 California ...... 53,500,107 50,080,840 48,736,877 51,027,075 48,410,120 Colorado ...... 35,785,322 32,654,483 30,891,824 33,387,883 29,900,397 Connecticut ...... 7,555,787 7,108,466 6,955,080 7,237,865 6,941,523 Delaware ...... 5,348,363 4,963,102 4,784,280 5,062,869 4,711,825 Florida ...... 119,380,477 110,754,683 106,736,177 112,984,729 105,094,704 Georgia ...... 54,257,931 49,855,082 47,534,817 50,926,084 46,346,846 Idaho ...... 1,615,518 1,522,826 1,493,052 1,550,142 1,492,856 Illinois ...... 80,396,108 73,124,936 68,921,937 74,800,876 66,477,157 Indiana ...... 92,010,787 83,700,336 78,901,574 85,617,065 76,113,835 Iowa ...... 30,408,352 27,615,429 25,981,975 28,254,411 25,018,136 Kansas ...... 26,763,719 24,295,773 22,848,095 24,859,333 21,990,826 Kentucky ...... 76,757,356 69,698,851 65,566,898 71,312,802 63,126,121 Lands of the Fort Mojave Tribe ...... 636,876 600,334 588,596 611,103 588,519 Lands of the Navajo Nation ...... 26,449,393 23,999,556 22,557,749 24,557,793 21,700,587 Lands of the Ute Tribe of the Uintah and Ouray Reservation ...... 2,758,744 2,503,220 2,352,835 2,561,445 2,263,431 Louisiana ...... 42,035,202 38,461,163 36,496,707 39,310,314 35,427,023 Maine ...... 2,251,173 2,119,865 2,076,179 2,158,184 2,073,942 Maryland ...... 17,447,354 15,842,485 14,902,826 16,209,396 14,347,628 Massachusetts ...... 13,360,735 12,511,985 12,181,628 12,747,677 12,104,747 Michigan ...... 56,854,256 51,893,556 49,106,884 53,057,150 47,544,064 Minnesota ...... 27,303,150 24,868,570 23,476,788 25,433,592 22,678,368 Mississippi ...... 28,940,675 26,790,683 25,756,215 27,338,313 25,304,337 Missouri ...... 67,312,915 61,158,279 57,570,942 62,569,433 55,462,884 Montana ...... 13,776,601 12,500,563 11,749,574 12,791,330 11,303,107 Nebraska ...... 22,246,365 20,192,820 18,987,285 20,661,516 18,272,739 Nevada ...... 15,076,534 14,072,636 13,652,612 14,344,092 13,523,584 New Hampshire...... 4,461,569 4,162,981 4,037,142 4,243,492 3,997,579 New Jersey...... 18,241,502 17,107,548 16,681,949 17,426,381 16,599,745 New Mexico*...... 14,789,981 13,514,670 12,805,266 13,815,561 12,412,602 New York...... 35,493,488 32,932,763 31,741,940 33,595,329 31,257,429 North Carolina...... 60,975,831 55,749,239 52,856,495 56,986,025 51,266,234 North Dakota...... 25,453,173 23,095,610 21,708,108 23,632,821 20,883,232 Ohio ...... 88,512,313 80,704,944 76,280,168 82,526,513 73,769,806 Oklahoma ...... 47,577,611 43,665,021 41,577,379 44,610,332 40,488,199 Oregon ...... 9,097,720 8,477,658 8,209,589 8,643,164 8,118,654 Pennsylvania ...... 106,082,757 97,204,723 92,392,088 99,330,827 89,822,308 Rhode Island...... 3,811,632 3,592,937 3,522,686 3,657,385 3,522,225 South Carolina...... 31,025,518 28,336,836 26,834,962 28,969,623 25,998,968 South Dakota...... 4,231,184 3,862,401 3,655,422 3,948,950 3,539,481 Tennessee ...... 34,118,301 31,079,178 29,343,221 31,784,860 28,348,396 Texas ...... 221,613,296 203,728,060 194,351,330 208,090,841 189,588,842 Utah* ...... 28,479,805 25,981,970 24,572,858 26,566,380 23,778,193 Virginia ...... 31,290,209 28,990,999 27,898,475 29,580,072 27,433,111 Washington ...... 12,395,697 11,441,137 10,963,576 11,679,707 10,739,172 West Virginia...... 62,557,024 56,762,771 53,352,666 58,083,089 51,325,342 Wisconsin ...... 33,505,657 30,571,326 28,917,949 31,258,356 27,986,988 Wyoming ...... 38,528,498 34,967,826 32,875,725 35,780,052 31,634,412 * Excludes EGUs located in Indian country within the state.

F. Geographically Isolated States and building block 3 of the BSER. The NREL and wind resources.765 The EPA also Territories With Affected EGUs data for RE that the EPA is relying upon recognizes that there are studies and Alaska, Hawaii, Guam, and Puerto for building block 3 does not cover the data for some renewable resources in Rico constitute a small set of states and non-contiguous states and territories. some of the other non-contiguous jurisdictions. However, taken as a U.S. territories representing about one The EPA acknowledges that NREL has whole, the data we currently possess do percent of total U.S. EGU GHG collaborated with the state of Hawaii to not allow us to quantify the emissions emissions. Based on the current record, provide technical expertise in support the EPA does not possess all of the reductions available from building block of the state’s aggressive goals for clean 3 using the same methodology used for information or the analytic tools needed energy, including analyses of the grid to quantify the application of the BSER integration and transmission of solar 765 Hawaii Solar Integration Study, NREL for these states and territories, Technical Report NREL/TP–5500–57215, June 2013. particularly data regarding RE costs and Available at http://www.nrel.gov/docs/fy13osti/ performance characteristics needed for 57215.pdf.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00165 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64826 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

the contiguous states encompassed by apportioned in excess of $1.34 billion environmental and energy regulators the three interconnections. Lastly, the pursuing its aspirational goal of 50 and policy officials. The EPA has IPM model used to support the EPA’s percent of the state’s total yearly electric received many comments from a wide analysis is geographically limited to the load from renewable and alternative range of stakeholders seeking a final contiguous U.S. As a result of these energy sources by 2025. Puerto Rico’s rule that afforded freedom and factors, the EPA currently lacks the goal is to achieve 20 percent RE sales by flexibility to consider a wide range of necessary analytic resources to set 2035, and the territory is working hard standards of performance to implement emission performance goals for these to meet the requirements of the Mercury the BSER, but also providing significant areas. and Air Toxics Standards, which will feedback on the elements and options in Because of the lack of suitable data reduce emissions from its power plants the proposal and constructive and analytic tools needed to develop substantially. Guam’s RPS is to achieve suggestions for alternative approaches. area-appropriate building block targets 25 percent REsales by 2035. The EPA has carefully considered all of as defined in section V, the EPA is not The agency intends to continue to this input, and is finalizing emission setting CO2 emission performance goals consider these issues and determine guidelines that continue to provide a for Alaska, Hawaii, Guam, or Puerto what the appropriate BSER is for these variety of options for states to fashion Rico in this final rule at this time. The areas. As part of that effort, the agency their plans in ways legally supportable EPA believes it is within its authority to will investigate sources of information by the CAA, while also making certain address performance goals only for the and types of analysis appropriate to adjustments to address key comments. contiguous U.S. states in this final rule. devise the appropriate levels for The next few paragraphs present an Under section 111(d), the EPA is not building block 3 and BSER performance overview of the main features of the required, at the time that the EPA levels. Because we recognize that these final emission guidelines, highlighting promulgates section 111(b) areas face some of the most urgent key changes from proposal. In the rest requirements for new sources, to climate change challenges, severe public of this section, we describe in detail the promulgate emission guidelines for all health problems from air pollution and various elements of the final emission of the sources that, if they were new some of the highest electricity rates in guidelines’ requirements for state plans. sources, would be subject to the section the U.S., the EPA is committed to The proposal contained rate-based 111(b) requirements if there is a obtaining the right information to goals for each state, reflecting a blended reasonable basis for deferring certain quantify the emission reductions that reduction target for that state’s fossil groups of sources. As discussed, in this are achievable in these four areas and fired EGUs, and provided that states rule, the EPA has a reasonable basis for putting goals in place soon. could either meet that rate-based goal or deferring setting goals for these four convert it to a mass-based equivalent VIII. State Plans jurisdictions. In addition, the Courts goal. Reflecting the final BSER have recognized the authority of A. Overview described in section V and in response agencies to develop regulatory programs After the EPA establishes the to many comments desirous that the in step-by-step fashion. As the U.S. emission guidelines that set forth the EPA establish mass-based goals in the Supreme Court noted in Massachusetts BSER, each state with one or more final rule, these final guidelines include v. EPA, 549 U.S. 497, 524 (2007): affected EGUs 767 shall then develop, three approaches that states may adopt ‘‘Agencies, like legislatures, do not adopt and submit a state plan under for purposes of implementing the BSER, generally resolve massive problems in CAA section 111(d) that establishes any one of which a state may use in its one fell regulatory swoop;’’ and instead standards of performance for the plan. These are: (1) Establishing they may permissibly implement such affected EGUs in its jurisdiction in order standards of performance that apply the regulatory programs over time, ‘‘refining to implement the BSER. Starting from subcategory-specific CO2 emission their preferred approach as the foundation of CAA section 111(d) performance rates to their affected circumstances change and as they and the EPA’s implementing regulations EGUs, (2) adopting a combination of develop a more nuanced understanding (40 CFR part 60 subpart B), the EPA’s standards and/or other measures that 766 of how best to proceed.’’ proposal laid out a number of options, achieve state-specific rate-based goals The EPA recognizes, however, that variations and flexibilities that were that represent the weighted aggregate of EGUs in Alaska, Hawaii, Puerto Rico, intended to provide states and affected the CO2 emission performance rates and Guam emit CO2 and that there are EGUs the ability to design state plans applied to the affected EGUs in each opportunities to reduce the carbon that accorded with states’ specific state, and (3) adopting a program to intensity of generation in those areas situations and policies (now and in the meet mass-based CO2 emission goals over time. We recognize further that future), and to ensure reliability and that represent the equivalent of the rate- there are efforts underway to increase affordability of electricity across the based goal for each state. These the use of RE in these jurisdictions. In system and for all ratepayers. The alternatives, as well as the other options particular, we recognize that Hawaii has proposal has prompted numerous we are finalizing, ensure that both states tremendous opportunities for RE and discussions between and among and affected EGUs enjoy the maximum has adopted very ambitious goals: 40 stakeholders, especially states and flexibility and latitude in meeting the percent clean energy by 2030 and 100 groups of states, including state requirements of the emission guidelines percent by 2045. Since 2008, Alaska has and that the BSER is fully implemented 767 As stated previously, states with one or more by each state. 766 See, e.g., Grand Canyon Air Tour Coalition v. affected EGUs will be required to develop and In the proposal, we provided two F.A.A., 154 F.3d 455, 471 (D.C. Cir. 1998) implement plans that set emission standards for designs for state plans: One where all (ordinarily, agencies have wide latitude to attack a affected EGUs. The CAA section 111(d) emission the reduction obligations are placed regulatory problem in phases and that a phased guidelines that the EPA is promulgating in this attack often has substantial benefits); National action apply to only the 48 contiguous states and directly on the affected EGUs and one, Association of Broadcasters v. FCC, 740 F.2d 1190, any Indian tribe that has been approved by the EPA which we called the ‘‘portfolio 121–11 (D.C. Cir. 1984) (‘‘We have therefore pursuant to 40 CFR 49.9 as eligible to develop and approach,’’ that could include measures recognized the reasonableness of [an agency’s] implement a CAA section 111(d) plan. Because to be implemented, in whole or in part, decision to engage in incremental rulemaking and Vermont and the District of Columbia do not have to defer resolution of issues raised in a affected EGUs, they will not be required to submit by parties other than the affected EGUs. rulemaking. . . .’’). a state plan. In the final guidelines, we retain that

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00166 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64827

basic choice, but with some measures, alone or in conjunction with states without the need for formal modifications to respond to comments any federally enforceable emission arrangements between individual states. we received, especially on the portfolio standards on affected EGUs also We have been mindful of the concerns approach. In their plans, states will be included in the state plan, will result in raised by stakeholders about reliability. able to choose either to impose federally the affected EGUs in the state meeting The final BSER, especially the changes enforceable emission standards that the state’s mass-based CO2 emission in the timing of the interim period, fully meet the emission guidelines goal. A ‘‘state measures’’ type plan must substantially address these concerns. directly on affected EGUs (the also include a backstop provision— The flexibilities provided for the design ‘‘emission standards’’ approach) or to triggered if, during the interim period, of state plans, including the ability to use a ‘‘state measures’’ approach, which the state plan fails to achieve the use trading programs, further enhance would be composed, at least in part, of emission reduction trajectory identified system reliability. We have included, as measures implemented by the state that in the plan or if, during the final phase, an additional assurance, a reliability are not included as federally enforceable the state plan fails to meet the final state safety valve for use where the built-in components of the plan but result in the mass-based CO2 emission goal—that flexibilities are not sufficient to address affected EGUs meeting the requirements would impose federally enforceable an immediate, unexpected reliability of the emission guidelines. A state emission standards on the affected situation. measures type plan must include a EGUs adequate to meet the emission The EPA believes that all the backstop of federally enforceable guidelines when fully implemented. flexibilities provided in the final rule standards on affected EGUs that fully The final guidelines reflect the are not only appropriate, but will meet the emission guidelines and that changes to the timing of the reductions enhance the success of the program. CO2 would be triggered if the state measures within the interim period, which is laid is a global pollutant, and where and fail to result in the affected EGUs out in section V as part of the when the reductions occur is not as achieving on schedule the required determination of the BSER. States may significant to the environmental emission reductions. adopt in their plans emission reduction outcome as compared to many other States that choose an emission trajectories different from the pollutants. The flexibilities provided in standards plan may establish as illustrative three-step trajectory the final guidelines will better reflect standards of performance for their included in these guidelines for the unique interconnectedness of the affected EGUs the subcategory-specific purposes of creating a ‘‘glide path’’ electricity system, and will allow states CO2 emission performance rates, which between 2022 and 2029, provided that and EGUs to reduce CO2 emissions 768 express the BSER. This would satisfy the interim and final CO2 emission while maintaining reliability and the requirement described in section performance rates or state CO2 emission affordability for all consumers. VIII.D.2.a.3 that a state demonstrate its goals are met. In developing the plan, the state plan would achieve the CO2 emission We recognize that while we are rulemaking process must meet the performance rates; in this case, no establishing 2022 as the date by which minimum public participation further demonstration would be the period for mandatory reductions requirements of the implementing necessary. Alternatively, a state may must start as part of our BSER regulations as applicable to these establish emission standards for affected determination, utilities and other parties guidelines, including a public hearing EGUs at different levels from the are moving forward with projects that and meaningful engagement with all uniform subcategory-specific emission reduce emissions of CO2 from affected members of the public, including performance rates, provided that when EGUs. We received numerous comments vulnerable communities. In the implemented, the emission standards urging us to allow credit for these early community and environmental justice achieve the CO2 emission performance actions. The final guidelines encourage considerations section, section IX of this rates or state rate- or mass-based CO2 those early reductions, by making clear preamble, the EPA addresses the actions emission goal set forth by the EPA for that states may, in their plans, allow that the agency is taking to help ensure the state. States that adopt differential EGUs to use allowances or ERCs that vulnerable communities are not standards of performance among their generated through the CEIP. The final disproportionately impacted by this affected EGUs must demonstrate that, in guidelines also require that states rule. These actions include conducting the aggregate, the differential standards include in their final plans a schedule a proximity analysis, setting of performance will result in their of the actions they will be taking to expectations for states to engage affected EGUs meeting the CO2 emission ensure that the period for mandatory meaningfully with vulnerable performance rates, the state’s rate-based reductions will begin as required communities and requiring that they CO2 emission goal or its mass-based CO2 starting in 2022, and submit a progress describe their plans for doing so as they emission goal. report on those actions. develop their state plans, providing In the proposal, we proposed that For all types of plans, the final communities with access to additional states could use the portfolio approach guidelines make clear that states may resources, providing communities with to meet either a rate- or mass-based goal. adopt programs that allow trading information on federal programs and In these final emission guidelines, the among affected EGUs. The final resources available to them, state measures approach is available guidelines retain the flexibility for states recommending that states take a multi- only for a state choosing a mass-based to do individual plans, or to join with pollutant planning approach that CO2 emission goal, to provide certainty other states in a multi-state plan. In examines the potential impacts of co- that the state measures are achieving the addition, and in response to comments pollutants on overburdened required emission reductions. Similar to from many states and other communities, and conducting an emission standards plans with stakeholders, the guidelines provide assessment to determine if any localized differential standards of performance, that states may design their programs so air quality impacts need to be further states that adopt state measures plans that they are ‘‘ready for interstate addressed. Additionally, the EPA must demonstrate that the state trading,’’ that is, that they contain outlines the continued engagement that features necessary and suitable for their it will be conducting with states and 768 Rate-based and mass-based emission standards affected EGUs to engage in trading with communities throughout the state plan may incorporate the use of emission trading. affected EGUs in other ‘‘trading ready’’ development process.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00167 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64828 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

As discussed in more detail in section EM&V requirements for RE and have made to the timelines included in VIII.E, commenters, particularly states, demand-side EE resources and other the proposal respond to these comments provided compelling information measures used to adjust a CO2 rate; and and to concerns about, among other establishing that for some, and perhaps treatment of interstate effects. things, reliability, feasibility, and cost. many, states it will take longer than the As previously discussed, the EPA has B. Timeline for State Plan Performance agency initially anticipated to develop determined that the BSER includes and Provisions To Encourage Early and submit their required plans. In implementation of reduction measures Action response to those comments, we are over the period of 2022 through 2029, finalizing a plan submittal process that This section describes state plan with final compliance by affected EGUs provides additional time for states that requirements related to the timing of in 2030. Therefore, the final rule need it to submit a final plan submittal achieving the emission reductions requires that interim CO2 emission to the EPA after September 6, 2016. required in the guidelines and the state performance rates or state CO2 emission Within the time period specified in the plan performance periods. This section goals be met for the interim period of emission guidelines (from as early as also describes the CEIP the EPA is 2022–2029. Many commenters September 6, 2016, to as late as establishing to encourage early expressed a desire that the EPA September 6, 2018, depending on investment in certain types of RE designate steps during the interim whether the state receives an extension), projects, as well as in demand-side EE period to create an interim goal that the state must submit its final state plan projects implemented in low-income offered states and utilities greater to the EPA. The EPA then must communities. flexibility and choice in determining determine whether to approve or 1. Timeline for State Plan Performance their own emission reduction disapprove the plan. If a state does not trajectories over the course of the submit a plan, or if the EPA disapproves The final guidelines establish three interim period. Since our intent at a state’s plan, then the EPA has the types of performance periods: (1) A final proposal was to provide such flexibility express authority under CAA section deadline by which and after which and choice, and since it remains our 111(d) to establish a federal plan for the affected EGUs must be in compliance intent to do so in this final rule, we are state.769 During and following with the final reduction requirements, addressing these comments by implementation of its approved state (2) an interim period, and (3) within including in the 2022–2029 interim plan, each state must demonstrate to the that interim period, three multi-year period three interim step periods (2022– EPA that its affected EGUs are meeting interim step periods. As discussed 2024, 2025–2027, 2028–2029), which the interim and final performance below and in section V, these correspond roughly to the phasing in of requirements included in this final rule performance periods are consistent with the BSER. We note, however, that the through monitoring and reporting our determination of the BSER and are final rule also allows states the requirements. also responsive to the key comments we flexibility to define an alternate This section is organized as follows. received on this aspect of the state trajectory of emission performance First, we discuss the timeline for state plans. between 2022 and 2029, provided that A performance period is a period for plan performance and provisions to (1) the state plan specifies its own which the final plan submittal must encourage early action. Second, we interim step CO emission performance demonstrate that the required CO 2 describe the types of plans that states 2 rates or state CO emission goals, (2) emission performance rates or state CO 2 can submit. Third, we summarize the 2 meeting the alternative interim step CO emission goal will be met. The final 2 components of an approvable state plan emission performance rates or state CO guidelines establish 2030 as the 2 submittal. Fourth, we address the emission goals will result in the interim deadline for compliance by affected process and timing for submittal of state emission performance rates or state CO EGUs with the final CO emission 2 plans and plan revisions. Fifth, we 2 emission goal being met on an 8-year performance rates or CO rate or mass address plan implementation and 2 average or cumulative basis, and, (3) the emission goal; 2030 is the beginning of achievement of CO2 emission final CO emission performance rates or the final performance period. The 2 performance rates or state CO2 emission state CO emission goal is achieved. To interim performance period is 2022 to 2 goals for affected EGUs, and the be approvable, a state plan submittal 2029, and there are three interim step consequences if they are not met. Sixth, must demonstrate that the emission periods—2022–2024, 2025–2027, and we discuss general considerations for performance of affected EGUs will meet 2028–2029—where increasingly states in developing and implementing the interim step CO emission stringent emission performance rates or 2 plans, including consideration of a performance rates or interim step state state emission goals must be met. The facility’s ‘‘remaining useful life’’ and CO emission goals over the 2022–2024, state may submit a plan that 2 ‘‘other factors’’ and electric reliability. 2025–2027, and 2028–2029 periods and incorporates alternative interim step Seventh, we note certain resources that the final CO emission performance emission performance rates or state 2 are available to facilitate state plan rates or state CO emission goal no later emission goals to those provided by 2 development and implementation. than 2030.770 EPA, as long as on average or Finally, we discuss additional This relatively long period—first for cumulatively, as appropriate, they result considerations for inclusion of CO2 planning, then for implementation and in the equivalent of the interim emission reduction measures in state achievement of the interim and final plans, including: Accounting for emission performance rates or state CO2 emission performance rates or state emission reduction measures in state emission goals in the emission CO2 emission goals—provides states and plans; requirements for mass-based and guidelines. These timelines are based on rate-based emission trading approaches; careful consideration of the substantial 770 States are free to establish different interim comments we received on both the step performance rates or interim step state goals 769 A federal plan may be withdrawn if the state timing of the interim period and the than those the EPA has specified in this final rule. submits, and the EPA approves, a state plan that trajectory of compliance by affected If states choose to determine their own interim step meets the requirements of this final rule and section EGUs over the interim period and our performance rates or state goals, the state must 111(d) of the CAA. More details regarding the demonstrate that the plan will still meet the interim federal plan are addressed in the EPA’s proposed determination of the BSER, discussed in performance rates or state goal for 2022–2029 federal plan rulemaking. section V above. The modifications we finalized in this action.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00168 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64829

utilities with substantial flexibility planning processes. Yet other compliance impacts to be counted regarding methods and timing of commenters provided input suggesting toward meeting requirements under the achieving emission reductions from that states be allowed to establish their rule, and that certain conditions should affected EGUs. The EPA believes that own set of emission performance steps be applied to recognition of early timing flexibility in implementing during the interim plan performance reductions so as to ensure the emission measures provides significant benefits period and thereby control their own reductions required in the rule. We also that allow states to develop plans that emission reduction trajectory or ‘‘glide received comments from stakeholders will help achieve a number of goals, path’’ for achievement of the interim regarding the disproportionate burdens including, but not limited to: Reducing goal and the 2030 goal, or that the EPA that some communities already bear, cost, addressing reliability concerns, not establish any interim standards at and stating that all communities should addressing concerns about stranded all. Commenters also noted that for have equal access to the benefits of assets, and facilitating the integration of some states, there was not a significant clean and affordable energy. The EPA meeting the emission guidelines and difference between the interim and final recognizes the validity and importance compliance by affected EGUs with other goal, and, therefore, no glide path for of these perspectives, and as a result has air quality and pollution control those states. As discussed in previous determined to provide a program— obligations on the part of both states and sections, based on this input and our called the Clean Energy Incentive affected EGUs. Moreover, we note that final determination of the BSER, the Program (CEIP)—in which states may over the course of time between EPA has adjusted the interim period to choose to participate. This section submittal of final plans and 2030, include 2022–2029, is establishing three describes this program. circumstances may change such that interim performance periods creating a The CEIP is designed to incentivize states may need or wish to modify their reasonable trajectory from 2022 to 2030, investment in certain RE and demand- plans. The relatively lengthy and is also retaining the flexibility for side EE projects that commence performance periods provided in the states to establish their own emission construction in the case of RE, or final rule should help keep those reduction trajectory during the interim commence operation in the case of EE, situations to a minimum but will also period. following the submission of a final state accommodate them if necessary.771 The As noted, the EPA has determined plan to the EPA, or after September 6, EPA envisions that the agency, states that the period for mandated reductions 2018, for states that choose not to and affected EGUs will have an ongoing should begin in 2022, instead of 2020 as submit a final state plan by that date, relationship in the course of we proposed, because of the substantial and that generate MWh (RE) or reduce implementing this program. Since the amount of comment and data we end-use energy demand (EE) during record also indicates a high degree of received indicating that states and 2020 and/or 2021. State participation in interest on the part of states and utilities reasonably needed that the program is optional; the EPA is stakeholders in pursuing banking and additional time to take the steps establishing this program as an trading programs, the timing and level necessary to start achieving reductions. additional flexibility to facilitate of stringency of the interim CO2 In order to assure the EPA and the achievement of the CO2 emission performance rates or state CO2 emission public that states are making progress in reductions required by this final rule, goals we are finalizing should provide implementing the plan between the time regardless of the type of state plan a states and affected EGUs with ample of the state plan submittal and the state chooses to implement. capacity to accommodate such changes beginning of the interim period, and as Under the CEIP, a state may set aside without necessitating changes in state discussed in further detail in section allowances from the CO2 emission plans in many instances. VIII.D, the final rule requires that the budget it establishes for the interim plan The timelines established in the final state plan submittal include a timeline performance period or may generate rule respond to the issues raised in with all the programmatic plan early action ERCs (ERCs are discussed numerous comments regarding the milestone steps the state will take in more detail in section VIII.K.2), and concept of the interim period, including between the time of the state plan allocate these allowances or ERCs to comments supporting the flexibility submittal and 2022 to ensure the plan eligible projects for the MWh those afforded states in developing their plans is effective as of 2022. projects generate or the end-use energy and the timing necessary to meet the savings they achieve in 2020 and/or 2. Provisions To Encourage Early Action 2030 emission requirements. Some 2021. A state implementing a mass- commenters supported beginning the Many commenters supported based plan approach, as described in interim goal plan period at 2020. Others providing incentives for states and section VIII.C, may issue early action stated that the investments necessary to utilities to deploy CO2-reducing allowances; a state implementing a rate- meet the proposed interim emission investments, such as RE and demand- based plan approach, also described in performance goals beginning in 2020 are side EE measures, as early as possible. section VIII.C, may issue early action unachievable in that timeframe or In the proposal, the EPA requested ERCs. For each early action allowance would place too great a burden on comment on an approach that would or ERC a state allocates to such projects, affected EGUs, states, and ratepayers. recognize emission reductions that the EPA will provide the state with an Some suggested that the 2020 interim existing programs provide prior to the appropriate number of matching goal step should be eliminated in favor initial plan performance period starting allowances or ERCs, as outlined below, of later start dates, including 2022, from a specified date. We also requested for the state to allocate to the project. 2025, or other years. Some commenters comment on options for that specified The EPA will match state-issued early urged the EPA to establish phased date and on conditions that should action ERCs and allowances up to an interim steps creating a steady apply to counting those pre-compliance amount that represents the equivalent of downward trajectory that allowed emission reductions toward a state goal. 300 million short tons of CO2 emissions. several years for each step, compatible The EPA received many comments The EPA intends that a portion of this with the ‘‘chunkiness’’ of utility requesting that the agency recognize pool will be reserved for eligible wind early actions for the emission reductions and solar projects, and a portion will be 771 Modifications to state plans are addressed they provide prior to the performance reserved for low-income EE projects. In more specifically in section VIII.E.7 below. period, that the EPA allow those pre- the proposed federal plan, the EPA is

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00169 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64830 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

taking comment on the size of each • For RE: Generate metered MWh allowances or ERCs as appropriate, or reserve, and is proposing provisions to from any type of wind or solar would include a non-binding statement provide that any unallocated amounts resources; of intent as part of its supporting would be redistributed among • For EE: Result in quantified and documentation and revise its plan to participating states. verified electricity savings (MWh) include those requirements at a later The EPA has determined that the size through demand-side EE implemented date. of this 300 million short ton CO - in low-income communities; and 2 • Generate or save MWh in 2020 and/ Following approval of a final state equivalent matching pool is an or 2021. plan that includes requirements for appropriate reflection of the CO2 The following provisions outline how implementing the CEIP, the agency will emission reductions that could be a state may award early action ERCs or create an account of matching achieved by the additional early allowances to eligible projects, and how allowances or ERCs for the state that investment in RE and demand-side EE the EPA will provide matching ERCs or reflects the pro rata share—based on the the agency expects will be incentivized allowances to states. amount of the reductions from 2012 by the CEIP. For example, in 2012, 13 • For RE projects that generate levels the affected EGUs in the state are GW of utility scale wind were metered MWh from any type of wind or required to achieve relative to those in deployed,772 and, in 2014, 3.4 GW of solar resources: For every two MWh the other participating states—of the 300 773 utility-scale solar plus 2–3 GW of generated, the project will receive one million short ton CO2 emissions- distributed solar were deployed,774 early action ERC (or the equivalent equivalent matching pool that the state according to industry estimates. number of allowances) from the state, is eligible to receive. Thus, states whose Assuming 19 GW per year of RE from and the EPA will provide one matching EGUs have greater reduction obligations 2017–2020 based on these historic ERC (or the equivalent number of will be eligible to secure a larger maximums yields an installed base of 76 allowances) to the state to award to the proportion of the federal matching pool GW of RE potentially eligible for CEIP project. upon demonstration of quantified and incentives in 2020 and/or 2021. • For EE projects implemented in verified MWh of RE generation or Assuming an average capacity factor of low-income communities: For every two demand side-EE savings from eligible 30 percent, this would translate into MWh in end-use demand savings projects realized in 2020 and/or 2021. approximately 200 TWh/year of achieved, the project will receive two Any matching allowances or ERCs generation, which would be eligible for early action ERCs (or the equivalent that remain undistributed after approximately 300 million short tons of number of allowances) from the state, September 6, 2018,775 will be matching allowances over the 2-year and the EPA will provide two matching distributed to those states with period, if the RE MWh were converted ERCs (or the equivalent number of approved state plans that include to allowances based on the 2012 carbon allowances) to the state to award to the requirements for CEIP participation. intensity of 0.8 short tons per MWh. project. This would leave the remaining half of Early action allowances or ERCs These ERCs and allowances will be the pool of matching federal allowances awarded by the state, and matching distributed according to the pro rata available for EE projects implemented in allowances or ERCs awarded by the EPA method outlined above. Unused low-income communities, and pursuant to the CEIP, may be used for matching allowances or ERCs that additional growth in RE deployment compliance by an affected EGU with its remain in the accounts of states beyond these historic maximums as emission standards and are fully participating in the CEIP on January 1, potentially enabled by reductions in transferrable prior to such use. 2023, will be retired by the EPA. cost and improvements in performance. The EPA discusses the CEIP in the For purposes of establishing a state For a state to be eligible for a proposed federal plan rule, and will plan program eligible for an award of matching award of allowances or ERCs address design and implementation matching allowances or ERCs from the from the EPA, it must demonstrate that details of the CEIP, including the EPA, such a program must include a it will award allowances or ERCs only appropriate factor for determining mechanism for awarding early action to eligible projects. These are projects equivalence between allowances and emission allowances or ERCs for eligible that: MWh and the definition of a low- actions that reduce or avoid CO2 income community for project eligibility • Are located in or benefit a state that emissions in 2020 and/or 2021, and that purposes, in a subsequent action. Before is implemented in a way such that the has submitted a final state plan that doing so, the EPA will engage states and includes requirements establishing its early action allowances or ERCs stakeholders to gather additional allocated by the state would maintain participation in the CEIP; information concerning implementation • the stringency of the state’s goal for Are implemented following the topics, and to solicit information about emission performance from affected submission of a final state plan to the the concerns, interests and priorities of EGUs in the performance periods EPA, or after September 6, 2018, for a states, stakeholders and the public. established in this rule. Specifically, the state that chooses not to submit a In order for a state that chooses to state must demonstrate in its plan that complete state plan by that date; participate in the CEIP to be eligible for it has a mechanism in place that enables a future award of allowances or ERCs issuance of ERCs or allowances from the 772 U.S. Energy Information Administration from the EPA, a state must include in its state to parties effectuating reductions Electric Power Annual 2013. http://www.eia.gov/ initial submittal a non-binding electricity/annual. Table 4.6: Capacity additions, in 2020 and/or 2021 in a manner that retirements and changes by energy source. March statement of intent to participate in the would have no impact on the aggregate 2015. program. In the case of a state emission performance of affected EGUs 773 U.S. Energy Information Administration submitting a final plan by September 6, required to meet rate-based or mass- Electric Power Monthly. http://www.eia.gov/ 2016, the state plan would either based CO2 emission standards during electricity/monthly. Table 6.3: New Utility Scale include requirements establishing the Generating Units by Operating Company, Plant, Month, and Year. necessary infrastructure to implement 775 This may occur because not all states may 774 GTM Research/Solar Energy Industries such a program and authorizing its elect to include requirements for CEIP participation Association: U.S. Solar Market Insight Q1 2015. affected EGUs to use early action in their state plans.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00170 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64831

the compliance periods.776 This incentives and market signal generated deployment of projects that will deliver demonstration is not required to by the CEIP can help sustain the demand-side EE benefits to these account for matching ERCs or momentum toward greater RE communities, which will in turn lower allowances that may be issued to the investment in the period between now the costs of these approaches. These state by the EPA. Participation in this and 2022 so as to offset any dampening lower costs will help new technologies program is entirely voluntary, and effects that might be created by setting and delivery mechanisms penetrate in nothing in these provisions would have the start date 2 years later than at the future, thus improving the cost of the effect of requiring any particular proposal. implementation of the emission affected EGU to achieve reductions prior The specific criteria the EPA is guidelines overall, consistent with to 2022, or requiring states to offer establishing for eligible RE projects Congress’ design in the New Source incentives for emission reductions reflect a variety of considerations. First, Performance Standard provisions of the achieved prior to 2022.777 These and the EPA seeks to preserve the incentive CAA. Further, reducing barriers to other details will be developed in the for project developers to execute on demand-side EE in low-income subsequent action. planned investments in all types of solar communities will help ensure that the The EPA is providing the CEIP as an and wind technologies. Commenters benefits of the final rule are shared option for states implementing plans— raised concerns that the fast pace of broadly across society and that potential and is including a similar program for reductions underlying the emission adverse impacts on low-income the federal plan proposal being issued targets in the proposed rule could ratepayers are avoided. It complements concurrently—for several reasons. Chief potentially shift investment from RE to other steps the federal government is among them is that offered by natural gas, thus dampening the taking to bring clean energy commenters to the effect that the overall incentive to develop wind and solar technologies to these communities, as cost of achievement of the emission projects, in particular. Second, the EPA, we discuss in section IX of this performance rates or state goals could be consistent with the CAA’s design that preamble. reduced by an approach that granted incentivizes technology and accelerates More broadly, the CEIP responds to some form of beneficial recognition to the decline in the costs of technology, the urgency of meeting the challenge of emissions reduction investments that seeks to drive the widespread climate change in two key ways. First, both occur and yield reductions prior to development and deployment of wind of course, it fosters reductions before the first date on which the program of and solar, as these broad categories of 2022. Second, in targeting investments the interim plan performance period. renewable technology are essential to in wind, solar and low-income EE, it Other commenters pointed out that to longer term climate strategies. Finally, focuses on the kinds of measures and the extent that states and utilities would in contrast to other CO2-reducing technologies that are the essential benefit from the availability of low-cost technologies—including other zero- foundation of longer-term climate RE and other zero-emitting generation emitting or RE technologies—solar and strategies, strategies that inevitably options during the interim and final wind projects often require lead times of depend on the further development and plan performance periods, the EPA shorter duration, which would allow widespread deployment of highly should include in the final emission them to generate MWh beginning in adaptable zero-emitting technologies. We are not requiring that projects guidelines provisions that accelerate 2020. The specific criterion the EPA is demonstrate to states that they are deployment of RE resources, since in so establishing for eligible EE projects— ‘‘additional’’ or surplus relative to a doing the final emission guidelines namely that these projects be business-as-usual or state goal-related would speed achievement of expected implemented in low-income baseline in order to be eligible. At the reductions in the cost of those communities—is also consistent with same time, we believe that including an technologies commensurate with their the technology-forcing and development incentive to develop projects that accelerated deployment. In addition, the design of CAA section 111. The EPA benefit low-income communities will believes it is appropriate to offer an increase the likelihood of investments 776 For example, under a mass-based implementation, the state plan could include a set- additional incentive to remove current being made that would not have been aside of early action allowances from an emissions barriers to implementing demand-side made otherwise. budget that itself reflects the state goals. Allocation EE programs in low-income In order to be awarded matching ERCs of those early action allowances to parties communities. While the EPA or allowances by the EPA for projects effectuating reductions in 2020 and 2021 would have no impact on the total emissions budget, acknowledges that a number of states that meet the eligibility criteria, a final which sets the total allowable emissions in the have demand-side EE programs focused state plan must have requirements compliance periods. Alternatively, under a rate- on these communities,778 the agency establishing the appropriate based implementation, the state plan could require also recognizes that there have been infrastructure to issue early action ERCs that early action ERCs issued to parties effectuating or allowances to eligible project reductions in 2020 and 2021 would be ‘‘borrowed’’ historic economic, logistical, and from a pool of ERCs created by the state during the information barriers to implementing providers by 2020. The state must interim plan performance period. States could limit programs in these communities. As a require that the state or its agent will, in the size of the ‘‘borrowed’’ pool of ERCs to be result, the costs of implementing accordance with state plan requirements equivalent to the size of the federal matching pool, demand-side EE programs in these approved as meeting the ERC issuance or could take into consideration the potential for each state’s federal matching pool to expand after communities are typically higher than and EM&V requirements included in a redistribution of unused credits. For every early in other communities and stand as section VIII.K: (1) Evaluate project action ERC awarded for actions in 2020 and 2021, barrier to harvesting potentially cost proposals from eligible RE and demand- the state would retire one ERC from the pool of effective reductions and advancing side EE project providers, including the ERCs created as a result of reductions achieved from 2022 onward. these technologies. The EPA intends for EM&V plans that must accompany such 777 In addition to the CEIP, states may also offer the CEIP to help incentivize increased proposals; (2) evaluate monitoring and credit for early investments in RE and demand-side verification reports submitted by EE according to the provisions of section VIII.K.1 778 Several of these programs are discussed in eligible providers following project of this final rule: A state may award ERCs to section IX of this preamble, including, for example, implementation, which contain the qualified providers that implement projects from Maryland’s EmPOWER Low Income Energy 2013 onward that realize quantified and verified Efficiency Program (LIEEP) and New York’s quantified and verified MWh of RE MWh results in 2022 and subsequent years. EmPower New York program. generation or energy savings achieved

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00171 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64832 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

by the project in 2020 and/or 2021; (3) implementation and compliance affected EGUs that would apply in the issue ERCs or allowances to eligible flexibilities while at the same time event the plan does not achieve its providers for these MWh results; (4) delivering meaningful benefits, anticipated level of emission ensure that no MWh of renewable particularly for low-income performance as specified in the state generation or energy savings receives communities. The EPA looks forward to plan during the period that the state is early action or matching ERCs or an upcoming public dialogue about the relying on state measures. The inclusion allowances more than once.779 implementation details of the CEIP. of a backstop of federally enforceable The CEIP will provide a number of emission standards in a state measures C. State Plan Approaches benefits. First, the program will provide plan type is legally necessary for a state incentives designed to reduce energy 1. Overview plan to meet the terms of 111(d), which bills early in the implementation of the Under the final emission guidelines, specifically require a state to submit guidelines through earlier and broader states may adopt and submit either of standards of performance. application of energy saving two different types of state plans. The These two types of state plans and technologies, and help ensure that these first would apply all requirements for their respective approaches, either of benefits are fully shared by low-income meeting the emission guidelines to which could be implemented on a communities. Second, the EPA believes affected EGUs in the form of federally single-state or multi-state basis, allow that stimulating or supporting early enforceable emission standards.781 We states to meet the statutory requirements investment in RE generation refer to this as an ‘‘emission standards’’ of CAA section 111(d) while technologies could accelerate the rate at state plan type. The second, which we accommodating the wide range of which the costs of these technologies refer to as a ‘‘state measures’’ plan type, regulatory requirements and other fall over the course of the interim programs that states have deployed or would allow the state mass CO2 performance period. Third, the CEIP emission goals to be achieved by will deploy in the electricity sector that will provide affected EGUs and states affected EGUs in part, or entirely, reduce CO2 emissions from affected with additional emission reduction through state measures 782 that apply to EGUs. Further, as described in detail resources to help them achieve their affected EGUs, other entities, or some below, both types of plans are state plan obligations. Finally, the combination thereof. The state measures responsive to comments we received program will improve the liquidity, in plan type also includes a mandatory from states and other stakeholders. In the early years of the program, of the contingent backstop of federally addition to providing states the option ERC and allowance markets we expect enforceable emission standards for of developing an emission standards or to emerge for compliance with the state measures type plan, the final rule 780 requirements of these guidelines. 781 40 CFR 60.21(f) defines ‘‘emission standard’’ makes clear that states that choose an The EPA is establishing this program as ‘‘a legally enforceable regulation setting forth an emission standards plan can adopt a as an option for states that wish to drive allowable rate of emissions into the atmosphere, plan that meets either the CO2 emission establishing an allowance system, or prescribing investments in RE and low-income EE performance rates, a rate-based CO2 equipment specifications for control of air pollution that will result in actual, early emissions.’’ This definition is promulgated and emission goal, or a mass-based CO2 reductions in CO2 emissions from effective, and we note that it authorizes the use of emission goal. affected EGUs. States are also allowance systems as a form of emission standard. Under these two basic plan types, the authorized to set their own glide path, To resolve any doubt that allowance systems are an final emission guidelines provide states acceptable form of emission standard in the final or interim step performance rates or rule, we are including regulatory text in the final with a number of potential plan goals, so long as the interim and final subpart UUUU regulations authorizing the use of pathways for meeting the emission performance rates or goals are met, and allowance systems as a form of emission standard guidelines. A plan pathway represents a could do so in a way that takes into under section 111(d). Section 60.21(f) was specific plan design approach used to originally amended in 2005 to include recognition account the availability of the CEIP to of allowance systems as a form of emission standard meet the emission guidelines. These assist affected EGUs in meeting the in the Clean Air Mercury Rule (CAMR) (70 FR plan pathways are discussed in section applicable glide path and performance 28606, 28649; May 18, 2005). CAMR was vacated VIII.C.2 through C.5 below, and further rates or goals. While the EPA is not in its entirety in New Jersey v. EPA, 517 F.3d 574 elaborated in sections VIII.J (for mass- (D.C. Cir. 2008). However, the reason for vacatur requiring states to take advantage of this was wholly unrelated to the question of whether an based emission standards) and VIII.K program, its availability simply allowance system could be a form of emission (for rate-based emission standards). enhances these already-existing standard. In response to the New Jersey decision, The final emission guidelines provide the agency removed CAMR provisions from the four streamlined plan pathways. These Code of Federal Regulations. The agency chose to 779 streamlined plan pathways represent For a state plan incorporating the use of ERCs retain the language of 60.21(f) and 60.24(b)(1) or allowances to be approvable by the EPA, such generally recognizing allowance systems. This straightforward plan approaches for a plan must use an EPA-approved or EPA- language is broader than CAMR and unrelated to meeting the emission guidelines, and administered tracking system for ERCs or the reasons for its vacatur. The EPA re-promulgated avoid the need to meet additional plan allowances. The EPA received a number of these provisions in February of 2012 (77 FR 9304, comments from states and stakeholders about the 9447; Feb. 16, 2012). Even if this were not the case, requirements and include additional value of the EPA’s support in developing and/or the agency would not concede that simply because elements in a plan submittal. The administering tracking systems to support state ‘‘allowance systems’’ were not provided for in the streamlined plan pathways include the administration of rate-based emission trading framework regulations of subpart B, they could not following: programs. The EPA is exploring options for be relied upon in specific emission guidelines, such providing such support and is conducting an initial as these for CO2. The implementing regulations • Establishing federally enforceable, mass- scoping assessment of tracking system support generally serve a gap-filling role where there are not based CO2 emission standards for affected needs and functionality. more specific provisions laid out in the relevant EGUs, complemented by state-enforceable 780 The CEIP is expected to provide states and emission guidelines. In order to resolve any mass-based CO2 emission standards for new affected EGUs additional flexibility in meeting the question whether allowance systems are authorized fossil fuel-fired EGUs.783 This approach guidelines, and bears similarity in both design and under the final rule, we are including regulatory could involve an emission budget trading purpose to the Compliance Supplement Pool, text in subpart UUUU to make this authorization program that includes affected EGUs as well which the agency established as a part of the NOX explicit. SIP Call. See 63 FR 57356, 57428–30 (Oct. 27, 782 ‘‘State measures’’ refer to measures that are 783 1998). Certain aspects of the Compliance adopted, implemented, and enforced as a matter of New source CO2 emission complements are Supplement Pool were challenged in litigation and state law. Such measures are enforceable only per discussed in section VIII.J.2.b, which also provides upheld by the D.C. Circuit Court of Appeals. See state law, and are not included in and codified as EPA-derived new source CO2 emission Michigan v. EPA, 213 F.3d 663, 694 (D.C. Cir. 2000). part of the federally enforceable state plan. complements for states.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00172 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64833

as new fossil fuel-fired EGUs. This approach Based on this overall approach, the requirements of the emission guidelines facilitates interstate emission trading, final emission guidelines provide for a through the process of finalization of through either a single-state ‘‘ready-for- range of state options—both easily such rule. interstate-trading’’ plan approach or through implementable approaches that can be a. Rate-based approach. The first type a multi-state plan. Under a ‘‘ready-for- interstate-trading’’ plan, interstate emission used to meet the emission guidelines, of ‘‘emission standards’’ plan approach trading may occur without the need for a and more customizable approaches that a state may choose is one that uses rate- multi-state plan.784 can be used, if a state chooses, to based emission standards. Under this • Establishing federally enforceable, mass- address special circumstances or state plan approach, the plan would include based CO2 emission standards for affected policy objectives. federally enforceable emission EGUs.785 This approach facilitates interstate standards for affected EGUs, in the form emission trading, through either a single-state 2. ‘‘Emission Standards’’ State Plan of lb CO2/MWh emission standards. ‘‘ready-for-interstate-trading’’ plan approach Type A rate-based ‘‘emission standards’’ or through a multi-state plan. In a separate The emission standards type of state concurrent action, the EPA is proposing a plan may be designed to either meet the model rule for states that could be used in plan imposes requirements solely on CO2 emission performance rates for a plan implementing this approach.786 affected EGUs in the form of federally affected EGUs or achieve the state’s rate- • Establishing federally enforceable, enforceable emission standards. This based CO2 emission goal for affected subcategory-specific rate-based CO2 emission type of state plan, as described below, EGUs. A plan could be designed such standards for affected EGUs, consistent with may consist of rate-based emission that compliance by affected EGUs the CO2 emission performance rates in the standards for affected EGUs or mass- would assure achievement of either the emission guidelines. This approach provides based emission standards for affected for interstate emission trading, through either CO2 emission performance rates for a single-state ‘‘ready-for-interstate-trading’’ EGUs. affected EGUs or the state rate-based plan approach or through a multi-state The state plan submittal for an CO2 emission goal. To meet the CO2 plan.787 In a separate concurrent action, the emission standards type plan must emission performance rates for affected EPA is proposing a model rule for states that demonstrate that these federally EGUs, a plan would establish separate could be used in a plan implementing this enforceable emission standards for rate-based emission standards for approach. affected EGUs will achieve the CO • 2 affected fossil fuel-fired electric utility Establishing federally enforceable rate- emission performance rates or the steam generating units and stationary based CO2 emission standards at a single applicable state rate-based or mass- level that applies for all affected EGUs, combustion turbines (in lb CO2/MWh) based CO2 emission goal for affected consistent with the state rate-based CO2 goal that are equal to or lower than the CO2 for affected EGUs in the emission EGUs. emission performance rates in the guidelines.788 This approach provides for Both rate-based and mass-based emission guidelines. To meet a state interstate emission trading, through a multi- emission standards included in a state rate-based CO2 goal, a plan would state plan that meets a single weighted plan must be quantifiable, verifiable, establish a uniform rate-based emission 789 average multi-state rate-based CO2 goal. enforceable, non-duplicative and standard (in lb CO2/MWh) that applies The final emission guidelines also permanent. These requirements are to all affected EGUs in the state. This provide for a range of additional custom described in more detail at section uniform emission rate would be equal to plan approaches that a state may VIII.D.2. or lower than the applicable state rate- Rate-based and mass-based emission pursue, if it chooses, to address specific based CO2 goal specified in the final circumstances or policy objectives in a standards may incorporate the use of emission guidelines. state. The custom plan pathways, while emission trading, as described below. Under these two approaches, viable options for meeting the emission The EPA anticipates the use of emission compliance by affected EGUs with the guidelines, come with additional plan trading in state plans, given the rate-based emission standards in a plan requirements and plan submittal advantages of this approach and would ensure that affected EGUs meet elements. These additional plan comments suggesting a high degree of the CO2 emission performance rates in requirements and plan submittal interest on the part of states, utilities, the emission guidelines or the state rate- elements are necessary to ensure that and independent power producers in based CO2 goal for affected EGUs. No the emission guidelines are met and that the inclusion of emission trading in further demonstration would be 790 the necessary level of CO2 emission state plans. necessary by the state to demonstrate The EPA notes it is proposing model performance is achieved by affected that its plan would achieve the CO2 EGUs. rules for both mass-based and rate-based emission performance rates or the state’s emission trading programs. States could rate-based CO2 goal. 784 Mass-based trading-ready plans are addressed adopt and submit the finalized model Alternatively, if a state chooses, it in section VIII.J.3. Multi-state plans, where a group rules for either emission trading could apply rate-based emission of states are meeting a joint CO2 goal for affected program to meet the requirements of standards to individual affected EGUs, EGUs, are addressed in section VIII.C.5. CAA section 111(d) and these emission 785 or to categories of affected EGUs, at a lb This plan approach would meet a state mass- guidelines. The EPA will evaluate the based CO2 goal for affected EGUs, or a joint multi- CO2/MWh rate that differs from the CO2 state mass-based CO2 goal for affected EGUs. These approvability of such submission, as emission performance rates or the state’s plan approaches are discussed in sections VIII.J.2 with any state plan submission, through rate-based CO2 goal. In this case, and VIII.C.5, respectively. independent notice-and-comment compliance by affected EGUs with their 786 Submission of a state plan based on the EPA’s rulemaking. The EPA notes that state finalized model rule for a mass-based emission emission standards would not trading program could be considered presumptively plan submittals that adopt the finalized necessarily ensure that the collective, approvable. The EPA would evaluate the model rule may be administratively and weighted average CO2 emission rate for approvability of such submission through an technically more straightforward for the these affected EGUs meets the CO2 independent notice and comment rulemaking. EPA in evaluating approvability, as the 787 Rate-based trading-ready plans are addressed emission performance rates or the state’s 791 in section VIII.K.4. EPA will have determined that the rate-based CO2 goal. 788 This plan approach is addressed in section model rule meets the applicable 791 VIII.C.2.a. The weighted average CO2 emission rate that 789 This multi-state plan approach is addressed in 790 The legal basis for authorizing trading in will be achieved by the fleet of affected EGUs in a section VIII.C.5. emission standards is discussed in section VIII.C.6. Continued

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00173 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64834 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

Under this type of approach, Eligible measures that may generate (2) Additional considerations for rate- therefore, the state would be required to ERCs, as well as the accounting method based approach. 792 include a demonstration, in the state for adjusting a CO2 emission rate, are Additional considerations and plan submittal, that its plan would discussed in section VIII.K.1. requirements for rate-based emission achieve the CO2 emission performance Requirements for rate-based emission standards state plans are addressed in rates or applicable state rate-based CO2 trading approaches are discussed in section VIII.K. This includes the basic goal. This demonstration would include section VIII.K.2. Quantification and accounting method for adjusting the a projection of the collective, weighted verification requirements for measures reported CO2 emission rate of an average CO2 emission rate the fleet of eligible to generate ERCs are discussed affected EGU, as well as requirements affected EGUs would achieve as a result in section VIII.K.3. for the use of measures to adjust a CO2 of compliance with the emission (1) Rate-based emission standards emission rate, both of which are standards in the plan. Once the plan is based on operational or other standards. discussed in sections VIII.K.1 through 3. implemented, if the CO2 emission As discussed in further detail in Such requirements include eligibility, performance rates or applicable state section VIII.D.2.d.3, regarding the legal accounting, and quantification and rate-based CO2 goal are not achieved, considerations and statutory language of verification requirements (EM&V) for corrective measures would need to be CAA section 111(h), the EPA is the use of CO2 emission reduction implemented, as described in section finalizing that design, equipment, work measures that provide substitute VIII.F.3. practice, and operational standards generation for affected EGUs or avoid Under a rate-based approach, a state cannot be considered to be ‘‘standards the need for generation from affected may include in its plan a number of of performance’’ for this final rule. EGUs in rate-based state plans. Section provisions to facilitate affected EGU However, a state may elect to use VIII.K.4 addresses multi-state compliance with the emission emission standards for affected EGUs coordination among rate-based emission trading programs. standards. First, a state may encourage that result in a reduced CO2 lb/MWh (or require) EGUs to undertake actions b. Mass-based approach. emission rate for affected EGUs because The second ‘‘emission standards’’ to reduce CO emissions at the affected 2 of operational or other standards. The approach a state may elect to use is EGU level, such as heat rate state would include in its state plan an mass-based emission standards applied improvements or fuel switching. These emission standard that is the rate to affected EGUs. Under this approach, measures are discussed in section VIII.I. standard that results from the applicable the plan would include federally Second, a state may implement a operational or other standard. For enforceable emission standards for mass market-based emission trading program, example, a state might choose to CO emissions from affected EGUs. The which enables EGUs to generate and 2 recognize that an individual affected plan would be designed to achieve the procure ERCs, a tradable compliance EGU has plans to retire, and those plans mass-based CO goal for a state’s unit representing one MWh of electric 2 could be codified in the state plan by affected EGUs (see section VII) or a level generation (or reduced electricity use) adopting an emission standard of 0 CO2 of CO emissions equal to or less than with zero associated CO emissions. 2 2 lb/MWh as of a certain date. The state the mass-based CO goal plus the new Considerations and requirements for 2 would thus include in the state plan an source complement CO emissions (see rate-based trading programs are 2 emission standard of 0 CO2 lb/MWh for section VIII.J.2.b, Table 14).793 discussed in section VIII.K. that affected EGU that applies after a Under a mass-based approach, a state ERCs would be issued by the specified date. could require that individual affected administering state regulatory body. The An approvable plan could apply such EGUs meet a specified mass emission state may issue ERCs to affected EGUs emission standards to a subset of standard. Alternatively, a state could that emit below a specified CO2 affected EGUs or all affected EGUs. As choose to implement a market-based emission rate, as well as for measures with any rate-based plan, the state emission budget trading program. The that provide substitute generation for would need to demonstrate that the plan EPA envisions that the latter option is affected EGUs or avoid the need for would achieve the required level of most likely to be exercised by states generation from affected EGUs. These emission performance for affected seeking to implement a mass-based ERCs may then be used to adjust the EGUs, in CO2 lb/MWh. A plan could emission standard approach, as it would reported CO2 emission rate of an also apply such emission standards to a maximize compliance flexibility for affected EGU when demonstrating subset of affected EGUs in the state affected EGUs and enable the state to compliance with a rate-based emission while applying other rate-based meet its mass goal in the most standard. For each submitted ERC, one emission standards to the remainder of economically efficient manner possible. MWh is added to the denominator of the affected EGUs in the state. For example, (1) Mass-based emission standard reported CO2 emission rate, resulting in a plan might include an emission applied to individual affected EGUs. a lower adjusted CO2 emission rate. standard of 0 CO2 lb/MWh reflecting a One pathway a state could take to retirement mandate for one or more achieve its mass-based CO2 goal would state that applies different rate-based emission affected EGUs in a state and apply a be to apply mass-based emission standards to individual affected EGUs or groups of rate-based emission standard equal to standards to individual affected EGUs, affected EGUs will depend upon the mix of electric generation from affected EGUs subject to different the CO2 emission performance rates or in the form of a limit on total allowable emission standards. For example, if a state applies a state’s rate-based CO2 emission goal to higher emission standards for affected steam the remainder of affected EGUs. 793 For example, a state plan designed to meet a generating units and lower emission standards for As with all emission standards, state mass-based CO2 goal for affected EGUs plus a affected NGCC units, the greater the projected new source complement could involve a mass- amount of electric generation from steam generating emission standards based on design, based emission budget trading program that, under units, the higher the projected weighted average equipment, work practice, and state law, applies to both affected EGUs, as well as emission rate that will be achieved for all affected operational standards must be new fossil fuel-fired EGUs. The program EGUs. quantifiable, verifiable, enforceable, requirements for affected EGUs would be federally 792 A demonstration of how a plan will achieve non-duplicative and permanent. These enforceable, while the program requirements for a state’s rate-based or mass-based CO2 emission goal other fossil fuel-fired EGUs would be state- is one of the required plan components, as requirements are described in more enforceable. This approach is described further in described in section VIII.D.2. detail at section VIII.D.2. section VIII.J.2.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00174 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64835

CO2 emissions. These emission achieving the mass emission standard. affected EGU has plans to retire, and standards would be designed such that Notably, such an approach incentivizes those plans could be codified in the total allowable CO2 emissions from all actions taken at affected EGUs to reduce state plan by adopting an emission affected EGUs in a state are equal to or CO2 emissions, as well as the use of standard of 0 total tons of CO2, as of a less than the state’s mass-based CO2 strategies such as RE and demand-side certain date. The state would thus goal, or a state’s mass-based CO2 goal EE as complementary measures that include in the state plan an emission plus the new source complement CO2 reduce CO2 emissions. However, unlike standard of 0 total tons of CO2 for that emissions specified in section VIII.J.2.b, under a rate-based approach, for this affected EGU that applies after a Table 14. The individual affected EGUs latter set of measures there is no need specified date. Under a mass-based would be required to emit at or below to address and describe these state approach, the state could also include their mass-based standard to measures in a state plan submission or an emission standard (e.g., a mass limit) demonstrate compliance. Under this quantify and verify the RE and EE MWh that reflects the result of a limit on an approach, individual affected EGUs of generation and savings. As a result, affected EGU’s total operating hours would be required to undertake source- a mass-based emission budget trading over a specified period. Such an specific measures to assure their CO2 program incentivizes and recognizes a emission standard would be based on an emissions do not exceed their assigned wide range of emission reduction affected EGU’s potential to emit given a emission standard. Affected EGU actions while being relatively simple for specified number of operating hours. compliance with the emission standards a state to implement and administer. An approvable plan could apply such prescribed under this type of mass- Furthermore, the EPA notes that such an emission standards to a subset of based approach would ensure that the approach still allows for a state to affected EGUs or all affected EGUs. As affected EGUs in a state achieve the address electricity load growth, as load with any mass-based plan, the state state’s mass-based CO2 goal, or mass- growth can be met through low- and would need to demonstrate that the plan based CO2 goal plus new source zero-emitting generating resources, as would achieve the required level of complement. well as avoided through demand-side emission performance for affected (2) Mass-based emission standard EE and demand-side management EGUs, in total tons of CO2. A plan could with a market-based emission budget (DSM) measures. also apply such emission standards to a trading program. Additional considerations and subset of affected EGUs in the state A second pathway a state could take requirements for mass-based emission while applying other emission to achieve its mass-based CO2 goal standards state plans are addressed in standards to the remainder of affected would be to implement a market-based section VIII.J. This includes use of EGUs in the state. For example, a plan emission budget trading program. This emission budget trading programs in a might include an emission standard of type of program provides maximum state plan, including provisions 0 tons of CO2 for one or more affected compliance flexibility to affected EGUs, required for such programs (section EGUs, reflecting a retirement mandate and as a result, may be attractive to VIII.J.2.a) and the design of such for one or more affected EGUs in a state, states that choose to implement a mass- programs in the context of a state plan. and include the remainder of affected based approach in their state plan. Section VIII.J addresses program design EGUs in an emission budget trading An emission budget trading program approaches that ensure achievement of program. a state mass-based CO emission goal establishes a combined emission 2 3. ‘‘State Measures’’ State Plan Type standard for a group of emission sources (section VIII.J.2.c), as well as how states in the form of an emission budget. can use emission budget trading The second type of state plan is what Emission allowances are issued in an programs with broader source coverage we refer to as a ‘‘state measures’’ plan. amount up to the established emission and other flexibility features in a state As previously discussed, the EPA budget.794 Allowances may be plan, such as the programs currently believes states will be able to submit distributed to affected emission sources implemented by California and the state plans under the emission (as well as to other parties) through a RGGI participating states (section standards plan type, and its respective

number of different methods, including VIII.J.2.d). Section VIII.J.2.e addresses approaches, and achieve the CO2 direct allocation to affected sources or other considerations for the design of emission performance rates or state rate- auction. These allowances can be traded emission budget trading programs that based or mass-based CO2 goals by among affected sources and other states may want to consider, such as imposing federally enforceable requirements on affected EGUs. Upon parties. The emission standard applied allowance allocation approaches. further consideration of the to individual emission sources is a Section VIII.J.3 addresses multi-state requirements of CAA section 111(d), in requirement to surrender emission coordination among emission budget consideration of the comments we allowances equal to reported emissions, trading programs used in states that received on the proposed portfolio with each allowance representing one retain their individual state mass-based CO2 goals. approach and the state commitments ton of CO2. The EPA views an emission budget (3) Mass-based emission standards approach, and in order to provide trading program as a highly efficient, based on operational or other standards. flexibility and choice to states that may market-based approach for reducing CO As discussed in section VIII.C.2.a.(1) wish to adopt a plan that does not place 2 all the obligations on affected EGUs, the emissions from affected EGUs. Such above, a state may elect to use mass- based emission standards for affected EPA is finalizing the state measures programs include a limit on mass CO 2 EGUs that result in a reduced total plan type in addition to the emission emissions while providing both short- tonnage of CO standards plan type. The EPA believes term and long-term price signals that 2 emissions from affected the state measures plan type will encourage the owners or operators of EGUs because of operational or other provide states with additional latitude affected EGUs, as well as other entities, standards. The state would include in in accommodating existing or planned to determine the most efficient means of its state plan an emission standard that is the mass standard that results from programs that involve measures 794 An emission allowance represents a limited the applicable operational or other implemented by the state, or by entities authorization to emit, typically denominated in one standard. For example, a state might other than affected EGUs, that result in short ton or metric ton of emissions. choose to recognize that an individual avoided generation and CO2 emission

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00175 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64836 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

reductions at affected EGUs. This measures in conjunction with any documentation and the plan submittal includes market-based emission budget federally enforceable emission demonstrates that the state measures are trading programs that apply, in part, to standards for affected EGUs, will quantifiable, verifiable, enforceable, affected EGUs, such as the programs achieve the state mass-based CO2 non-duplicative and permanent as implemented by California and the emission goal for affected EGUs (or described above. This is necessary for RGGI participating states in the mass-based CO2 goal plus new source the EPA to ensure that the results Northeast and Mid-Atlantic, as well as complement). However, because the achieved through the plan are RE and demand-side EE requirements state measures would not be federally quantifiable and verifiable, and to assess and programs, such as renewable enforceable emission standards, the whether the state measures are portfolio standards (RPS), EERS, and plan must also include a backstop of anticipated to achieve the state mass- utility- and state-administered incentive federally enforceable emission based CO2 goal for affected EGUs (or programs for the deployment of RE and standards for all affected EGUs, in order mass-based CO2 goal plus new source demand-side EE technologies and for the state measures plan type to complement). practices. The EPA believes this second satisfy the requirement of CAA section The EPA’s evaluation of the state plan type will afford states with 111(d) that a state establish standards of approvability of a state measures plan appropriate flexibility while meeting the performance for affected EGUs. This would also include an assessment of statutory requirements of CAA section backstop would impose federally whether the backstop consisting of 111(d). enforceable emission standards on the federally enforceable emission Measures implemented under the state’s affected EGUs in the case that the standards for the state’s affected EGUs state measures plan type could include state measures fail to achieve the state would ensure that the required emission RE and demand-side EE requirements mass-based CO2 goal. The backstop, performance level is fully achieved by and deployment programs. This type of discussed further below, would assure affected EGUs, in the case that the state plan could align with existing state that the state CO2 emission goal or CO2 measures fail to achieve the state mass- resource planning in the electricity emission performance rates are fully based CO2 goal (or mass-based CO2 goal sector, including RE and demand-side achieved by affected EGUs in the form plus new source complement), or the EE investments by state-regulated of federally enforceable emission state does not meet programmatic state electric utilities. The state measures standards. measures milestones during the interim plan type also can accommodate a. Requirements for state measures period. The trigger for the backstop emission budget trading programs that under a state measures type plan. must also satisfactorily provide for the address a broader set of emission Under the state measures plan type, implementation of the backstop sources than just affected EGUs subject state measures must be satisfactorily emission standards. to CAA section 111(d), such as the described in the supporting material for b. Considerations for the backstop programs currently implemented by a state plan submittal. The supporting included in a state measures type plan. California and the RGGI participating material would need to demonstrate that As further discussed in section states. The EPA also notes that the state the state measures meet the same VIII.C.6.c, the EPA believes a backstop, measures plan type could accommodate integrity elements that would apply to composed of federally enforceable imposition by a state of a fee for CO2 federally enforceable emission emission standards for the affected emissions from affected EGUs, an standards. Specifically, the state plan EGUs that are sufficient to achieve the approach suggested by a number of submittal must demonstrate that the state CO2 emission goal or the CO2 commenters. state measures are quantifiable, emission performance rates in the event This plan type would allow the state verifiable, enforceable, non-duplicative that state measures do not result in the to implement a suite of state measures and permanent. These requirements are required CO2 emission performance, is that are adopted, implemented, and described in more detail at section necessary for the state measures plan enforceable only under state law, and VIII.D.2. Under the state measures plan, type to meet the requirements of CAA rely upon such measures in achieving if a state chooses to impose emission section 111(d). The state plan must the required level of CO2 emission standards on affected EGUs, such specify the backstop that would apply performance from affected EGUs. The emission standards must be included in federally enforceable emission state measures under this plan type the federally enforceable plan as they standards to the affected EGUs if the could be measures involving entities would be under an emission standards state measures plan does not achieve the other than affected EGUs, or a plan. anticipated level of CO2 emission combination of such measures with The EPA would assess the overall performance by affected EGUs, or a state emission standards for affected EGUs, so approvability of a state measures plan does not meet programmatic state long as the state demonstrates that such based, in part, on the state’s satisfactory measures milestones during the interim measures will result in achievement of demonstration that the state measures, period. The state plan must include a state’s mass-based CO2 goal (or mass- in conjunction with any federally promulgated regulations (or other based CO2 goal plus new source enforceable emission standards on the requirements) that fully specify these complement), as discussed below. The affected EGUs that might be included in emission standard requirements, which EPA notes that under this plan type, a the plan, would result in the state plan’s must be quantifiable, verifiable, state could also choose to include any achievement of the mass-based CO2 goal enforceable, non-duplicative and emission standards for affected EGUs, for the state’s affected EGUs (or mass- permanent. These requirements are which are required to be included in the based CO2 goal plus new source described in more detail at section plan as federally enforceable measures, complement). This includes a VIII.D.2. to be implemented alongside or in demonstration of adequate legal These federally enforceable emission conjunction with state measures the authority and funding to implement the standards must be designed such that state would implement and enforce. state plan and any associated measures. compliance by affected EGUs with the For a state measures plan to be The EPA’s determination that such a emission standards would achieve the approvable, it must include a plan is satisfactory would be based in CO2 emission performance rates or demonstration of how the measures, part on whether the state measures are state’s rate- or mass-based interim and whether state measures alone or state adequately described in the supporting final goals for affected EGUs. The

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00176 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64837

backstop emission standards must months of the deadline for the state’s period (rather than the 90 million tons specify CO2 emission performance submission of its periodic report to the originally specified in the plan), or some levels that would apply for the interim EPA on state plan implementation and other combination during the remaining plan performance period (including performance, as described in section interim step 2 and 3 performance specifying levels for each of the interim VIII.D.2.c.796 797 periods.798 The emission standards step 1 through step 3 periods) and the The backstop emission standards included as the backstop in the plan final two-year plan performance must make up for the shortfall in CO2 must specify calculations for how such periods.795 If a state chose, these emission performance. The shortfall adjustments will be made. backstop emission standards could be must be made up as expeditiously as based on a model rule or federal plan practicable. The state may address the 4. Summary of Comments on State Plan promulgated by the EPA. requirement to make up for the shortfall Approaches The state measures plan must specify in CO2 emission performance by The EPA received a wide range of the trigger and conditions under which submitting, as part of the final plan, comments on the basic plan approaches the backstop federally enforceable backstop emission standards that assure in the proposal. Numerous commenters emission standards would apply that is affected EGUs would achieve the state’s supported providing states with the consistent with the requirements in the interim and final CO2 emission goals or option of implementing a rate-based or emission guidelines. The trigger and the CO2 emission performance rates for mass-based approach. Some attendant conditions for deployment of affected EGUs, and then later submit commenters expressed concern that a the backstop would address the CAA appropriate revisions to the backstop rate-based approach would not reduce section 111(d) requirement that states emission standards adjusting for the overall emissions, and could actually submit a program that provides for the shortfall through the state plan revision lead to increased emissions. The EPA implementation of standards of process. The state may alternately does not agree with this latter comment, performance. The state measures plan effectuate this by submitting, along with because both approaches would result must specify the level of emission the backstop emission standards, in adequate and appropriate constraints performance that will be achieved by provisions to adjust the emission on CO2 emissions. As documented in affected EGUs as a result of standards to account for any prior the RIA, a rate-based approach would implementation of the state measures emission performance shortfall, such result in a substantial reduction in CO2 plan during the interim and final plan that no modification of the emission emissions relative to emissions under a performance periods. This includes the standards is necessary in order to business-as-usual case. level of emission performance during address the emission performance Numerous commenters supported the interim plan periods 2022–2024, shortfall. 2025–2027 and 2028–2029, as well as For example, assume a state measures allowing states to implement a rate- based emission standard approach the performance level that would be plan identified a mass-based CO2 achieved during every subsequent 2- standard for affected EGUs of 100 applied to affected EGUs. There was year final plan performance period million tons during the interim step 1 also broad support in comments for (2030–2031, and subsequent 2-year performance period (2022–2024), 90 allowing states to pursue a mass-based approach in the form of mass emission periods). If actual CO2 emission million tons during the interim step 2 performance by affected EGUs fails to performance period (2025–2027), and 80 standards on affected EGUs. The EPA is meet the level of emission performance million tons during the interim step 3 finalizing both of these approaches. specified in the plan over the 8-year performance period (2028–2029). Over The EPA received a mix of comments interim performance period (2022–2029) the entire interim plan performance for and against the proposed portfolio or for any 2-year final goal performance period (2022–2029), the interim mass- approach, in which state requirements period, the state measures plan must based CO2 goal is cumulative emissions and other measures that apply to non- require that the backstop federally of 270 million tons. Assume that CO2 EGU entities would be part of a state’s enforceable emission standards would emissions from affected EGUs in the federally enforceable state plan. take effect and be applied to affected interim step 1 period were actually 115 Multiple commenters supported the EGUs. Similarly, the plan must require million tons, triggering implementation portfolio approach because it would that the backstop standards take effect if of the backstop. In this instance, the align with existing state and utility actual emission performance is deficient mass-based standard for affected EGUs planning processes in the electric power by 10 percent or more relative to the implemented as part of the backstop sector, and would maximize state performance levels that the state has during subsequent plan performance discretion and flexibility in developing chosen to specify in the plan for the periods would need to ensure that plans. Commenters mentioned the range interim step 1 period (2022–2024) or the cumulative CO2 emissions during the of state requirements and utility interim step 2 period (2025–2027). The 2022–2029 interim period do not exceed programs overseen by states that could backstop standards are also triggered if, 270 million tons. This could be be used under a portfolio approach and at the time of the state’s annual reports achieved, for example, by implementing result in achieving the CO2 emission to the EPA during the interim period, a mass standard of 75 million tons goal for affected EGUs, including state the state has not met the programmatic during the interim step 2 performance RPS, EERS and utility-administered EE state measures milestones for the programs. Commenters noted that the reporting period. The state measures 796 States may choose to establish an effective portfolio approach would provide states plan must provide that, in the event the date for backstop emission standards that is sooner maximum flexibility to take local backstop is triggered, such emission than 18 months. circumstances, economics and state 797 In the event a state does not implement the standards would be effective within 18 backstop as required if actual emission performance triggers the backstop, the EPA will take appropriate 798 In this example, states could elect to 795 This includes the level of emission action. The EPA notes that as part of the proposed implement different combinations of mass-based performance during the interim plan periods 2022– federal plan rulemaking, it is proposing a regulatory standards during the remaining interim step 2 and 2024, 2025–2027 and 2028–2029, as well as the mechanism to call plans in the instances of 3 plan performance periods, provided that performance level that would be achieved during substantial inadequacy to meet applicable cumulative CO2 emissions during the full interim every subsequent 2-year final plan performance requirements or failure to implement an approved plan performance period (2022–2029) do not exceed period (2030–2031, and subsequent 2-year periods). plan. 270 million tons.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00177 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64838 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

policy into account when developing The EPA received broad support in different implementation options allow their plans. comments for allowing states to states to tailor their implementation of By contrast, multiple commenters implement multi-state plan approaches, linked emission trading programs, based opposed the portfolio approach. Some and has made multiple changes in the on state policy preferences, as well as commenters questioned how a portfolio final rule to address many suggestions economic and other considerations. approach would work, and whether the outlining different approaches states These different options provide varying EPA had provided sufficient detail may want to take. These changes are levels of state control over emission explaining how such a plan approach intended to provide streamlined trading system partners and require could be implemented by a state. In approaches for multi-state coordination varying levels of coordination in the particular, multiple commenters while maintaining transparency and course of state plan development. questioned how different state assuring that the CO2 emission In response to comments, the EPA is programs, such as utility-administered performance rates or state CO2 emission also further clarifying how multi-state EE programs, could be made federally goals are achieved. plans with a joint goal for affected EGUs enforceable in practice under CAA The EPA is finalizing two approaches may be implemented. The EPA is section 111(d).799 Multiple commenters that allow states to coordinate clarifying that states may participate in implementation in order to meet the more than one multi-state plan, if expressed concern about making state 800 requirements and utility programs for emission guidelines. necessary, for example, to address First, states may meet the RE and demand-side EE enforceable affected EGUs in states that are served requirements of the emission guidelines by more than one ISO or RTO. The EPA under the CAA. Some of these and CAA section 111(d) by submitting is further clarifying that a subset of commenters supported the state multi-state plans that address the affected EGUs in a state may participate commitments plan approach that the affected EGUs in a group of states. The in a multi-state plan. These EPA took comment on in the proposal, EPA is finalizing the proposed approach clarifications are discussed in section which was a variant of the portfolio by which multiple states aggregate their VIII.C.5.d. approach. Under the state commitment rate or mass CO2 goals and submit a a. Summary of comments on multi- variant, measures that applied to multi-state plan that will achieve a joint state plans. entities other than affected EGUs would CO2 emission goal for the fleet of Multiple commenters supported the not be federally enforceable under the affected EGUs located within those EPA’s proposed approach that would CAA, but state commitments to states (or a joint mass-based CO2 goal allow states to implement a multi-state implement those measures would be plus a joint new source CO2 emission plan to meet a joint CO2 emission goal. federally enforceable elements of a state complement).801 However, a number of states commented plan under the CAA. Second, the EPA is also finalizing that states should also be allowed to After considering these comments, the another approach, in response to coordinate without aggregating multiple EPA is not finalizing the portfolio comments received on the proposed individual state goals into a single joint approach or the state commitment rule. This approach enables states to goal. Many states questioned the variant. However, the EPA is finalizing retain their individual state goals for incentives that a state would have to the state measures plan type, as affected EGUs and submit individual aggregate its goal with other states that described above, which would plans, but to coordinate plan have different goals, and also noted the accommodate state choices and allow implementation with other states administrative complexities presented states to rely upon a variety of measures, through the interstate transfer of ERCs by states seeking to formally coordinate as was envisioned under the portfolio or emission allowances.802 This state plans with one another. approach, in a way that meets the approach facilitates interstate emission The EPA notes that there are multiple statutory requirements of CAA section trading without requiring states to incentives for states to collaborate by 111(d). submit joint plans.803 The EPA implementing a multi-state plan to meet considers these to be individual state an aggregated joint goal, regardless of 5. Multi-State Plans and Multi-State plans, not multi-state plans. the specific level of their individual Coordination States have the option to implement goals, because states share grid regions The EPA views the ability of a state this second approach in different ways, and impacts from plan implementation to implement an individual plan or a as discussed in section VIII.C.5.c. These will be regional in nature. Further, multi-state plan as a significant multiple analyses, including those by flexibility that allows a state to tailor 800 The EPA notes that in addition to these ISOs and RTOs, indicate that regional implementation of its plan to state approved approaches, other types of multi-state approaches could achieve state goals at approaches may be acceptable in an approvable lesser cost than individual state plan policy objectives and circumstances. plan, provided the obligations of each state under The EPA sees particular value in multi- the multi-state plan are clear and the submitted approaches. However, the EPA also state plans and multi-state coordination, plan(s) meets applicable emission guideline recognizes the value in allowing for which allow states to implement a plan requirements. collaboration where states retain 801 The concept of a new source CO emission in a coordinated fashion with other 2 individual goals. These approaches complement is addressed in section VIII.J.2.b. Table could provide some of the benefits of a states. Such approaches can lead to 14 provides individual state new source CO2 more efficient implementation, lower emission complements. For a multi-state plan, a joint goal while reducing the compliance costs for affected EGUs and joint new source CO2 emission complement would negotiations among states necessary to be the sum of the individual new source CO2 develop a multi-state plan with a joint lower impacts on electricity ratepayers. emission complements in Table 14 for the states Coordinated approaches also will help participating in the multi-state plan. goal. As a result, the EPA has finalized states identify and address any potential 802 This approach also applies where a state plan the additional approaches described in electric reliability impacts when is designed to meet a state mass-based CO2 goal section VIII.C.5 to provide for developing plans. plus a state’s new source CO2 emission coordination while maintaining complement. individual goals. These approaches 803 States may submit individual plans with such 799 Legal considerations with the proposed linkages, or if they choose, provide a joint would allow for interstate transfer of portfolio approach are explored in section submittal. Forms of joint submittals are described ERCs or emission allowances while VIII.C.6.d. at section VIII.E. retaining individual state goals.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00178 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64839

Many commenters suggested that Under this approach, a rate-based implementation may occur under both states should be encouraged to join or multi-state plan would include a an ‘‘emission standards’’ type of plan form regional market-based programs. weighted average rate-based emission and a ‘‘state measures’’ type of plan, Many commenters touted the economic goal, derived by calculating a weighted where states are implementing emission 809 efficiency benefits of such approaches, average CO2 emission rate based on the trading programs. For rate-based and noted that such programs have individual rate-based goals for each of plans, this type of coordinated approach features that support electric reliability. the participating states and 2012 is limited to state plans with rate-based The EPA agrees with these comments, generation from affected EGUs. A mass- emission standards that are equal to the and notes that it encouraged such based multi-state plan would include an CO2 emission performance rates in the approaches in the proposal. While the aggregated mass-based CO2 emission emission guidelines. EPA is not requiring states to join and/ goal for the participating states, in Under this approach, a state plan or form regional market-based programs, cumulative tons of CO2, derived by could indicate that ERCs or CO2 we note that such programs can be summing the individual mass-based allowances issued by other states with helpful for many reasons, including CO2 emission goals of the participating an EPA-approved state plan could be features that support reliability. Market- states.806 used by affected EGUs for compliance based programs allow greater flexibility Such plans could include emission with the state’s rate-based or mass-based for affected EGUs both in the short-term standards in the form of a multi-state emission standard, respectively. Such and long-term. Under a market-based rate-based or mass-based emission plans must indicate how ERCs or program, affected EGUs have the ability trading program.807 Alternatively, states emission allowances will be tracked to obtain sufficient allowances or credits could submit a multi-state plan using a from issuance through use by affected to cover their emissions in order to state measures approach.808 Both EGUs for compliance,810 through either comply with their emission standards. approaches could provide for a joint tracking system, interoperable Additionally, we continue to encourage implementation of a multi-state tracking systems, or an EPA- states to cooperate regionally. Regional emission trading program. administered tracking system.811 cooperation in planning and reliability c. Multi-state coordination among The EPA would assess the assessments is an important tool to states retaining individual state goals. approvability of each state’s plan meeting system needs in the most cost- States that do not wish to pursue a individually—the use of ERCs or effective, efficient, and reliable way. joint CO2 emission goal with other states emission allowances issued in another b. Multi-state coordination through a may pursue a second pathway to multi- state would not impact the joint emission goal. state collaboration. States may submit approvability of the components of the Multiple states may submit a multi- 812 individual plans that will meet the CO2 individual state plan. However, the state plan that achieves an aggregated emission performance rates or a state EPA would also assess linkages with joint CO2 emission goal for the affected mass CO goal for affected EGUs (or other state plans, to ensure that the joint EGUs in the participating states (or a 2 mass-based CO2 goal plus the new tracking system or interoperable joint mass-based CO2 goal plus a joint source CO2 emission complement), but tracking systems used to implement new source CO2 emission rate-based or mass-based emission 804 include implementation in coordination complement). The joint emission goal with other state plans by providing for trading programs across states are approach is acceptable for both types of the interstate transfer of ERCs or CO2 properly designed with necessary state plans, the ‘‘emission standards’’ allowances, depending on whether the components, systems, and procedures to plan type and the ‘‘state measures’’ plan state is implementing a rate-based or maintain the integrity of the linked type. However, the EPA is requiring that mass-based emission trading program. emission trading programs. a joint goal may apply only to states This form of coordinated Coordinated state plan implementing the same type of plan, implementation among states that retain either an ‘‘emission standards’’ plan or different remedies would apply under an emission individual state mass-based CO2 goals a ‘‘state measures’’ plan.805 standards plan and a state measures plan. Under an (or that implement individual state emission standards plan, corrective measures plans with rate-based emission 804 As a conceptual and legal matter, the would be triggered. Under a state measures plan, standards consistent with the CO2 relationship between states coordinating to meet a the federally enforceable backstop emission joint CO2 emission goal under this rule is similar standards would be triggered. See section VIII.F.3. to the relationship between states coordinating SIP 806 Where a multi-state plan is designed to meet 809 ERCs may only be transferred among states submissions to attain the NAAQS in an interstate a joint mass-based CO2 goal plus a joint new source implementing rate-based emission limits. Likewise, nonattainment area. In both cases, the states CO2 emission complement, the joint new source emission allowances may only be transferred among coordinate their actions in a way that, cumulatively, CO2 emission complement would be the sum of the states implementing mass-based emission limits. 810 the measures applicable in each state will lead to individual new source CO2 emission complements Referred to in different programs as achievement of a common interstate goal (with the in section VIII.J.2.b, Table 14, for the states ‘‘surrender,’’ ‘‘retirement,’’ or ‘‘cancellation.’’ EPA evaluating the sufficiency and success of the participating in the multi-state plan. 811 The EPA received a number of comments from plans on a holistic, interstate basis). Despite the 807 A potential example of this approach is the states and stakeholders about the value of the EPA’s shared goal, in both cases, the mere fact of method by which the states participating in RGGI support in developing and/or administering coordination has no effect on each state’s sovereign have implemented individual CO2 Budget Trading tracking systems to support state administration of legal authority. For example, the legally applicable Program regulations in a linked manner using a rate-based emission trading programs. The EPA is rules in a given state are adopted by that state shared emission and allowance tracking system. exploring options for providing such support and individually, not by a joint entity or other interstate Each state’s regulations implementing RGGI stand is conducting an initial scoping assessment of mechanism. Similarly, the fact that the states alone on a legal basis, but provide for the use of tracking system support needs and functionality. coordinate their rules does not grant them the CO2 allowances issued in other participating states 812 Note that for mass-based plans, the authority to directly enforce each other’s rules, or for compliance under the state regulations. These approvability requirements for a state plan would to take direct legal action against a state that is states are not listed by name in state regulations, differ, depending on the structure of the emission failing to implement its own rules. Although some which instead refer to participating states that have budget trading program included in the state plan. states may jointly submit their coordinated rules to established a corresponding CO2 Budget Trading For example, approvability requirements and basic the EPA as a matter of administrative convenience, Program regulation. More information is available at accounting with regard to whether a plan achieves the state rules within such a plan are nothing more http://www.rggi.org. a state’s mass CO2 goal would differ for emission than reciprocal laws of the sort that states routinely 808 Under this approach, a state measure could budget trading programs that cover only affected enact in voluntary coordination with each other. include, if a state chose, a multi-state emission EGUs subject to CAA section 111(d) vs. programs 805 This is necessary because if the joint goal is trading program that is enforceable at the state that apply to a broader set of emission sources. not achieved during a plan performance period, level. These considerations are addressed in section VIII.J.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00179 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64840 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

emission performance rates in the based CO2 emission goal through mass- On the other hand, if a state plan emission guidelines) is discussed in based emission standards applicable complies with all applicable more detail in sections VIII.J and K. only to affected EGUs (or, alternatively, requirements of the CAA (including Section VIII.J discusses coordinated to achieve the mass CO2 goal and a new these guidelines), then the EPA must implementation among states source CO2 emission complement approve it as satisfactory. This is true implementing individual mass-based through federally enforceable mass- even if the emission standards in the emission budget trading programs and based emission standards in state plan are more stringent than the section VIII.K discusses coordinated conjunction with state enforceable minimum requirements of these implementation among states emission standards on new sources), guidelines, or the state plan achieves implementing individual rate-based then the set of rate-based emission more emission reductions than required emission trading programs. standards or the set of mass-based by these guidelines. This follows from d. Multi-state plans that address a emission standards in the state plan section 116 of the CAA as interpreted by subset of EGUs in a state. establishes standards of performance for the U.S. Supreme Court in Union Elec. The EPA is clarifying in the final affected EGUs as required under section Co. v. EPA, 427 U.S. 246, 263–64 (1976). emission guidelines that a state may 111(d)(1)(A). The EPA has the authority b. Legal basis for emissions trading in participate in more than one multi-state to approve emission standards for state plans. plan. Under this approach, the state affected EGUs as part of a state plan There are three legal considerations would identify in its submittal the under all three cases (as long as such with respect to emissions trading in subset of affected EGUs in the state that emission standards meet the state plans. First, we explain how the are subject to the multi-state plan or requirements of CAA section 111(d) and definition of ‘‘standard of performance’’ plans. This could involve a subset of the final emission guidelines), thereby in section 111(a)(1) allows section affected EGUs that are subject to a making such emission standards 111(d) plans to include standards of multi-state plan, with the remainder of federally enforceable upon approval by performance that authorize emissions affected EGUs subject to a state’s the EPA. In all three cases, the emission trading. Second, we explain how the individual plan. Alternatively, different standards must be quantifiable, EPA interprets the phrase ‘‘provides for affected EGUs in a state may be subject verifiable, enforceable, non-duplicative implementation and enforcement of to different multi-state plans. In all and permanent; this ensures that the [the] standards of performance’’ in the cases, the state would need to identify plan provides for implementation and context of a rate-based ERC trading in each specific plan which affected enforcement of the standards of program. Third, we give a similar EGUs are subject to such plan, with performance (i.e. the emission explanation of the EPA’s interpretation each affected EGU subject to only one standards) as required by section of the same phrase in the context of a multi-state plan or subject only to the 111(d)(1)(B). Finally, as described in mass-based allowance trading program. state’s individual plan (if relevant). section VIII.B.7.b below, standards of (1). In the proposal, the EPA proposed These scenarios may occur where a performance may include emission that CAA section 111(d) plans may state chooses to cover affected EGUs in trading. Thus, the credit and allowance include standards of performance that different ISOs or RTOs in different trading that is allowed under the authorize emissions averaging and multi-state plans. This will provide emission standards approach is trading. 79 FR 34830, 34927/1 (June 18, states with flexibility to participate in consistent with the statutory 2014). We are finalizing that states may multi-state plans that address the requirement that the plan establish include the use of emission trading in affected EGUs in a respective grid standards of performance. approvable state plans. region, in the case where state borders We note that the standard the statute For purposes of this legal discussion, cross grid regions. provides for the EPA’s review of a state in the case of an emission limitation These scenarios may also occur where plan is whether it is ‘‘satisfactory.’’ We expressed as an emission rate, trading a state is served by multiple vertically interpret a ‘‘satisfactory’’ plan as one takes the form of buying or selling ERCs integrated electric utilities with service that meets all applicable requirements that an affected EGU may generate if its territories that cross state lines. This of the CAA, including applicable actual emission rate is lower than its will provide states with flexibility to requirements of these guidelines. Some allowed emission rate or that an eligible participate in multi-state plans that commenters suggested that resource may generate. In the case of an address the affected EGUs owned and ‘‘satisfactory’’ should be taken to mean emission limitation expressed as a mass- operated by a utility with a multi-state something less (such as mostly or based limit, trading takes the form of service territory. substantially meeting requirements) but buying or selling allowances. the structure of 111(d) shows otherwise. As quoted in full above, the definition 6. Legal Bases and Considerations for When a state plan is unsatisfactory, of ‘‘standard of performance’’ under State Plan Types and Approaches section 111(d)(2) gives the EPA the CAA section 111(a)(1) is a ‘‘standard for a. Legal basis for emission standards ‘‘same’’ authority to promulgate a emissions of air pollutants which approach. federal plan as the EPA has under reflects the degree of emission The emission standards approach is section 110(c). Under section 110(c), the limitation achievable through the consistent with the requirements of EPA has authority to promulgate a application of the best system of CAA section 111(d). If a state simply federal implementation plan if a SIP emission reduction which . . . the adopts the CO2 emission performance does not comply with all CAA Administrator determines has been rates, then the corresponding rate-based requirements (see sections 110(k)(3) and adequately demonstrated.’’ emission standards in the state plan 110(l)). Both an emission rate that may be met establish standards of performance for For example, if an emission standards through tradable ERCs, and a mass limit affected EGUs as required under section type plan includes an emission standard requirement that emissions not exceed 111(d)(1)(A). Similarly, if a state that is unenforceable due to defective the number of tradable allowances chooses to achieve the rate-based CO2 rule language, then the plan is not surrendered by an affected source, emission goal through rate-based satisfactory because it does not comply qualify as a ‘‘standard for emissions.’’ emission standards applicable only to with the guideline requirement that The term ‘‘standard’’ is not defined, but affected EGUs, or to achieve the mass- emission standards must be enforceable. its everyday meaning is a rule or

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00180 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64841

requirement,813 which, under the only this rule, because the environmental [certain] air pollutant[s] . . . and (B) (or at least a permissible) reading of the effects of CO2 emissions are not provides for the implementation and provision, would include an emission dependent on the location of the enforcement of such standards of rate that may be met through tradable emissions. performance.’’ Section 111(d)(2)(A) ERCs and a requirement to retire (2). In our final rule, we are indicates that the EPA must approve the tradable allowances. prescribing certain specific state plan if it is ‘‘satisfactory.’’ Treating a tradable emission rate or requirements for trading systems for For states that choose to adopt and mass limit requirement as a ‘‘standard of ERCs in a rate-based approach. These submit a state measures plan, such state performance’’ is consistent with past specific requirements are in addition to must submit a state plan that includes EPA practice. In the Clean Air Mercury the generic requirements for any state standards of performance for CO2 Rule, promulgated in 2005, the EPA plan (see section VIII.D.2.d below for emissions from affected EGUs in the established tradable mass limits as the the legal basis for the generic form of a federally enforceable backstop emission guidelines for certain air components for state plans) and are in order to meet the requirements of pollutants from fossil fuel-fired EGUs, intended to ensure the integrity of the section 111(d). Section 111(d) and explained that a tradable mass limit ERC trading system. The integrity of the unambiguously requires a state to qualifies as a ‘‘standard for trading system is key to ensuring that a submit a plan that establishes standards emissions.’’ 814 In addition, in the 1995 state plan provides for implementation of performance for certain sources, but Municipal Solid Waste (MSW) and enforcement of the standards of does not mandate when such standards Combustor rule the EPA authorized performance, as required by section of performance must be in effect or emission trading by sources.815 111(d)(1)(B). Requirements relating to implemented in order to meet It should be noted that CAA section ERCs in a rate-based trading system, and applicable compliance deadlines. 302(l) includes another definition of allowances in a mass-based system, Instead, Congress has delegated to the ‘‘standard of performance,’’ which is ‘‘a must also be submitted as federally EPA the determination of the requirement of continuous emission enforceable components of the state appropriate effective date of standards reduction, including any requirement plan, as such requirements provide for of performance submitted under state relating to the operation or maintenance the implementation and enforcement of plans to meet the requirements of of a source to assure continuous a tradable emission rate or mass limit section 111(d). In other words, where emission reduction.’’ As described for an affected EGU. the statute is silent, the EPA has above, section 111(d) contains its own, However, as described in section authority to provide a reasonable more specific definition of ‘‘standard of VIII.C.6.d, the EPA has legal concerns interpretation. The EPA’s interpretation performance,’’ which a tradable regarding whether federally enforceable is that for states that submit state plans emission rate or mass limit satisfies. requirements under a CAA section establishing standards of performance Whether or not section 302(l) applies in 111(d) state plan can be imposed on under section 111(d), the effective date light of section 111(d)’s more specific entities other than affected EGUs. It is of such standards of performance may definition, a tradable emission rate or important to note that the use of ERCs be later in time, perhaps indefinitely, for mass limit also meets section 302(l)’s and inclusion of state plan requirements a number of reasons and under certain requirements. A tradable emission rate regarding a rate-based trading system, conditions. A key condition is that the applies continuously in that the source and the use of allowances and inclusion state plan provides for the achievement is under a continuous obligation to meet of state plan requirements regarding a of the required reduction by means its emission rate, and that is so mass-based trading system, does not run other than the standards of performance regardless of the averaging time, e.g., a afoul of these legal concerns, as neither on the timetable required by the BSER, rate that must be met on an annual the requirements of section 111(d) nor with provision for federally enforceable basis. Similarly, a mass limit of the federally enforceable state plan in standards of performance to be requirement implemented through the either case extend to non-EGU implemented if those other means fall use of allowances applies continuously generators or third-party verifiers of short. The EPA believes it is reasonable in that the source is continuously under such compliance units. to defer the effective date for standards an obligation to assure that at the (3). In our final rule, we are of performance for affected EGUs as appropriate time, its emissions will not prescribing certain specific long as affected EGU CO2 emissions are exceed the allowances it will surrender. requirements for trading systems for projected to achieve, and do achieve, In this respect, a tradable emission rate allowances in a mass-based approach. the requisite state goal. or mass limit requirement is similar to These specific requirements are in Additionally, under the state a non-tradable emission rate that must addition to the generic requirements for measures plan type, if a state chooses to be met over a specified period, such as any state plan (see section VIII.D.2.d impose emission standards for the one year. In all of these cases, a source below for the legal basis for the generic affected EGUs in conjunction with state is continuously subject to its requirements for state plans) and are measures that apply to other entities for requirement although it may be able to intended to ensure the integrity of the any period prior to the triggering of the emit at different levels at different allowance trading system. The integrity backstop, this final rule requires such points in time. It should also be noted of the trading system is key to ensuring emission standards to be submitted as that a tradable emission rate or mass that a state plan provides for federally enforceable measures included limit requirement is appropriate for CO2 implementation and enforcement of the in the state plan. The EPA believes this emissions, the air pollutant covered by standards of performance. is appropriate to help ensure the c. Legal basis for state measures plan performance of a state measures plan 813 E.g., ‘‘Something that is set up and established type. will meet the requirements of this final by authority as a rule for the measure of quantity, The EPA believes the state measures rule. Section 111(d) clearly authorizes weight, value, or quality.’’ Webster’s Third New plan type is consistent with CAA states to impose, and the EPA to International Dictionary 2223 (1967); see also The American College Dictionary (C.L. Barnhart, ed. section 111(d). Section 111(d)(1) approve, federally enforceable emission 1970) (‘‘an authoritative model or measure’’). requires a state to submit a plan that standards for affected EGUs. Though 814 70 FR 28606, 28616–17 (May 18, 2005). ‘‘(A) establishes standards of federally enforceable emission 815 60 FR 65387, 6540/2 (Dec. 19, 1995). performance for any existing source for standards for affected EGUs in a state

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00181 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64842 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

measures plan themselves would not standards themselves in conjunction responsive to, and accommodating of, necessarily achieve the requisite state with any state measures the state states and stakeholders who have goals, the EPA is authorized to approve chooses to rely upon further assures the expressed the importance of being able state plans when they satisfactorily meet likelihood of the affected EGUs to rely upon various measures that have applicable requirements. The EPA can achieving the state goals as required the effect of reducing CO2 emissions evaluate whether a state measures plan under this rule and section 111(d). from affected EGUs. The EPA is is satisfactory by determining whether The state measures plan is a variation finalizing the state measures plan type any federally enforceable emission of the proposed portfolio approach in upon careful consideration of statutory standards for affected EGUs in that both plan types allow the state to requirements and comments received conjunction with state measures on rely upon measures that impose based on the proposed portfolio other entities will result in the requirements on sources other than approach and state commitment achievement of the requisite emissions affected EGUs in meeting the requisite approach. performance level. As previously state CO2 emission goal. The state The EPA additionally notes that the explained in this final rule, the measures plan type is also a variation of state measures plan type is not performance rates and the state goals are the proposed state commitment precluded by the recent Ninth Circuit the arithmetic expression of BSER as approach in that the measures involving Court of Appeals’ decision in applied across affected EGUs in a state entities other than affected EGUs are not Committee for a Better Arvin et al. v. US as a source category. In a state measures included as part of the federally EPA et al., Nos. 11–73924 and 12–71332 plan, the evaluation of whether a state enforceable 111(d) state plan, but the (May 20, 2015). The court held that the measures plan is satisfactory goes to state may rely upon such measures that EPA violated the CAA by approving a evaluating both the state measures and have the effect of reducing CO2 California SIP which relied on emission any federally enforceable emission emissions from affected EGUs as a reductions from state-only mobile standards on the affected EGUs to matter of state law. The EPA took source standards (‘‘waiver measures’’) determine whether the plan as a whole comment on the proposed portfolio without including those standards in will result in the affected EGUs approach and state commitment the SIP. The court first looked at the achieving the applicable goals that approach, and on the utilization of plain language of section 110(a)(2)(A) of reflect BSER. measures on entities other than affected the CAA, which states that SIPs ‘‘shall Section 111(d)(1)(B) also requires a EGUs in meeting the requirements of the include’’ the emission limitations and state to submit a program that provides emission guidelines and CAA section other control measures on which a state for the implementation and enforcement 111(d). With respect to the proposed relies to comply with the CAA. The of the applicable standards of state commitment approach, the EPA court then stated that the EPA’s action performance. Under the state measures received comments recommending that was also inconsistent with the structure approach, this requirement regarding the EPA require a federally enforceable of the CAA. The EPA has the primary implementation is satisfied in part by backstop with emission standards responsibility to protect the nation’s air the submission of an approvable trigger sufficient to achieve the requisite CO2 quality, but in the court’s view, the EPA mechanism for the backstop and emission performance. The backstop itself would be unable to enforce the appropriate monitoring, reporting and component the EPA is finalizing as part state-only standards. In addition, the recordkeeping requirements. The trigger of the state measures plan type is court stated that the EPA’s action was mechanism provides for the consistent with the EPA’s statements in inconsistent with citizens’ right to ‘‘implementation’’ of the backstop, i.e., the proposal regarding states’ enforce SIP provisions under section the standards of performance, by putting obligations under section 111(d) to 304. the backstop into effect once the establish emission standards for affected There are a number of reasons why associated trigger is deployed. In other EGUs, as the backstop contains federally this decision does not preclude the state words, when the CO2 performance level enforceable emission standards for measures plan type. The Ninth Circuit’s under a state plan exceeds the trigger as affected EGUs that will achieve the textual analysis does not apply here, as described in section VIII.C.4.b, the requisite CO2 emission performance, the language of section 110(a)(2)(A) does emission standards that were submitted and is consistent with comments not control for 111(d) state plans. as the federally enforceable backstop received regarding the proposed state Section 111(d)(1) requires state plans to and any attendant requirements must be commitment approach. ‘‘establish standards of performance’’ implemented and in effect. The The state measures plan type the EPA and to ‘‘provide for implementation and statutory requirement under CAA is finalizing is also a logical outgrowth enforcement’’ of the standards of section 111(d)(2) regarding enforcement of the comments received on the performance, but, unlike section is also satisfied under the state measures proposed portfolio approach. As further 110(a)(2)(A), section 111(d) does not plan type by the state submitting explained below, legal questions remain specifically say that every emission standards of performance sufficient to as to whether state plans under section reduction measure must be ‘‘included’’ meet the requisite emission performance 111(d) can include federally enforceable in the state plan and be made federally rates or state goal, in the form of the measures that impose requirements on enforceable. Even if section 111(d) did backstop, for inclusion as part of the sources other than affected EGUs. impose such requirements, the state federally enforceable state plan. However, a number of commenters and measures approach satisfies them Additionally, by requiring states that stakeholders expressed robust support because the trigger is included in the choose to impose emission standards on for the ability to rely on measures and plan as a federally enforceable affected EGUs under the state measures programs that do not impose implementation measure, and the approach to submit such emission requirements on affected EGUs backstop included in the plan also standards for inclusion in the federally themselves through plan types such as contains standards of performance that enforceable plan, this requirement the proposed portfolio and state reflect the BSER and are federally further provides for implementation and commitment approaches. The EPA is enforceable once they are triggered. enforcement as required by the statute. reasonably interpreting 111(d) as The Ninth Circuit’s structural analysis Regulating the affected EGUs through authorizing the state measures plan also does not apply. The availability of federally enforceable emission type, and believes this plan type is also the trigger and backstop gives the EPA

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00182 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64843

and citizens a federally enforceable the event that states submit such equivalent to or better than the required route to ensure that all necessary measures to the EPA for inclusion in the CO2 emission performance level in the emission reductions take place in order state plan, the EPA would not approve state plan; to achieve the standards of performance. them into the state plan and therefore 3. The EGU CO2 emission This is markedly different than the would not make them federally performance must be quantifiable and state-only standards, where according to enforceable. verifiable; the Ninth Circuit, the EPA and citizens We note that section 111(d) limits on 4. The plan must include a process for had no route to ensure that all necessary federal enforceability of requirements state reporting of plan implementation, emission reductions took place in order against non-affected sources do not CO2 emission performance outcomes, to attain the NAAQS. In addition, case imply that the BSER cannot be based on and implementation of corrective law suggests that federal enforceability actions by non-affected sources. As measures, if necessary. for every requirement may not be discussed in section V, the BSER may be After reviewing the comments we necessary when there are sufficient based on the ability of owners/operators received concerning the approvability federally enforceable requirements to of affected sources to engage in criteria, the EPA has decided against satisfy the statute, see National Mining commercial relationships with a wide maintaining the four proposed Ass’n v. United States EPA, 59 F.3d range of other entities, from the vendors, approvability criteria separately from 1351 (D.C. Cir. 1995); in this case installers, and operators of air pollution the list of components required for an federal enforceability for the state-only control equipment to, in this approvable plan, which may be measures is not necessary to meet the rulemaking, owners/operators of RE. confusing and potentially redundant. statutory requirements of section The EPA notes it is also not finalizing The EPA has determined that a 111(d)(1) as the federally enforceable the proposed state commitment satisfactory state plan that meets the trigger and backstop are sufficient. approach or state crediting approach. required plan components discussed d. Legal considerations with proposed The EPA believes the finalized state below will inevitably meet the proposed portfolio approach. measures plan type provides states with approvability criteria. The EPA, The EPA is not finalizing the portfolio the same flexibilities as would have therefore, has incorporated the proposed approach that was included in the been allowed under these two proposed approvability criteria into the section proposed rulemaking, 79 FR 34830, approaches, and does so in a way that titled ‘‘Components of a state plan 34902 (June 18, 2014). In the proposal, is legally supportable by the CAA. submittal’’ (section VIII.D.2 below). the EPA noted that the portfolio Therefore, the EPA does not believe it There is no functional change in the approach raised legal questions. 79 FR necessary to finalize the state approvability criteria or the components 34830, 34902–03. A number of commitment approach or state crediting of a state plan addressed in the commenters stated that the portfolio approach. proposal; they are simply combined and approach is unlawful because it exceeds e. Legal basis for multi-state plans. this change does not have a substantive the limitations that section 111(d)(1) While nothing in section 111(d)(1) effect on state plan development or places on state plans. Upon further explicitly authorizes either states to approval. review, we agree with these comments. adopt and submit multi-state plans, or Under the proposed ‘‘Enforceable Section 111(d)(1) provides that state the EPA to approve them as satisfactory, Measures’’ criterion (section VIII.C.1 of plans shall ‘‘establish[] ‘‘standards of nothing in section 111(d)(1) explicitly the proposal preamble), the EPA performance for any existing source’’ prohibits it, either. In addition, nothing specifically requested comment on the and ‘‘provide[] for the implementation in section 111(d)(2)(A)’s standard of appropriateness of applying existing and enforcement of . . . standards of ‘‘satisfactory’’ prohibits the EPA from EPA guidance on enforceability to state performance’’ under CAA section considering multi-state plans as plans under CAA section 111(d), 111(d)(1). Although in the proposal we satisfactory. There is thus a gap that the considering the types of entities that identified possible interpretations of EPA may reasonably fill. might be included in a state plan.817 section 111(d)(1) that could justify the In light of the purpose of these The EPA also requested comment on proposed portfolio approach, after emission guidelines, to reduce whether the agency should provide reviewing the comments, we are not emissions of a pollutant that globally guidance on enforceability adopting those interpretations. Because mixes in the stratosphere, and the considerations related to requirements section 111(d)(1) specifically requires mechanisms to reduce those emissions, in a state plan for entities other than state plans to include only (A) standards which may have beneficial effects across affected EGUs, and if so, what types of for emissions imposed on affected state lines, it is reasonable to allow for entities. Comments received strongly sources and (B) measures that multi-state plans. Thus, our gap-filling suggested that the EPA provide implement and enforce such interpretation of section 111(d) in this guidance on enforceability standards,816 we interpret it as allowing context is reasonable. considerations for non-EGU affected federal enforceability only of D. State Plan Components and entities, particularly for RE and EE. requirements or measures that are in Approvability Criteria Comments also requested additional those two specifically required guidance specific to this rulemaking, provisions. We therefore do not 1. Approvability Criteria including examples of enforceable interpret the term ‘‘implementation of In the ‘‘Criteria for Approving State measures for specific activities, such as . . . such standards of performance’’ to Plans’’ section of the preamble to the authorize the EPA to approve state plans June 2014 proposal (section VIII.C), the 817 The existing guidance documents referenced EPA proposed the following as were: (1) September 23, 1987 memorandum and with obligations enforceable against the accompanying implementing guidance, ‘‘Review of broad array of non-emitting entities that necessary components of an approvable State Implementation Plans and Revisions for would have been implicated by the state plan: Enforceability and Legal Sufficiency,’’ (2) August 5, portfolio approach. Thus, the EPA is not 1. The plan must contain enforceable 2004 ‘‘Guidance on SIP Credits for Emission Reductions from Electric-Sector Energy Efficiency measures that reduce EGU CO2 finalizing the portfolio approach, and in and Renewable Energy Measures,’’ and (3) July 2012 emissions; ‘‘Roadmap for Incorporating Energy Efficiency/ 816 Such measures include, for example, in this 2. The projected CO2 emission Renewable Energy Policies and Programs into State rule, requirements for ERCs. performance by affected EGUs must be and Tribal Implementation Plans, Appendix F.’’

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00183 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64844 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

solar thermal technologies, waste heat contributed to the EPA’s decision to The content of the state plan submittal recovery, net-metering energy savings finalize the option for states to submit will vary depending on which plan type and state RPS. a state measures plan, which would be the state decides to adopt. States that These enforcement considerations comprised, at least in part, of measures choose to participate in multi-state arose primarily under the proposed implemented by the state that are not plans must adequately address plan portfolio approach for state plans, included as federally enforceable components that apply to all which would have allowed state plans components of the plan, with a backstop participating states in the multi-state to include federally enforceable of federally enforceable emission plan. measures that apply to entities that are standards for affected EGUs that fully The rest of this section covers not affected EGUs. In this action, the meet the emission guidelines and that components that are required for all EPA is finalizing the state measures would be triggered if the plan failed to types of plans, as well as components approach instead of the portfolio achieve the CO2 emission performance specific to each specific type of plans. approach, under which a state can rely levels specified in the plan on schedule. Section VIII.D.2.a addresses the upon measures that are not federally For more information on the state components required for all plan enforceable as long as the plan also measures plan approach, see section submittals. Section VIII.D.2.b addresses includes a backstop of federally VIII.C.3 of this preamble above. the additional components required for enforceable emission standards that submittals under the emission standards apply to affected EGUs. As explained in 2. Components of a State Plan Submittal plan type. Section VIII.D.2.c addresses depth in section VIII.C, if the state is In this action, the EPA is finalizing additional components required for adopting the state measures approach, that a state plan submittal must include submittals under the state measures the state plan submittal will need to the components described below. As a plan type. specify, in the supporting materials, the result of constructive comments a. Components required for all state state-enforceable measures that the state received from many commenters and plan submittals. is relying upon, in conjunction with any additional considerations, the EPA is The EPA is finalizing requirements federally enforceable emission finalizing state plan components that that a final plan submittal must contain standards for affected EGUs, to meet the are responsive to that input and are the following components, in addition emission guidelines. As part of the state appropriate for the types of state plans to those in either section VIII.D.2.b (for measures approach, the EPA is allowed in the final emission the emission standards plan type) or finalizing a requirement for a federally guidelines. A state plan submittal must VIII.D.2.c (for the state measures plan enforceable backstop, which requires also be consistent with additional type) of this section. the affected EGUs to meet emission specific requirements elsewhere in this (1) Description of the plan approach standards that fully achieve the CO2 final rule and with the EPA and geographic scope. emission performance rates or the state’s implementing regulations at 40 CFR The description of the plan type must CO2 emission goal if the state measures 60.23–60.29, except as otherwise indicate whether the state will meet the do not meet the state’s mass-based CO2 specified by this final rule. These emission guidelines on an individual emission goal. Because the EPA is not requirements apply to both individual state basis or jointly through a multi- finalizing the portfolio approach, which state plan submittals and multi-state state plan, and whether the state is would have allowed states to include plan submittals. When a state plan adopting an emission standards plan federally enforceable measures in a state submittal is approved by the EPA, the type or a state measures plan type. For plan that apply to entities that are not EPA will codify the approved CAA multi-state plans this component must affected EGUs, the agency is not section 111(d) state plan in 40 CFR part identify all participating states and providing additional guidance on 62. Section VIII.D.3 discusses the geographic boundaries applicable to federal enforceability of measures that components of a state plan submittal each component in the plan submittal. might apply to such entities. As that would be codified as the state CAA If a state intends to implement its proposed, we are requiring that state section 111(d) plan when the state plan individual plan in coordination with plans include a demonstration that plan submittal is approved by the EPA. other states by allowing for the measures are enforceable, which for The EPA is finalizing that states can interstate transfer of ERCs or emission emission standards plan types is choose to meet the emission guidelines allowances, such links must also be discussed in section VIII.D.2.b.3 below through one of two types of state plans: identified.818 and for state measures plan types is an emission standards plan type or a (2) Applicability of state plans to discussed in section VIII.D.2.c.6 below. state measures plan type. A state affected EGUs. Commenters also requested that the pursuing the emission standards plan The state plan submittal must list the EPA allow states to rely on provisions type may opt to submit a plan that individual affected EGUs that meet the with flexible compliance mechanisms in meets the CO2 emission performance applicability criteria of 40 CFR 60.5845 state plans and clarify how to address rates for affected EGUs or meets the and provide an inventory of CO2 flexible compliance mechanisms when state rate-based or mass-based CO2 emissions from those affected EGUs for demonstrating achievement of a state emission goal for affected EGUs. A state the most recent calendar year prior to CO2 emission goal. Additionally, a implementing a state measures plan submission for which data are commenter requested that the approach plan type must submit a plan available. enforceability mechanisms that the EPA where the state measures, in (3) Demonstration that a state plan requires in state plans should support conjunction with any emission will achieve the CO2 emission existing programs, as well as new standards on the affected EGUs, result performance rates or state CO2 emission programs in other states, by minimizing in achievement of the state mass-based goal. A state plan submittal must program changes required purely to CO2 goal for affected EGUs. The conform with federal requirements, backstop required to be submitted as demonstrate that the federally while still providing enough additional part of a state measures plan may 818 If applicable, this plan component must also program review and accounting to achieve the CO2 emission performance identify if the plan is being submitted as a ‘‘ready- ensure that CO2 emission reductions are rates for affected EGUs or the state rate- for-interstate-trading’’ plan, as discussed in section achieved. These and related comments based or mass-based CO2 emission goal. VIII.J.3 and VIII.K.4.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00184 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64845

enforceable emission standards for or state rate-based or mass-based CO2 is appropriate considering the type of affected EGUs and/or state measures are goals are achieved when affected EGUs emission standards and/or state sufficient to meet either the CO2 comply with the emission standards: measures included (or relied upon, in emission performance rates or the state’s • State plan establishes separate rate-based the case of state measures) in a state CO2 emission goal for affected EGUs in CO2 emission standards for affected fossil plan. The results of the demonstration the emission guidelines for the interim fuel-fired electric utility steam generating must be reproducible using the and final plan performance periods. units and stationary combustion turbines (in documented assumptions described in This includes during the interim period lb CO2/MWh) that are equal to or lower than the state plan submittal. The method of 2022–2029, including the interim the CO2 emission performance rates in the and projection of EGU generation and emission guidelines during the interim and step 1 period (2022–2024); interim step CO2 emissions can differ from the EPA’s 2 period (2025–2027); and interim step final plan performance periods. • State plan establishes a single rate-based forecast in the RIA. The EPA received 3 period (2028–2029) period, as well as comments on whether it would require CO2 emission standard for all affected EGUs during the final period of 2030–2031 that is equal to or lower than the state’s rate- specific modeling tools and input and subsequent 2-year periods.819 A based CO2 goal in the emission guidelines assumptions. Commenters raised demonstration of CO2 emission during the interim and final plan concerns that the EPA may require performance is required through 2031. performance periods. states to use proprietary models, and • For the post-2031 period, the State plan establishes mass-based CO2 that states do not have the financial demonstration requirement may be emission standards for affected EGUs that resources to use such models. The EPA cumulatively do not exceed a state’s mass- satisfied by showing that emission is not requiring a specific type of standards or state measures on which based CO2 goal in the emission guidelines during the interim and final plan method or model, as long as the one the demonstration through 2031 is chosen uses technically sound methods based are permanent and will remain in performance periods. • State plan establishes mass-based CO and tools that establish a clear place. As discussed in more detail in 2 emission standards for affected EGUs that, relationship between electricity grid section VIII.J, states adopting a plan together with state enforceable limits on mass interactions and the range of factors that based upon a mass-based state CO 2 emissions from new EGUs, cumulatively do impact future EGU economic behavior, emission goal must demonstrate that not exceed the state’s EPA-specified mass generation, and CO2 emissions. The EPA they have addressed the risk of potential 821 CO2 emission budget in the emission will assess whether a method or tool is emission leakage in their mass-based guidelines during the interim and final plan technically sound based on its state plan. performance periods. capability to represent changes in the The type of demonstration of CO2 All other state plan designs must emission performance and electric system commensurate to the set include a projection of CO2 emission of emission standards and state documentation required for such a performance by affected EGUs under the demonstration in a state plan submittal measures in a state plan while state plan. accounting for the key parameters will vary depending on how the CO2 For example, if a state chooses to specified in section VIII.D.2.a.(3)(c) emission standards for affected EGUs apply rate-based CO2 emission and/or state measures in a state plan are below. Including a base case CO2 standards to individual affected EGUs, emission projection in the state plan applied across the fleet of affected EGUs or to subcategories of affected EGUs 820 submittal (i.e., one that does not include in a state, as discussed below. (such as fossil fuel-fired electric utility any federally enforceable CO emission (a) State plan type designs that steam generating units and stationary 2 standards included in a plan or state- require a projection of CO2 emission combustion turbines), at a lb CO /MWh 2 enforceable measures referenced in a performance. Whether a projection of rate that differs from the CO emission 2 plan submittal), will help facilitate the affected EGU CO2 emission performance performance rates or the state’s rate- EPA’s assessment of the CO emission must be included in a state plan based CO goal in the emission 2 2 performance projection. Methods and submittal depends on the design of the guidelines, then a projection is required. tools could range from applying future state plan. The following plan designs Also, if a state chooses to implement a growth rates to historical generation and do not require a projection of CO2 mass-based program including both emissions data, using statistical emission performance by affected EGUs affected EGUs and new EGUs, but with under the state plan because they ensure total allowable emissions in excess of analysis, or electric sector energy that the CO2 emission performance rates the presumptively approvable EPA- modeling. specified mass CO2 emission budget for (c) Required documentation of 819 State plans may meet the CO2 emission projections. When required to provide a performance rates in the emission guidelines during that state, the state must provide a the interim plan performance step periods, or assign projection of CO2 emission performance. CO2 emission performance projection, different interim step CO2 emission performance Likewise, if a state chooses a state the state must also provide rates, provided the CO2 emission performance rates measures state plan approach, a comprehensive documentation of in the emission guidelines are achieved during the analytic parameters for the EPA to full interim period. Likewise, a state plan may meet projection of CO2 emission performance the interim step state CO2 emission goals in the is required. assess the reasonableness of the emission guidelines or establish different interim (b) Methods and tools. A satisfactory projection. The analytic parameters, step CO2 emission levels, provided the state interim demonstration of the future CO2 when considered as a whole, should CO2 goal is achieved during the full interim period. emission performance of affected EGUs reflect a logically consistent future 820 For simplicity, the EPA refers here to state measures under a state measures plan as being must use technically sound methods outlook of the electric system. Refer to included ‘‘in the state plan’’ although such state- that are reliable and replicable. A state the Incorporating RE and Demand-side enforceable measures are not codified as part of the plan submittal must explain how the EE Impacts into State Plan federally enforceable approved state plan. However, projection method and/or tool works Demonstrations TSD of the final rule for the approval of a state measures plan is dependent on a demonstration in the state plan submittal that and why the method and/or tool chosen further details on quantifying impacts of those state-enforceable measures meet the eligible RE and demand-side EE 821 requirements in the emission guidelines and that A state’s EPA-specified mass CO2 emission measures. those state measures, alone or in combination with budget is the state’s mass-based CO2 goal for federally enforceable emission standards for affected EGUs plus the EPA-specified new source The CO2 emission performance affected EGUs, will meet the mass-based CO2 goal. CO2 emission complement. See section VIII.J.2.b. projection documentation must include:

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00185 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64846 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

• Geographic representation, which must different information sources and power purchase agreements or related be appropriate for capturing impacts and/or demonstrate how any inconsistencies documentation, consistent with the changes in the electric system between the individual electricity requirements at section VIII.K.1 and section • Time period of analysis, which must VIII.L; and demand forecasts have been reconciled. • extend through 2031 (d) Additional projection Any other applicable assumptions used • Electricity demand forecast (MWh load in the projection. and MW peak demand) at the state and requirements under a rate-based regional level. If the demand forecast is not emission standards plan. For an (e) Additional projections from NERC, an ISO or RTO, EIA, or other emission standards plan that applies requirements for a state measures plan. publicly available source, then the projection rate-based CO2 emission standards to For a state measures plan, a projection must include justification and individual affected EGUs, or to of affected EGU CO2 emission documentation of underlying assumptions subcategories of affected EGUs, at a lb performance must demonstrate that the that inform the development of the demand CO2/MWh rate that differs from the CO2 state measures, whether alone or in forecast, such as annual economic and emission performance rates or the state’s conjunction with any federally demand growth rate, population growth rate. • Planning reserve margins rate-based CO2 goal in the emission enforceable CO2 emission standards for • Planned new electric generating capacity guidelines, a projection of affected EGU affected EGUs, will achieve the state’s • Analytic treatment of the potential for CO2 emission performance is required. mass-based CO2 goals in the emission building unplanned new electric generating The state must demonstrate that the guidelines for the interim and final capacity weighted average CO2 emission rate of periods. The projection must accurately • Wholesale electricity prices affected EGUs, when weighted by represent individual state-enforceable • Fuel prices, when applicable; measures (or bundled measures) and • generation (in MWh) from affected Fuel carbon content EGUs subject to the different rate-based timing for implementation of these state • Unit-level fixed operations and maintenance costs, when applicable; emission standards, will be equal to or measures. • Unit-level variable operations and less than the CO2 emission performance A state must demonstrate that its maintenance costs, when applicable; rates or the state’s rate-based CO2 state-enforceable measures, along with • Unit-level capacity emission goal during the interim and any federally enforceable CO2 emission • Unit-level heat rate final plan performance periods. standards for affected EGUs included in • If applicable, EGU-specific actions in the The projection will involve an a state plan, will achieve the state mass- state plan designed to meet the required CO2 analysis of the change in generation of based CO2 goal. In addition to the emission performance, including their affected EGUs given the compliance elements described in section timeline for implementation costs and incentives under the VIII.D.2.a.(3).(c), the state must clearly • If applicable, state-enforceable measures, with electricity savings and renewable application of different emission rate document, at a minimum: electricity generation (MWhs) expected for standards across affected EGUs in a • The assignment of federally enforceable individual and collective measures, as state. It must accurately represent the emission standards for each affected EGUs, if applicable. Quantification of MWhs expected emission standards in the plan, applicable; and from EE and RE measures will involve including the use of market-based • the individual state measures, including assumptions that states must document, as aspects of the emission standards (if their projected impacts over time. described in the Incorporating RE and applicable), such as use of ERCs or Because different types of state Demand-side EE Impacts into State Plan emission allowances as compliance Demonstrations TSD. measures could have varying degrees of • instruments. impact on reducing or avoiding CO Annual electricity generation (MWh) by In addition to the elements described 2 fuel type and CO emission levels, for each emissions from affected EGUs, and 2 in the previous section (c), the affected EGU different state measures may interact • projection under this plan design must ERC or emission allowance prices, when with one another in terms of CO2 applicable include: emission reduction impacts, the method • The state must also provide a clear The assignment of federally enforceable and tools a state uses to project CO2 emission standards for each affected EGUs; emissions impacts must have the demonstration that the state measures • and/or federally enforceable emission A projection showing how generation is capability to project how the combined expected to shift between affected EGUs and standards informing the projected across affected EGUs and non-affected EGUs set of state-enforceable measures are achievement of the emission over time; likely to impact CO2 emissions at performance requirements will be • Underlying assumptions regarding the affected EGUs. If a state chooses to use permanent and remain in place. availability and anticipated use of the MWh an emission budget trading program as The EPA encourages participation in of electricity generation or electricity savings a mass-based state measure, for regional modeling efforts which are from eligible measures that can be issued example, the state must choose an designed to allow sharing of data and ERCs; analytic method or tool that can account • help promote consistent approaches The specific calculation (or assumption) for and properly represent any program of how eligible MWh of electricity generation across state boundaries. A state that or savings that can be issued ERCs are being flexibilities that impact CO2 emissions submits a single-state plan must used in the projection to adjust the reported from affected EGUs, such as use of out- consider interstate transfer of electricity CO2 emission rate of affected EGUs, of-sector GHG offsets and cost- across state boundaries, taking into consistent with the accounting methods for containment provisions. The state account other states’ plan types adjusting the CO2 emission rate of an affected would show that the emissions budget reflecting the best available information EGU specified in section VIII.K.1 of the trading program relied upon for the state at the time of the CO emission emission guidelines, if applicable; measures plan, as well as any other state 2 • performance projection. Projections of ERC prices, if applicable; measures, ensure that the sum of • If a state plan provides for the ability of CO2 emission performance for multi- emissions at all affected EGUs will be RE resources located in states with mass- state plans and single-state plans that based plans to be issued ERCs for use in lower than or equal to the state’s CO2 include multi-state coordination must emission goal in the time periods adjusting the reported CO2 emission rates of either use a single (regional) electricity affected EGUs, consideration in the specified in these guidelines. All demand forecast or must document the projection that such resources must meet flexibilities must be clearly documented use of electricity demand forecasts from geographic eligibility requirements, based on in the demonstration.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00186 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64847

(4) Monitoring, reporting and type of plan the state chooses to adopt an electronic system to support this recordkeeping requirements for affected and implement. These state reporting requirement that can be accessed at the EGUs. requirements and reporting periods are EPA’s Central Data Exchange (CDX) The state plan submittal must specify discussed in section VIII.D.2.b (for (http://www.epa.gov/cdx/). See section how each emission standard is emission standards plan types) and VIII.E.8 for additional information on quantifiable and verifiable by describing VIII.D.2.c (for state measures plan electronic submittal requirements. the CO2 emission monitoring, reporting types). The EPA finalizes that each state In the June 2014 proposal, the EPA and recordkeeping requirements for report is due to the EPA no later than proposed that states must keep records, affected EGUs. The applicable the July 1 following the end of each for a minimum of 20 years, of all plan monitoring, recordkeeping and reporting period. The EPA recognizes components, plan requirements, plan reporting requirements for affected the multiple comments received supporting documentation and status of EGUs are outlined in section VIII.F. recommending extending the state meeting the plan requirements, In the June 2014 proposal, the EPA report due date from July 1 to a later including records of all data submitted proposed that states must include in date or to allow the states the flexibility by each affected EGU used to determine their state plans a record retention to propose an alternative report compliance with its emission standards. requirement for affected EGUs to submittal date. The EPA is not pursuing The EPA received multiple comments maintain records for at least 10 years these recommendations due to the recommending that the EPA reduce following the date of each occurrence, implications of the state reports’ due recordkeeping requirements due to the measurement, maintenance, corrective date and the trigger and schedule for burden in expenditure of resources and action, report or record. Commenters implementation of corrective measures manpower to maintain records for at requested clarification of the record (for the emission standards approach) or least 20 years. Commenters retention requirements for states as the backstop federally enforceable recommended that recordkeeping compared to for affected EGUs and also emission standards (for the state requirements be reduced to 5 years requested that the EPA clarify onsite measures approach). The EPA believes consistent with emission guidelines for versus offsite record maintenance the July 1 deadline for states to submit other existing sources. requirements for affected EGUs. The reports to the EPA on plan After considering the comments EPA is finalizing that states must implementation is feasible given that received, this final rule requires that a include in their plans a record retention the information required to be included state must keep records of all plan requirement for affected EGUs of not in the reports will be available per the components, plan requirements, less than 5 years following the date of reporting requirements for affected supporting documentation, and the each compliance period, compliance EGUs in state plans. status of meeting the plan requirements true-up period, occurrence, In addition to the state reporting defined in the plan for the interim plan measurement, maintenance, corrective requirements discussed in section period from 2022–2029 (including action, report, or record, whichever is VIII.D.2.b (for emission standards interim steps 1, 2 and 3). After 2029, latest. Affected EGUs must maintain approach) and VIII.D.2.c (for state states must keep records of all each record onsite for at least 2 years measures approach) and as discussed information relied upon in support of after the date of the occurrence of each below, states must include in the any continued demonstration that the record and may maintain records offsite supporting material of a final state plan final CO2 emission performance rates or and electronically for the remaining submittal a timeline with all the goals are being achieved. The EPA years. Each record must be in a form programmatic plan milestone steps the agrees with comments that a 20-year suitable and readily available for state will take between the time of the record retention requirement could be expeditious review. The EPA finds that final state plan submittal and 2022 to unduly burdensome, and has reduced these final recordkeeping requirements ensure the plan is effective as of 2022. the length of the record retention are appropriate and consistent with the The EPA is also finalizing a requirement requirement for the final rule. During requirements for other CAA section that states must submit a report to the the interim period, states must keep 111(d) emission guidelines. EPA in 2021 that demonstrates that the records for 10 years from the date the (5) State reporting and recordkeeping state has met the programmatic plan record is used to determine compliance requirements. milestone steps that the state indicated with an emission standard, plan A state plan submittal must contain it would take from the submittal of the requirement, CO2 emission performance the process, content and schedule for final plan through the end of 2020, and rate or CO2 emission goal. During the state reporting to the EPA on plan that the state is on track to implement final period, states must keep records implementation and progress toward the approved state plan as of January 1, for 5 years from the date the record is meeting the CO2 emission performance 2022. A final state plan submission used to determine compliance with an rates or state CO2 emission goal. must include a requirement for the state emission standard, plan requirement, The EPA requested comments on to submit this report to the EPA no later CO2 emission performance rate or CO2 whether full reports containing all of the than July 1, 2021. This report will help emissions goal. All records must be in report elements should only be required the EPA further assist and facilitate plan a form suitable and readily available for every 2 years and on the appropriate implementation with states as part of an expeditious review. States must also frequency of reporting of the different ongoing joint effort to ensure the keep records of all data submitted by proposed elements, considering both the necessary reductions are achieved. each affected EGU that was used to goals of minimizing unnecessary The EPA is finalizing the requirement determine compliance with each burdens on states and ensuring program that submissions related to this program affected EGU’s emission standard, and transparency and effectiveness. be submitted electronically. such data must meet the requirements of Commenters recognized that different Specifically, this includes negative the emission guidelines, except for any reporting frequencies may be declarations, state plan submittals information that is submitted to the EPA appropriate for different types of state (including any supporting materials that electronically pursuant to requirements plans. The EPA agrees with the are part of a state plan submittal), any in 40 CFR part 75. If the state is commenters and is finalizing state plan revisions, and all reports required adopting and implementing the state reporting requirements based on the by the state plan. The EPA is developing measures approach, the state must also

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00187 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64848 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

maintain records of all data regarding given to the public by prominent utility and related sectors, including the implementation of each state measure advertisement announcing the date(s), EE sector. and all data used to demonstrate time(s) and place(s) of such hearing(s). The EPA notes that meaningful public achievement of the mass CO2 emission For each hearing held, a state plan involvement goes beyond the holding of goal and such data must meet the submittal must include in the a public hearing. The EPA envisions requirements of the emission guidelines. supporting documentation the list of meaningful engagement to include The EPA finds that these final witnesses and their organizational outreach to vulnerable communities, recordkeeping requirements balance the affiliations, if any, appearing at the sharing information and soliciting input need to maintain records while reducing hearing, and a brief written summary of on state plan development and on any the strain on state resources. each presentation or written submission accompanying assessments, such as (6) Public participation and pursuant to the requirements of the those described in section IX. The certification of hearing on state plan. implementing regulations at 40 CFR agency uses the terms ‘‘vulnerable’’ and A robust and meaningful public 60.23. Additionally, the EPA ‘‘overburdened’’ in referring to low- participation process during state plan recommends that states work with local income communities, communities of development is critical. For the final municipalities, community-based color, and indigenous populations that plan submittal, states must organizations and the press to advertise are most affected by, and least resilient meaningfully engage with members of their state public hearing(s). The EPA to, the impacts of climate change, and the public, including vulnerable also encourages states to provide are central to our community and communities, during the plan background information about their environmental justice considerations. In development process. This section proposed final state plan or their initial section VIII.E, the EPA provides states describes how the EPA will evaluate a submittal in the appropriate languages with examples of resources on how they state plan for compliance with the in advance of their public hearing and can engage with vulnerable minimum required elements for public at their public hearing. Additionally, the communities in a meaningful way. With participation provided in the existing EPA recommends that states provide respect specifically to ensuring implementing regulations as well as translators and other resources at their meaningful community involvement in recommendations for other steps the public hearings, to ensure that all their public hearing(s), however, the state can take to assure robust and members of the public can provide oral EPA recommends that states have both inclusive public participation. feedback. a Web site and toll-free number that all The existing implementing As previously discussed in this rule, stakeholders, including overburdened regulations regarding public recent studies also find that certain communities, labor unions, and others participation requirements are in 40 communities, including low-income can access to get more information CFR 60.23(c)–(f). Per the implementing communities and some communities of regarding the upcoming hearing(s) and regulations, states must conduct a color (more specifically, populations to get their questions related to public hearing on a final state plan defined jointly by ethnic/racial upcoming hearings answered. before such plan is adopted and Furthermore, the EPA recommends that submitted. State plan development can characteristics and geographic location) are disproportionately affected by states work with their local government be enhanced by tapping the expertise partners to help them in reaching out to and program experience of several state certain climate change related impacts.823 Also as discussed in this all stakeholders, including vulnerable government agencies. The EPA communities, about the upcoming rule, effects from this rule can be encourages states to include utility public hearing(s). anticipated to affect vulnerable regulators (e.g. the PUCs) and state (7) Supporting documentation. energy offices as appropriate early on communities in various ways. Because The state plan submittal must provide and throughout in the development of certain communities have a potential supporting material and technical the state plan.822 The EPA notes that likelihood to be impacted by state plans, documentation related to applicable utility regulators and state energy offices the EPA believes that the existing public components of the plan submittal. have the opportunity during the public participation requirements under 40 (a) Legal authority. participation processes required for CFR 60.23 are effectuated for the In its submittal, a state must state plans to provide input as well. The purposes of this final rule by states adequately demonstrate that it has the EPA also encourages states to conduct engaging in meaningful, active ways legal authority (regulations/legislation) outreach meetings (that could include with such communities. and funding to implement and enforce public hearings or meetings) with In addition, certain communities each component of the state plan vulnerable communities on its initial whose economies are significantly submittal, including federally submittal before the plan is submitted. dependent on coal, or whose economies enforceable emission standards for In its final plan submittal, a state must may be affected by ongoing changes in affected EGUs and state measures. A provide certification that the state made the utility power and related sectors, state can make such a demonstration by the plan submittal available to the may be particularly concerned about the providing supporting material related to public and gave reasonable notice and final rule. The EPA encourages states to the state’s legal authority used to opportunity for public comment on the make an effort to provide background implement and enforce each component state plan submittal. The state must information about their proposed initial of the plan, such as copies of statutes, demonstrate that the public hearing on submittal and final state plans to these regulations, PUC orders, and any other the state plan was held only after communities in advance of their public applicable legal instruments. For states reasonable notice, which will be hearing. In particular, the EPA participating in a multi-state plan, the considered to include, at least 30 days encourages states to engage with submittal(s) must also include as prior to the date of such hearing, notice workers and their representatives in the supporting documentation each state’s necessary legal authority to implement 822 While we specifically encourage state 823 USGCRP 2014: Melillo, Jerry M., Terese (T.C.) the portion of the plan that applies environmental agencies and utility regulators to Richmond, and Gary W. Yohe, Eds., 2014: Climate within the particular state, such as consult here, we note that, under CAA programs, Change Impacts in the United States: The Third state agencies have a history of consultation with National Climate Assessment. U.S. Global Change copies of state regulations and statutes, one another as appropriate. Research Program, 841 pp. including a showing that the states have

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00188 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64849

the necessary authority to enter into a a state plan that meets the CO2 weighted average CO2 emission rate multi-state agreement. performance rates for the two based on the individual rate-based goals (b) Technical documentation. subcategories of affected EGUs or for each of the participating states and As applicable, the state submittal develop a plan that adopts either the 2012 generation from affected EGUs. For must include materials necessary to rate-based or the mass-based state CO2 a mass-based multi-state plan, the joint support the EPA’s evaluation of the emission goal provided in the emission goal would be a sum of the individual submittal including analytical materials guidelines. mass-based goals of the participating used in the calculation of interim goal Each state plan submittal must states, in tons of CO2. The plan steps (if applicable), analytical materials identify the emission performance rates submittal must include in its supporting used in the multi-state goal calculation or rate-based or mass-based CO2 documentation a description of the (if multi-state plan), analytical materials emission goal that must be achieved analytic process, tools, methods, and used in projecting CO2 emission through the plan (expressed in numeric assumptions used to calculate the joint performance that will be achieved values, including the units of multi-state goal. through the plan, relevant measurement, such as pounds of CO2 (2) Identification of federally implementation materials and any per net MWh of useful energy output or enforceable emission standards for additional technical requirements and tons of CO2). The plan submittal must affected EGUs. guidance the state proposes to use to identify the CO2 interim period The state plan submittal for an implement elements of the plan. performance rates or state goal (for emission standards plan type must (c) Programmatic plan milestones and 2022–2029), interim step performance include federally enforceable emission timeline. rates or state goals (interim step standards that apply to affected EGUs. As part of the state plan supporting performance rates or state goal 1 for The emission standards must meet the documentation, the state must include 2022–2024; interim step performance requirement of component (3) of this in its submittal a timeline with all the rates or state goal 2 for 2025–2027; section, ‘‘Demonstrations that each programmatic plan milestone steps the interim step performance rates or state emission standard is quantifiable, non- state will take between the time of the duplicative, permanent, verifiable, and goal 3 for 2028–2029) and final CO2 state plan submittal and 2022 to ensure emission performance rates or state goal enforceable.’’ The plan must identify the the plan is effective as of January 1, of 2030 and beyond. affected EGUs to which these standards 2022. The programmatic plan The EPA has finalized an interim apply. The compliance periods for each milestones and timeline should be performance rates or state goal for the emission standard for affected EGUs, on appropriate to the overall state plan interim period of 2022–2029 and a final a calendar year basis, must be as follows approach included in the state plan performance rates or state goal to be met for the interim period: January 1, 2022– submittal. by 2030. For the interim period, the EPA December 31, 2024; January 1, 2025– (d) Reliability. has also finalized three interim step December 31, 2027; and January 1, As discussed in more detail in section performance rates or state goals: interim 2028–December 31, 2029. Starting on VIII.G.2, each state must demonstrate as step 1 performance rates or state goal for January 1, 2030, the compliance period part of its state plan submission that it 2022–2024, interim step 2 performance for each emission standard is every 2 has considered reliability issues while rates or state goal for 2025–2027 and calendar years. States can choose to set developing its plan. interim step 3 performance rates or state shorter compliance periods for the b. Additional components required for goal for 2028–2029.824 States are free to emission standards than the compliance the emission standards plan type. The establish different interim step periods the EPA is finalizing in this EPA is finalizing requirements that a performance rates or interim step state rulemaking, but cannot set longer final plan submittal using the emission periods. As discussed in more detail in goals than those the EPA has specified standards plan type must contain the section VIII.F, the EPA recognizes that in this final rule. If states choose to following components, in addition to the compliance periods provided for in determine their own interim step the components discussed in the this rulemaking are longer than those performance rates or state goals, the preceding section VIII.D.2.a. historically and typically specified in state must demonstrate that the plan (1) Identification of interim period CAA rulemakings. The EPA determined will still meet the interim performance emission performance rates or state goal that the longer compliance periods rates or state goal for 2022–2029 (for 2022–2029), interim step provided for in this rulemaking are finalized in the emission guidelines and performance rates or interim state goals acceptable in the context of this specific the plan submittal must include in its (2022–2024; 2025–2027; 2028–2029) and rulemaking because of the unique supporting documentation a description final emission performance rates or characteristics of this rulemaking, of the analytic process, tools, methods, state goal (2030 and beyond). including that CO2 is long-lived in the The state plan submittal must indicate and assumptions used to make this atmosphere, and this rulemaking is whether the plan is designed to meet the demonstration. focused on performance standards For states participating in a multi- CO2 emission performance rates or the related to those long-term impacts. state plan with a joint goal (for interim state rate-based or mass-based CO2 For state plans in which affected emission goal. As noted in the emission and final periods), the individual state EGUs may rely upon the use of ERCs for goals in the emission guidelines would guidelines, the EPA is finalizing CO2 meeting a rate-based federally emission performance rates for fossil be replaced with an equivalent multi- enforceable emission standard, the state fuel-fired steam generating units and for state goal for each period (interim and plan must include requirements stationary combustion turbines. The final). For a rate-based multi-state plan addressing the issuance, tracking and EPA has translated the source category- this would be a weighted average rate- use for compliance of ERCs consistent based emission goal, derived by the specific CO2 emission performance rates with the requirements in the emission into equivalent state-level rate-based participating states, by calculating a guidelines. These requirements are and mass-based CO2 goals in order to discussed in sections VIII.K.1–2. The 824 maximize the range of choices that In this action, the EPA is providing interim state plan must also demonstrate that state goals in the form of a CO2 emission rate states will have in developing their (emission rate-based goal) and in the form of the appropriate ERC tracking plans. The state may choose to develop tonnage CO2 emissions (mass-based goal). infrastructure that meets the

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00189 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64850 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

requirements of the emission guidelines EGU if it is not already incorporated in and the Administrator, the state, and will be in place to administer the state another state plan, except in instances third parties maintain the ability to plan requirements regarding ERCs and where incorporated as part of a multi- enforce against affected EGUs for document the functionality of the state plan. An example of a duplicative violations and secure appropriate tracking system. State plan requirements emission standard would occur, for corrective actions, in the case of the must include provisions to ensure that example, where a quantified and Administrator pursuant to CAA sections ERCs are properly tracked from issuance verified MWh from a wind turbine 113(a)–(h), in the case of a state, to submission for compliance. The state could be applied in more than one pursuant to its state plan, state law or plan must also demonstrate that the state’s CAA section 111(d) plan to adjust CAA section 304, as applicable, and in MWh for which ERCs are issued are the reported CO2 emission rate of an the case of third parties, pursuant to properly quantified and verified, affected EGU (e.g., through issuance and CAA section 304. through plan requirements for EM&V use of an ERC), except in the case of a In developing its CAA section 111(d) and verification that meet the multi-state plan where CO2 emission plan, to ensure that the plan submittal requirements in the emission performance is demonstrated jointly for is enforceable and in conformance with guidelines. EM&V requirements are all affected EGUs subject to the multi- the CAA, a state should follow the discussed in section VIII.K.3. Rate-based state plan or where states are EPA’s prior guidance on emission standards must also include implementing coordinated individual enforceability.828 These guidance monitoring, reporting, and plans that allow for the interstate documents serve as the foundation for 826 recordkeeping requirements for CO2 transfer of ERCs. This does not mean the types of monitoring, reporting, and emissions and useful energy output for that measures used to comply with an emission standards that the EPA has affected EGUs; and related compliance emission standard cannot also be used found can be, as a practical matter, demonstration requirements and for other purposes. For example, a MWh enforced. mechanisms. These requirements are of electric generation from a wind In the proposed regulatory text discussed in more detail in sections turbine could be used by an electric describing the enforcing measures that VIII.F and VIII.K. distribution utility to comply with state states must include in state plans, the For state plans using a mass-based RPS requirements and also be used by EPA inadvertently excluded a required emission trading program approach, the an affected EGU to comply with demonstration that states and other state plan must include implementation emission standard requirements under a third parties can enforce against affected requirements that specify the emission state plan. Another example is when EGUs for violations of an emission budget and related compliance actions taken pursuant to CAA section standard included in a state plan via requirements and mechanisms. These 111(d) requirements can satisfy other civil action pursuant to CAA section requirements must include: CO2 CAA program requirements (e.g., 304. Commenters noted the EPA’s intent emission monitoring, reporting, and Regional Haze requirements, MATS). to require this demonstration based on recordkeeping requirements for affected An emission standard is permanent if statements in both the proposal EGUs; provisions for state allocation of the emission standard must be met for preamble text and ‘‘State Plan allowances; provisions for tracking of each applicable compliance period. Considerations’’ TSD 829 and based on allowances, from issuance through An emission standard is verifiable if the requirements of CAA section 304. submission for compliance; and the adequate monitoring, recordkeeping and We are finalizing a requirement for a process for affected EGUs to reporting requirements are in place to demonstration that states and other demonstrate compliance (allowance enable the state and the Administrator third parties can enforce against affected to independently evaluate, measure, and ‘‘true-up’’ with reported CO2 emissions). EGUs for violations of an emission (3) Demonstration that each emission verify compliance with it. standard included in a state plan via An emission standard is enforceable standard is quantifiable, non- civil action as part of the required plan if: (1) It represents a technically accurate duplicative, permanent, verifiable and component demonstrating limitation or requirement and the time enforceable. enforceability. We are finalizing this period for the limitation or requirement The plan submittal must demonstrate requirement as a logical outgrowth of is specified; (2) compliance that each emission standard is proposal preamble text, the proposal requirements are clearly defined; (3) the quantifiable, non-duplicative, preamble citation to existing entities responsible for compliance and permanent, verifiable and enforceable enforceability guidance documents that liable for violations can be identified; with respect to an affected EGU, as discuss this requirement, comments and (4) each compliance activity or outlined below. received, and the clear statutory measure is enforceable as a practical An emission standard is quantifiable foundation. matter in accordance with EPA if it can be reliably measured, using (4) State reporting requirements. guidance on practical enforceability,827 technically sound methods, in a manner After consideration of the comments that can be replicated.825 received regarding state reporting An emission standard is non- 826 For example, an ERC that is issued by a state under its rate-based emission standards may be duplicative with respect to an affected used only once by an affected EGU to adjust its accompanying implementing guidance, ‘‘Review of reported CO2 emission rate when demonstrating State Implementation Plans and Revisions for 825 A CO2 continuous emissions monitoring compliance with the emission standards. However, Enforceability and Legal Sufficiency,’’ (2) August 5, system (CEMS) is the most technically reliable an ERC issued in one state could be used by an 2004, ‘‘Guidance on SIP Credits for Emission method of emission measurement for EGUs. A affected EGU to demonstrate compliance with its Reductions from Electric-Sector Energy Efficiency CEMS provides a measurement method that is emission standard in another state, where states are and Renewable Energy Measures,’’ and (3) July 2012 performance based rather than equipment specific collaborating in the implementation of their ‘‘Roadmap for Incorporating Energy Efficiency/ and is verified based on NIST traceable standards. individual emission trading programs through Renewable Energy Policies and Programs into State A CEMS provides a continuous measurement interstate transfer of ERCs, or participating in a and Tribal Implementation Plans, Appendix F.’’ stream that can account for variability in the fuels multi-state plan with a rate-based emission trading 828 See prior footnote. and the combustion process. Reference methods program. These coordinated multi-state approaches 829 State Plan Considerations technical support have been developed to ensure that all CEMS meet are addressed in sections VIII.C.5, VIII.J.3, and document for the Clean Power Plan Proposed Rule: the same performance criteria, which helps to VIII.K.4. http://www2.epa.gov/carbon-pollution-standards/ ensure a level playing field and consistent, accurate 827 The EPA guidance on enforceability includes: clean-power-plan-proposed-rule-state-plan- data. (1) September 23, 1987, memorandum and considerations.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00190 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64851

830 requirements, the EPA is finalizing for CO2 interim goal, as applicable. The interim step 3 goal for 2028–2029. state plans using the emission standards report due on July 1, 2030, must also States are free to establish different approach that a state report is due to the include the actual CO2 emission interim step goals than those the EPA EPA no later than the July 1 following performance achieved by affected EGUs has specified in this final rule. If states the end of each reporting period. Within during the interim step 3 period (2028– choose to determine their own interim the interim period (2022–2029) the EPA 2029). Starting in 2032, the biennial step goals, the state must demonstrate is finalizing the following interim state report must include a final that it will still meet the interim goal for reporting periods: Interim step 1 covers performance check to demonstrate that 2022–2029 finalized in this action and the three calendar years 2022–2024, the affected EGUs continue to meet the the plan submittal must include in its interim step 2 covers the three calendar final CO2 emission performance rates or supporting documentation a description years 2025–2027, and interim step 3 state rate-based or mass-based CO2 goal. of the analytic process, tools, methods, covers the two calendar years 2028– For state plans that use the emission and assumptions used to make this 2029. A biennial state report is required standards approach and are subject to demonstration. starting in 2030 and beyond covering the corrective measures provisions in For states participating in a multi- the two calendar years of each reporting the emission guidelines, if actual CO2 state plan with a joint goal (for interim period. This final reporting schedule emission performance (i.e., the and final periods), the individual state reduces the reporting frequency for emissions or emission rate) of affected goals in the emission guidelines would states implementing the emission EGUs exceeds the specified level of CO2 be replaced with an equivalent multi- standards approach and is responsive to emission performance in the state plan state goal for each period (interim and comments received that different by 10 percent or more during the final). The joint goal would be a sum of reporting frequencies may be interim step 1 or step 2 reporting the individual mass-based goals of the appropriate for different type of state periods, the state report must include a participating states, in tons of CO2. The plans. The EPA believes that because of notification to the EPA that corrective plan submittal must include in its the federally enforceable emission measures have been triggered. The same supporting documentation a description standards that apply to affected EGUs notification is required if actual CO2 of the analytic process, tools, methods, and their corresponding monitoring, emission performance fails to meet the and assumptions used to calculate the reporting and recordkeeping specified level of emission performance joint multi-state goal. requirements under the emission in the state plan for the 8-year interim (2) Identification of federally standards plan type, a lesser frequency performance period or any final plan enforceable emission standards for of reporting by the state is warranted. reporting period. Corrective measures affected EGUs (if applicable). The state must include in each report are discussed in detail in section VIII.F. If applicable, the state plan submittal to the EPA the status of implementation must include any federally enforceable of emission standards for affected EGUs c. Additional components required for the state measures approach. CO2 emission standards that apply to under the state plan, including current affected EGUs, and demonstrate that aggregate and individual CO2 emission The EPA is finalizing requirements those emission standards meet the performance by affected EGUs during that a final plan submittal using the requirements that apply in the context the reporting period. The state report state measures approach must contain of an emission standards approach, must include compliance the following components, in addition discussed in the preceding section demonstrations for affected EGUs and to the components discussed in section VIII.D.2.b. Specifically, the state plan identify whether affected EGUs are on VIII.D.2.a. We note again that states submittal must demonstrate that each schedule to meet the applicable CO2 choosing the state measures plan type federally enforceable emission standard emission performance rate or emission must use a mass-based state goal for the is quantifiable, non-duplicative, goal during the performance periods state measures and any emission permanent verifiable, and enforceable. If and compliance periods, as specified in standards on the affected EGUs prior to a state measures plan type includes CO2 the state plan. For rate-based emission the triggering of the backstop. emission standards that apply to trading programs, the report must also (1) Identification of interim state mass affected EGUs, these emission standards include for EPA review the state’s goal (for 2022–2029), interim step state must be federally enforceable. review of the administration of their mass goals (2022–2024; 2025–2027; (3) Identification of backstop of state rate-based emission trading 2028–2029) and final state mass goal federally enforceable emission program, as discussed in section (2030 and beyond). standards. VIII.K.2.g. The state plan submittal must identify A state measures plan must include a As discussed in more detail in section the mass-based CO2 emission goal that backstop of federally enforceable VIII.F, the state must include an interim must be achieved through the plan emission standards for affected EGUs performance check in the report (expressed in tons of CO2). The plan that fully achieve the interim and final submitted after each of the first two submittal must identify the state CO2 CO emission performance rates or the interim step periods. The interim 2 interim period goal (for 2022–2029), performance check will compare the state’s interim and final CO2 emission interim step goals (interim step goal 1 goal if the state plan fails to achieve the CO2 emission performance level identified in the state plan for the for 2022–2024; interim step goal 2 for intended level of CO2 emission applicable interim step period with the 2025–2027; interim step goal 3 for performance. The backstop emission 2028–2029) and final CO2 emission goal standards could be based on the actual CO2 emission performance achieved by affected EGUs during the of 2030 and beyond. finalized model rule that the EPA is period. In the report due to the EPA on For each state, the EPA has finalized proposing in a separate action. For the July 1, 2030, the state must include a an interim goal for the interim period of federally enforceable backstop, the state plan submittal must identify the comparison of the actual CO2 emission 2022–2029 and a final goal to be met by performance achieved by affected EGUs 2030. For the interim period, the EPA 830 for the interim period (2022–2029) with has also finalized three interim step In this action, the EPA is providing interim state goals in the form of a CO2 emission rate the interim CO2 emission performance goals: Interim step 1 goal for 2022–2024, (emission rate-based goal) and in the form of rates or state rate-based or mass-based interim step 2 goal for 2025–2027 and tonnage CO2 emissions (mass-based goal).

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00191 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64852 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

federally enforceable emission submittal. The EPA believes that annual affected EGUs must be effective within standards for affected EGUs, state reporting is appropriate for state 18 months of the deadline for the state demonstrate that those emission measures approach due to the flexibility reporting to the EPA on plan standards meet the requirements that inherent to the approach described in implementation and progress toward apply in the context of an emission section VIII.C.3 including the potential meeting the emission performance rates standards approach, discussed in the use by the state of a wider variety of or mass-based or rate-based state CO2 preceding section, identify a schedule state measures, responsible parties, etc. emission goal. For example, if a state and trigger for implementation of the This reporting frequency will also report due on July 1, 2025, shows that backstop that is consistent with the increase the degree of certainty on plan actual CO2 emission performance of requirements in the emission guidelines performance for states pursuing the state affected EGUs is deficient by 10 percent as discussed in section VIII.C.3.b and measures approach. or more relative to the specified level of identify all necessary state As discussed in section VIII.F, for emission performance for 2022–2024 in administrative and technical procedures states using the state measures the state plan, the backstop federally for implementing the backstop (e.g. how approach, the EPA is finalizing that at enforceable emission standards for and when the state would notify the end of the first two interim step affected EGUs must be effective as of affected EGUs that the backstop has periods, the state must also include in January 1, 2027. been triggered). Aspects of the backstop their annual report to the EPA the (6) Supporting documentation. are discussed in detail in section corresponding emission performance (a) Demonstration that each state VIII.C.3.b. checks. The interim performance checks measure is quantifiable, non- (4) Identification of state measures. will compare the CO2 emission duplicative, permanent, verifiable and A state adopting a state measures plan performance level identified in the state enforceable. type must provide as a part of the plan for the applicable interim step A state using the state measures supporting documentation of its plan period versus the actual CO2 emission approach, in support of its plan, must submittal, a description of all the state performance achieved by the aggregate also include in the supporting enforceable measures the state will rely of affected EGUs. In the report documentation of the state plan upon to achieve the requisite state mass- submitted to the EPA on July 1, 2030, submittal the state measures that are not based goal, the applicable state laws or the state must also report the actual CO2 federally enforceable emission regulations related to such measures, performance check for the interim standards, and describe how each state and identification of parties or entities period (2022–2029) with the interim measure is quantifiable, non- implementing or complying with such mass-based CO2 goal, as well as the duplicative, permanent, verifiable, and state measures. The state must also actual CO2 emission performance enforceable with respect to an affected include in its supporting documentation achieved by affected EGUs during the entity. the schedule and milestones for the interim step 3 period (2028–2029). A state measure is quantifiable if it implementation of the state measures, Beginning with the final period, the can be reliably measured, using showing that the measures are expected state must submit biennial reports no technically sound methods, in a manner to achieve the mass-based CO2 emission later than July 1 after the end of each that can be replicated. goal for the interim period (including reporting period that includes an actual A state measure is non-duplicative the interim step periods) and meet the performance check to demonstrate that with respect to an affected entity if it is final goal by 2030. A state measures the state continues to meet the final not already incorporated as a state plan submittal that relies upon state state CO2 goal. measure or an emission standard in measures that include RE and demand- If, at the time of the state report to the another state plan or state plan side EE programs and projects must also EPA, the state has not met the supporting material, except in instances demonstrate in its supporting programmatic state measures milestones where incorporated in another state as documentation that the minimum for the reporting period, or the part of a multi-state plan. This does not EM&V requirements in the emission performance check shows that the mean that measures in a state measure guidelines apply to those programs and actual CO2 emission performance of cannot also be used for other purposes. projects as a matter of state law. affected EGUs warrants implementation For example actions taken pursuant to (5) State reporting requirements. of backstop requirements,831 the state CAA section 111(d) requirements can After consideration of the comments must include in the state report a satisfy other CAA program requirements received regarding state reporting notification to the EPA that the backstop (e.g., Regional Haze requirements, requirements, the EPA is requiring in has been triggered and describe the MATS) and state requirements (e.g., this final rule for states using the state steps taken by the state to inform the measures approach that an annual state RPS). affected EGUs that the backstop has A state measure is permanent if the report is due to the EPA no later than been triggered. In the event of such an state measure must be met for each July 1 following the end of each exceedance under the state measures applicable compliance period. calendar year during the interim period. approach, the backstop federally A state measure is verifiable if This annual state report must include enforceable emission standards for the adequate monitoring, recordkeeping and the status of implementation of federally reporting requirements are in place to enforceable emission standards (if 831 As explained in section VIII.C.3.b, state plans enable the state to independently applicable) and state measures, and subject to the backstop requirement must require evaluate, measure and verify must include a report of the periodic the backstop to take effect if actual CO2 emission compliance with it. programmatic state measures milestones performance by affected EGUs fails to meet the level A state measure is enforceable 832 if: to show progress in program of emission performance specified in the plan over the 8-year interim performance period (2022–2029), (1) It represents a technically accurate implementation. The programmatic or for any 2-year final goal performance period. The limitation or requirement and the time state measures milestones with specific plan also must require the backstop to take effect period for the limitation or requirement dates for achievement should be if actual emission performance is deficient by 10 percent or more relative to the performance levels appropriate to the state measures that the state has chosen to specify in its plan for 832 Under the state measures approach, state described in the supporting the interim step 1 period (2022–2024) or the interim measures are enforceable only per applicable state documentation of the state plan step 2 period (2025–2027). law.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00192 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64853

is specified; (2) compliance analogous mechanism to that in section reporting, in order to adequately requirements are clearly defined; (3) the 110(a)(2), to the extent that the section implement and enforce section 111(b) or affected entities responsible for 110(a)(2) requirement makes sense and 112 standards. This again indicates it is compliance and liable for violations can is reasonable in the context of section reasonable for the EPA to fill a gap in be identified; and (4) each compliance 111(d). On the other hand, that Congress section 111(d)’s language and similarly activity or measure is practically did not explicitly provide such details require source monitoring, enforceable in accordance with EPA as are found in section 110(a)(2) recordkeeping, and reporting, as these guidance on practical enforceability,833 indicates that Congress intended to give are fundamental to implementing and and the state maintains the ability to the EPA considerable leeway in enforcing standards of performance that enforce against affected EGUs for interpreting the ambiguous phrase achieve the state performance rates or violations and secure appropriate ‘‘provides for implementation and goals. corrective actions pursuant to its plan or enforcement of [the] standards of Some commenters argued that states state law. performance.’’ have primary authority over the content The EPA will disapprove a state plan For example, section 110(a)(2)(E)(i) of state plans and that the EPA lacks if the documentation is not sufficient for explicitly requires states to provide authority to disapprove a state plan as the EPA to be able to determine whether necessary assurances that they have unsatisfactory simply because it lacks the state measures are expected to yield adequate personnel, funding and one or more of these components. We CO2 emission reductions sufficient to authority to carry out the SIP. Section disagree. The EPA has the authority to result in the necessary CO2 emission 111(d), on the other hand, does not interpret the statutory language of performance from affected EGUs for the explicitly contain this requirement. section 111(d) and to make rules that mass-based state CO2 emission goal to Thus, there is a gap to fill with respect effectuate that interpretation. With be achieved. to this issue when the EPA interprets respect to the components of an d. Legal basis for the components. section 111(d)’s requirement that plans approvable plan, we are interpreting the (1) General legal basis. ‘‘provide for implementation and statutory phrase ‘‘provide for Under section 111(d), state plans must enforcement’’ of the standards of implementation and enforcement’’ and ‘‘provide for the implementation and performance, and it is reasonable for the making rules that set out the minimum enforcement of [the] standards of EPA to fill the gap by requiring adequate elements that are necessary for a state performance.’’ Similar language occurs funding and authority, both because plan to be ‘‘satisfactory’’ in meeting this elsewhere in the CAA. First, for SIPs, adequate funding and authority are statutory requirement. This does not in section 110(a)(1) requires SIPs to fundamental prerequisites to adequate any way intrude on the state’s ability to ‘‘provide for implementation, implementation and enforcement of any decide what mix of measures should be maintenance, and enforcement’’ of the program, and because Congress has used to achieve the necessary emission NAAQS. However, section 110(a)(2), explicitly recognized this fundamental reductions. Nor does it intrude in any unlike 111(d), details a number of nature in the section 110 context.834 way on the state’s ability to decide how specific requirements for SIPs that, in We note two other places where the to satisfy a component. For example, for part, speak exactly to how a SIP should CAA requires a state program to satisfy legal authority, we are not dictating ‘‘provide for implementation, similar language regarding which state agencies or officials must maintenance, and enforcement’’ of the implementation and enforcement. First, specifically have the necessary legal NAAQS. We note that section 111(d) section 112(l)(1) allows states to adopt authority; that is entirely up to the state provides explicitly only that the and submit a program for so long as the fundamental requirement ‘‘procedures,’’ and not the substantive ‘‘implementation and enforcement’’ of to have adequate legal authority to requirements, for section 111(d) state section 112 standards. Section 112(l)(5) implement and enforce the plan is met. plans should be ‘‘similar’’ to those in further provides that the program must In addition, the EPA has already section 110, and thus a substantive (among other things) have adequate determined in the 1975 implementing requirement in section 110(a)(2) is not authority to enforce against sources, and regulations that certain components, an independent source of authority for adequate authority and resources to such as monitoring, recordkeeping, and the EPA to require the same for section implement the program. Second, section reporting, are necessary for 111(d) plans. However, when there is a 111(c) provides that, if a state develops implementation and enforcement of gap for the EPA to fill in interpreting and submits ‘‘adequate procedures’’ for section 111(d) standards of how a section 111(d) plan should ‘‘implementing and enforcing’’ section performance. 40 FR 53340, 53348/1 ‘‘provide for implementation and 111(b) standards of performance for new (Nov. 17, 1975). Thus, EPA’s position enforcement of [the] standards of sources in that state, the Administrator here is hardly novel. The EPA notes in performance,’’ and Congress explicitly shall delegate to the state the discussing the implementing addressed a similar gap in section 110, Administrator’s authority to regulations, nothing in this final rule then it may be reasonable for the EPA ‘‘implement and enforce’’ those reopens provisions or issues that were to fill the gap in section 111(d) using an standards. The EPA has interpreted previously decided in the original these ambiguous provisions in the promulgation of the regulations unless 833 The EPA’s prior guidance on enforceability EPA’s ‘‘Good Practices Manual for otherwise explicitly reopened for this serves as the foundation for the types of measures Delegation of NSPS and NESHAPS’’ and that the EPA has found can be, as a practical matter, rule. enforced. The EPA’s guidance on enforceability recommended (in the context of (2) Legal considerations with changes includes: (1) September 23, 1987, memorandum guidance) that state programs have a to affected EGUs. and accompanying implementing guidance, number of components, such as source In the proposed rulemaking, the EPA ‘‘Review of State Implementation Plans and proposed the interpretation that if an Revisions for Enforceability and Legal Sufficiency,’’ monitoring, recordkeeping, and (2) August 5, 2004, ‘‘Guidance on SIP Credits for existing source is subject to a section Emission Reductions from Electric-Sector Energy 834 On the other hand, there are specific 111(d) state plan, and then undertakes Efficiency and Renewable Energy Measures,’’ and requirements in 110(a)(2) that are fundamental for a modification or reconstruction, the (3) July 2012 ‘‘Roadmap for Incorporating Energy SIPs, but would not make sense in the 111(d) Efficiency/Renewable Energy Policies and Programs context. For example, the specific requirement for source remains subject to the state plan, into State and Tribal Implementation Plans,’’ an ambient air quality monitoring network in while also becoming subject to the Appendix F. 110(a)(2)(B) is irrelevant in the 111(d) context. modification or reconstruction

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00193 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64854 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

requirements. 79 FR 34830, 34903–4. under the emission standards approach) and enforcement of [the] standards of The EPA is not finalizing a position on cannot consist of (in whole or part) performance.’’ This language does not this issue in this final rule, and is re- design, equipment, work practice or explicitly prohibit a plan from including proposing and taking comment on this operational standards. A state may design, equipment, work practice and issue through the federal plan include such standards in a 111(d) plan operational standards, and allows for rulemaking being proposed in order to implement the standards of them to be included so long as they are concurrently with this action. The performance. For example, a state taking understood to provide for EPA’s deferral of action on this issue a mass-based approach may include in implementation of the standards of does not impact states’ and affected its 111(d) plan a limit on hours of performance. If they are included, the EGUs’ pending obligations under this operation on a particular affected EGU, 111(d) plan must still be ‘‘satisfactory’’ final rule relating to plan submission but that operational standard itself in other respects, in particular in deadlines, as this issue concerns cannot substitute for a mass-based establishing standards of performance potential obligations or impacts after an emission standard on the affected that are not in whole or in part design, existing source is subject to the EGU.835 equipment, work practice, and requirements of a state plan. The EPA This follows from the statute. First, operational standards. will propose and finalize its position on section 111(h)(1) authorizes the (4) Legal basis for engagement with this issue through the federal plan Administrator, when it is not feasible communities. rulemaking, which will be well in for certain reasons (specified in As previously discussed, section advance of the plan performance period 111(h)(2)) to prescribe or enforce a 111(d)(1) requires the EPA to beginning in 2022, at which point state standard of performance, to instead promulgate procedures ‘‘similar’’ to plan obligations on existing sources are promulgate a design, equipment, work those in section 110 under which states effectuated. practice or operational standard. If a adopt and submit 111(d) plans. Section (3) Legal considerations regarding standard of performance could include 110(a)(1) requires states to adopt and design, equipment, work practice or design, equipment, work practice or submit implementation plans ‘‘after operational standards. operational standards, such authority reasonable notice and public hearings.’’ In the proposal, the EPA asked for would be unnecessary. Second, The implementing regulations under 40 comment on three approaches to 111(h)(5) states that design, equipment, CFR 60.27 reflect similar public inclusion of design, equipment, work work practice or operational standards participation requirements with respect practice and operational standards in ‘‘described in’’ 111(h) shall be treated as to section 111(d) state plans. The EPA section 111(d) plans. 79 FR 34830, standards of performance for the is sensitive to the legal importance of 34926/3 (June 18, 2014). Under the first purposes of the CAA. This creates a adequate public participation in the approach, states would be precluded strong inference that standards of state plan process, including public from including these standards in performance otherwise should not participation by affected communities. section 111(d) plans unless the design, include design, equipment, work As previously discussed in this rule, equipment, work practice or operational practice, or operational standards. recent studies also find that certain standard could be understood as a Finally, the general definition of communities, including low-income ‘‘standard of performance’’ or could be ‘‘standard of performance’’ in section communities and some communities of understood to ‘‘provide for 302(l) is similar to the definition of color, are disproportionately affected by implementation and enforcement’’ of ‘‘emission limitation’’ (or ‘‘emission certain climate change-related impacts. Because certain communities have a standards of performance. We also standard’’) in section 302(k), with the asked, for the first approach, whether it potential likelihood to be impacted by exception that the definition of was even possible, given the statutory state plans for this rule, the EPA ‘‘emission limitation’’ explicitly language of 111(h), to consider a design, believes that the existing public includes design, equipment, work equipment, work practice or operational participation requirements under 40 practice and operational standards, but standard as a ‘‘standard of CFR 60.23 are effectuated for the the definition of ‘‘standard of performance.’’ Under the second purposes of this final rule by states performance’’ omits them. Thus, as with approach, states could include design, engaging in meaningful, active ways our discussion of the term ‘‘standard of equipment, work practice or operational with such communities. By requiring performance’’ above in VIII.C.6.b, even standards in the event that it could be states to demonstrate how they have if the general definition of ‘‘standard of shown a ‘‘standard of performance’’ was meaningfully engaged with vulnerable performance’’ in 302(l) applies to not feasible, as set out in section 111(h). communities potentially impacted by 111(d), the omission of design, Under the third approach, a state could state plans as part of the state plan equipment, work practice, and include design, equipment, work development process, states meeting operational standards in 302(l) confirms practice and operational standards in a this requirement will satisfy the our interpretation that they cannot be a 111(d) plan without any constraints. We applicable statutory and regulatory 111 ‘‘standard of performance’’ (except also asked whether, if there was legal requirements regarding public under the limited circumstances in uncertainty as to the status of these participation. standards, the EPA should authorize 111(h)). We conclude that it is states to include them in their 111(d) reasonable, and perhaps compelled, to 3. Components of the Federally plans with the understanding that if the interpret the term ‘‘standards of Approved State Plan EPA’s authorization were invalidated by performance’’ in 111(d) to not include In this action the EPA finalizes that, a court, states would have to revise their design, equipment, work practice and to be fully approved, a state plan plans accordingly. operational standards. submittal must meet the criteria and The EPA is finalizing the first However, section 111(d) requires include the required components approach. Specifically, a state’s plans to ‘‘provide for implementation described above. The EPA will propose standards of performance (in other and take final action on each state plan 835 In particular, a state may include in its 111(d) words, either the federally enforceable state plan an emission standard that is reflective of submittal in the Federal Register and backstop under the state measures the CO2 performance resulting from operational provide an opportunity for notice and approach or the emission standards standards the state imposes on an affected EGU. comment. When a state plan submittal

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00194 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64855

is approved by the EPA, the EPA will 6, 2018, a state must submit an initial existing programs and the attendant codify the approved 111(d) state plan in submittal by September 6, 2016, that legal authority underpinning such 40 CFR part 62. The following addresses three required components programs to more easily meet the components of the state plan submittal sufficiently to demonstrate that a state is September 6, 2016 deadline by will become the federally enforceable able to undertake steps and processes submitting a final plan which largely state 111(d) plan: necessary to timely submit a final plan contains or relies upon such existing 837 • Federally enforceable emission standards by the extended date of September 6, programs. Based on comments and for affected EGUs 2018. If an extension is requested and stakeholder feedback, however, the EPA • Federally enforceable backstop of emission granted, states must also submit a 2017 anticipates that many states intending to standards for affected EGUs update by September 6, 2017, that develop and submit a final plan will • Implementing and enforcing measures for documents the state’s continued seek the optional extension given the federally enforceable emission standards progress towards meeting the September time it may take to undergo necessary including EGU monitoring, recordkeeping 6, 2018 final plan submittal deadline. legislative, stakeholder, and planning and reporting requirements • In the proposal, EPA proposed a 13 processes. The EPA acknowledges that State recordkeeping and reporting month final state plan submittal requirements the initial submittal of September 6, deadline, with a 1 year possible 2016, is not essential to the ability of E. State Plan Submittal and Approval extension for states submitting states to submit final plans by Process and Timing individual state plans and a 2 year September 6, 2018, so that even without possible extension for states submitting 1. Overview this 2016 deadline, the EPA could multi-state plans as part of a multi-state require states to meet the 2018 deadline. In this action the EPA is finalizing region. The EPA received substantive Even so, this earlier date in the 3 year that state plan submittals are due on comment on the achievability of these planning process serves as a useful September 6, 2016, with the option of proposed deadlines for state plan ‘‘check-in’’ that provides several an extension to submit final state plans submittals. Multiple commenters significant advantages. First, this earlier by September 6, 2018, which is 3 years expressed concern that due to timing of date provides all states an opportunity after finalization of this rule. The legislative cycles (some of which are to understand what approaches other compelling nature of the climate change every 2 years), regulatory processes, and states are considering. Because there are challenge, and the need to begin other necessary tasks, states would find significant benefits to regional promptly what will be a lengthy effort it extremely difficult to submit plans in cooperation, the EPA believes that a to implement the requirements of these 1 or 2 years, whether or not they were formal process to collect and then guidelines, warrant this schedule. The planning to submit as part of a multi- provide this information will help all EPA also believes, for reasons further state region. The EPA agrees based on states develop better plans. Second, described in the next section, why this this input that a schedule shorter than because the guidelines provide schedule is achievable for states to 3 years will be challenging for many— significant flexibility, the ability for the submit final plans. We discuss the though not all—states. In light of the EPA to provide early input to states who timing of state plans in more detail in comments received and in order to may be pursuing more innovative this section below. provide maximum flexibility to states approaches will help ensure that all Discussed in the following sections while still taking timely action to reduce state plans are ultimately approvable. are state plan submittal and timing, CO2 emissions, in this final rule the EPA The EPA therefore believes the initial required components for initial is allowing for a 2 year extension until submittal is an appropriate means by submittals and the 2017 update, multi- September 6, 2018, for both individual which to offer the optional extension, state plan submissions, process for EPA and multi-state plans, to provide a total and for reasons further described in review of state plans, failure to submit of 3 years for states to submit a final section VIII.E.3, that the requirements of a plan, state plan modifications plan if an extension is received. Based the initial submittal are achievable by (including modifications to interim and on comments received, information the September 6, 2016, so states will be able final CO2 emission goals), plan EPA has regarding steps states have to develop and submit a plan that meets templates and electronic submittal, and already begun taking towards plan the requirements of the final emission legal bases regarding state plan process. development, and extensive experience guidelines and section 111(d) of the with similar state plan submission 2. State Plan Submittal and Timing CAA by the extended date. deadlines under CAA section 110 SIPs, Additionally, some states may not The implementing regulations (40 the EPA believes states will be able to submit a state plan as required by the CFR 60.23) require that state plans be submit final plans within 3 years by final emission guidelines and section submitted to the EPA within 9 months September 6, 2018, in the event states 111(d) of the CAA. For states that do not of promulgation of the emission are not required to submit a final plan submit a state plan, the CAA gives the guidelines, unless the EPA specifies by September 6, 2016. We address the 836 EPA express authority to implement a otherwise. For these 111(d) substantive requirements of initial federal plan for sources in that state guidelines, the EPA is finalizing that submittals and the 2017 update in the upon determination by the EPA that a each state must by September 6, 2016, next section. States that receive 2-year state has failed to submit a state plan by either submit a final plan submittal or extensions may submit the final plan the required date. For states that do not seek an extension to submit a final plan earlier than September 6, 2018, if they intend to submit a state plan to meet the by September 6, 2018. In the case of a so choose. obligations of this final rule, by state electing to participate in the CEIP, The EPA highlights that one purpose promulgating a federal plan for affected this 2016 submittal must include a non- of the initial submittal is to encourage EGUs in states that do not submit a plan binding statement of intent to and potentially facilitate states to do by September 6, 2016, such affected participate in the program. To seek an necessary planning and engagement EGUs would have a maximum of an extension of the September 6, 2016 with stakeholders so states are able to deadline until no later than September submit an approvable final state plan by 837 Based on comments received, we understand the extended deadline of September 6, that the Northeast and Mid-Atlantic states that 836 40 CFR 60.23(a)(1). 2018. Some states have well-developed participate in RGGI may be in this position.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00195 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64856 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

additional 2 years to plan for and deadline for plan submittal so that they citing, among other things, the number determine compliance strategies than have the ability to submit the initial of decisions needed to be made by a had promulgation of a federal plan been submittal or final plan in the State Plan state or states, and that the EPA needed predicated on states failing to submit a Electronic Collection System (SPeCS). If to clarify the requirements for an initial plan by September 6, 2018. The EPA the Governor has previously delegated submittal. Multiple commenters also also notes that this final rule affords authority to make CAA submittals on expressed concern that the requirements states and affected EGUs with many the Governor’s behalf, a state may for an initial submittal required final implementation flexibilities and submit documentation of the delegation decisions to be made by states, and that approaches for state plans that the EPA in lieu of a letter from the Governor. The the initial submittal deadline was not itself may not have the authority to letter or documentation must identify enough time for states to make these implement through a federal plan. the designee to whom authority is being decisions. Therefore, affected EGUs subject to a designated and must include the name It is important to note that the EPA is federal plan promulgated for a state that and contact information for the designee not requiring the adoption of any refuses to submit a state plan may and also identify the state plan enforceable measures or final decisions benefit from an additional 2 years to preparers who will need access to in order for the state to address any of plan for compliance with a federal plan SPeCS discussed in section VIII.E.8. A the initial submittal components by with potentially fewer flexibilities. state may also submit the names of the September 6, 2016. The EPA believes If no affected EGU is located within state plan preparers via a separate letter the absence of requiring enforceable a state, the state must submit a letter to prior to the designation letter from the measures to be included with the initial the EPA certifying that no such facilities Governor in order to expedite the state submittal greatly supports the ability of exist by September 6, 2016.838 The EPA plan administrative process. Required states intending to develop a final state will publish a notice in the Federal contact information for the designee and plan to submit an initial submittal by Register to notify the public of receipt preparers includes the person’s title, September 6, 2016. States are required of such letters. If an affected EGU is organization and email address. The to submit enforceable measures later found to be located in that state, EPA recommends this information be supported by technically complex the state must submit a final plan submitted early in the state planning documentation, such as modeling, and addressing such affected EGU or the process to allow sufficient time for adopted through state public EPA will determine the state has failed completion of SPeCS registration so that participation and regulatory or to submit a plan as required by the those authorized to use the system are legislative processes as part of SIPs emission guidelines and CAA section provided access. under other parts of the CAA within 111(d), and begin the process of timeframes comparable to the time the implementing a federal plan for that 3. Components of an Initial Submittal EPA is providing for initial affected EGU. and 2017 Update submittals.842 In the case of a tribe that has one or As noted, states may request a 2-year In order to further address the more affected EGUs located in its area extension to submit a final plan through commenters’ concerns regarding of Indian country, if the tribe either does making an initial submittal by possible ambiguity of the requirements not submit a CAA section 111(d) plan or September 6, 2016. For the extension to for an initial submittal so that an does not receive EPA approval of a be granted, the EPA is finalizing that the extension is granted, the EPA is submitted plan, the EPA has the initial submittal must address three providing clarity regarding the required responsibility to establish a CAA section required components sufficiently to components for an initial submittal. 111(d) plan for that area if it determines demonstrate that a state is able to Regarding the component that states that such a plan is necessary or undertake steps and processes necessary address an appropriate explanation for appropriate to protect air quality.839 See to timely submit a final plan by the an extension, the EPA proposed that the proposed federal plan rulemaking extended date of September 6, 2018: 840 appropriate explanations for seeking an for further information. • An identification of final plan approach extension beyond 2016 for submitting a The EPA notes that the current or approaches under consideration, including final plan include: A state’s required implementing regulations at 40 CFR part a description of progress made to date. schedule for legislative approval and 60 do not specify who has the authority • An appropriate explanation for why the administrative rulemaking, the need for to make a formal submission of the state state requires additional time to submit a multi-state coordination in the plan to the EPA for review. In order to final plan by September 6, 2018. development of an individual state plan, • clarify who on behalf of a state is Demonstration or description of or the process and coordination authorized to submit an initial opportunity for public comment on the necessary to develop a multi-state plan. initial submittal and meaningful engagement submittal, 2017 update, final state plan with stakeholders,841 including vulnerable In this final rule, the EPA is finalizing (or negative declaration, if applicable), communities, during the time in preparation these as appropriate explanations for and any revisions to an approved plan, of the initial submittal and plans for seeking an extension beyond 2016, but the EPA has included a requirement in engagement during development of the final makes clear—as explained further this final rule mirroring that of the plan. below—that other appropriate requirement in 40 CFR part 51 App. During the public comment period, explanations will be acceptable as well. V.2.1.(a) with respect to SIPs that multiple commenters stated that the It is important to note that the initial identifies the Governor of a state as the proposed timeframe for states to submit submittal does not require legislation authorized official for submitting the an initial submittal was not achievable, state plan to the EPA. If the Governor 842 For example, 13 states were required to submit SIP revisions sufficient to regulate GHGs under the 840 wishes to designate another responsible As stated previously, in the case of a state Prevention of Significant Deterioration (PSD) official the authority to submit a state electing to participate in the CEIP, this 2016 permitting requirements of the CAA within either plan, the EPA must be notified via letter submittal must include a non-binding statement of 3 weeks or 12 months in response to the EPA’s SIP from the Governor prior to the 2016 intent to participate in the program. call. See ‘‘Action To Ensure Authority To Issue 841 Such stakeholders may include labor unions Permits Under the Prevention of Significant and workers that have an interest in the state plan, Deterioration Program to Sources of Greenhouse 838 40 CFR 60.23(b). and communities whose economies are dependent Gas Emissions: Finding of Substantial Inadequacy 839 See 40 CFR 49.1 to 49.11. on coal. and SIP Call’’, 75 FR 77698, (December 13, 2010).

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00196 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64857

and/or regulations to be passed prior in The EPA emphasizes the required states then decide(s) to pursue the single order for the state to be granted an initial submittal components are state approach. Commenters viewed this extension, but the initial submittal intended to provide a reasonable as being potentially problematic since, should describe any concrete steps the pathway for states to demonstrate as proposed, a single state could only state has already taken on legislation whether they will be able to submit an receive an extension until 2017, and if and/or administrative rulemaking and approvable plan by the extended date of a multi-state plan effort does not work detail what the remaining steps are in September 6, 2018. The EPA also out the deadline for seeking the those processes before a final plan can anticipates that through the requirement extension until 2017 would have be submitted. The EPA also sought to address these components, the initial passed. The EPA notes finalizing a 2 comment on other circumstances for submittal will also facilitate state year extension that is available for any which an extension of time would be planning and stakeholder engagement, state, whether they are pursuing an appropriate, and also whether some particularly as one component requires individual state plan or a multi-state explanations for extensions should not the public and stakeholders to have an plan resolves the commenters’ concern be permitted. Commenters stated that opportunity to comment on the initial about conflicting extension deadlines if states should be able to seek extensions submittal. As previously described, states involved in a multi-state effort whenever an extension can be these components do not require final decide not to pursue the multi-state reasonably justified, and that the EPA decisions to be made by states, and this approach. Importantly, such should take at face value states’ good is further illustrated by the clarifications identification in an initial submittal faith efforts by accepting any state on how states may meet each of the does not obligate the state to then assertion that more time is needed to three required components. actually adopt that approach in their develop a plan unless there is clear Accordingly, the EPA believes none of final plan as the EPA acknowledges that evidence to the contrary. The EPA these components is onerous for states based on state processes and public believes there may be appropriate to address in an initial submittal by the input through plan development during explanations states may submit in September 6, 2016 deadline. To further the extended submission period, a state addition to the ones described in this underscore this point, the EPA is further may end up adopting a state plan final rule sufficient to demonstrate that explaining the clarifying examples approach more suitable to the needs of a state is able to undertake steps and listed above of how states may address that state and its affected EGUs than processes necessary to timely submit a the three required components, and previously identified in the initial final plan by the extended date of highlighting the achievability of these submittal. September 6, 2018. Given the examples for states to address through States can also describe progress opportunity for states to submit the initial submittal by September 6, made to date by identifying steps appropriate explanations other than the 2016. already taken to address development of ones detailed here, the EPA believes For identification of the final plan the final state plan, as the EPA addressing this component requiring an approach or approaches the state is recognizes that states in general have appropriate explanation for an considering, and description of progress already taken a number of steps to extension is easily achievable by made to date, states could identify prepare for state plan development to September 6, 2016. whether the state is considering the meet the obligations of this rule. For option of the CO2 emission performance example, since proposal, states have: In order to additionally clarify the rates, a rate-based CO2 goal, or a mass- Begun exploring tradeoffs among required components of the initial based CO2 goal, and whether the state is various state plan approaches such as submittal, the following are types of intending to pursue a single-state or individual versus multistate explanations of information states may multi-state plan. Stakeholders coordination, increased utilization of provide as part of the initial submittal commented that states will not be far demand-side EE and RE programs, and to sufficiently address each of the three enough along in the rule development implementing rate-based versus mass- required components for getting an process to have made these decisions. based programs; increased their extension: Commenters also stated that many state understanding of existing state programs • Details on whether a state is considering legislatures would need to pass and policies that reduce carbon a single or multi-state plan, a plan that meets legislation giving state environmental emissions; built relationships and the CO2 emission performance rates or state agencies legal authority and direction communications between key state CO2 rate or mass emission goal, and/or an before they could begin to make institutions such as environmental emission standards or state measures plan decisions such as rate or mass-based agencies, PUCs, governors’ offices, and type. • approach or single or multi-state plan energy regulators; hosted public A description of how the state intends to submittal. In order to address the stakeholder meetings to educate and address development of the required components of the final state plan, including commenters’ concerns, the EPA wishes solicit input from the public; and begun describing what actions have already been to clarify that state approaches discussing state processes for taken, what steps remain, and the schedule identified in the initial submittal do not developing potential state plans. States for completing those steps. need to be final and/or formalized may meet the first required component • A commitment to maintain any existing through a state legislature, and that by describing steps such as these measures the state intends to rely upon for states may opt to identify pursuit of already undertaken. its final plan in order to achieve the more than one approach at the same The EPA underscores that states may necessary reductions once the performance time, or to indicate the status of the easily address the first component of the period begins. initial submittal by describing such • deliberation of this issue within the Describing public participation state. steps, and also address the second opportunities such as stakeholder and The EPA received substantive required component by identifying next community meetings, or public hearings, throughout the 3 year plan development comment regarding the potential steps (which may be a natural extension process. This could also include leverage of adverse consequences for states of these already implemented activities), public participation approaches that states pursuing a multi-state approach and and laying out a schedule for already use to identify and engage potentially receiving an extension until 2018, development of a final plan. States that affected communities. where, for various reasons, a state or have taken these steps would especially

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00197 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64858 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

be able to address the component development process to help ensure that advantage of to address this component regarding an appropriate explanation for the state plan is approvable once as well. On the steps that states could an extension as the EPA recognizes the submitted to the EPA, and expects this take to engage vulnerable communities substantial work such states have begun level of engagement with states to in a meaningful way, the Agency to put towards development of state continue throughout the plan recommends that states consult the plans, and the continuation of this work development process. This requirement EPA’s May 2015 Guidance on justifies additional time to complete will also facilitate early identification of Considering Environmental Justice necessary steps to result in an concerns stakeholders and the public During the Development of Regulatory approvable state plan. The EPA may have with aspects of a final plan Actions. In this document, the EPA emphasizes that for states who intend to the state is considering. As states have defines meaningful involvement as submit a final plan and need an longtime and extensive experience with ensuring that ‘‘potentially affected extension, the components of the initial responding to public comments in community members have an submittal are not intended to require numerous contexts, including in the appropriate opportunity to participate burdensome final action by states by context of other CAA programs such as in decisions about a proposed activity September 6, 2016, but to identify a section 110 SIP development and in (i.e., rulemaking) that may affect their viable path to completing a final plan by permit issuance under NSR and Title V, environment and/or health; the September 6, 2018. the EPA anticipates states will be able population’s contribution can influence An initial submittal that contains a to timely address the initial submittal the EPA’s [regulatory authority’s] commitment to maintain any existing public participation. rulemaking decisions; the concerns of measures the state intends to rely upon As previously discussed, because all participants involved will be for its final plan in order to get the certain communities have a potential considered in the decision-making necessary reductions once the likelihood to be impacted by state plans, process; and the EPA [decision-makers] performance period begins (e.g. RE the EPA believes that the existing public will seek out and facilitate the standards and demand-side EE participation requirements under 40 involvement of those potentially programs the state intends to rely upon CFR 60.23 are effectuated for the affected by the EPA’s [or other through a state measures plan type), at purposes of this final rule by states regulatory authority’s] rulemaking least until the final plan is approved, engaging in meaningful, active ways process.’’ 843 Additionally, this guidance also addresses the requirement that with such communities. Therefore, the document also encourages those writing states provide an appropriate public participation component of the rules to consider the positive impacts explanation for an extension. Given the initial submittal includes meaningful that a rulemaking will have on state’s request for additional time prior engagement with vulnerable communities).844 Another resource that to putting in place enforceable measures communities, throughout the state plan the EPA recommends that states consult to reduce CO2, it would be reasonable development process and including when devising their state plans is the and appropriate, and in keeping with through the initial submittal. In order to document ‘‘Considering Environmental the goals of 111(d) to ensure that any demonstrate to the EPA that states are Justice in Permitting’’ available on the existing CO2 reduction measures that actively engaging with communities, agency’s Web site.845 Both of the the state intends to rely upon remain in states could provide in their initial resources discussed above can add to place while the state is developing a submittal a summary of steps they have what states may already have in place already taken to engage the public and final plan. Such commitment would to effectively engage vulnerable demonstrate that the state is taking how they intend to continue meaningful communities in the rulemaking process. substantive steps towards successful engagement, including with vulnerable The EPA recommends that as part of development of a final plan within 3 communities, during the additional time their meaningful engagement with years. (if an extension is granted) for vulnerable communities, states work Regarding the required public development of the final plan. In with communities to ensure that they participation component of the initial addition to approaches that states have a clear understanding of the submittal, the EPA believes this already use to identify and engage benefits and any potential adverse requirement is both achievable for states potentially affected communities, the impacts that a state plan might have on to submit an initial submittal by the EPA encourages states to use the their overburdened communities and September 6, 2016 deadline, and proximity analysis conducted for this that there is a clear process for states to provides a benefit in facilitating state rulemaking (which is described in plan development so that states are respond to input from communities. section IX.A) as a tool to help them If a state seeks an extension by more likely to be able to submit a final identify overburdened communities that submitting an appropriate initial plan within 3 years if the extension is could be potentially impacted by their submittal addressing the three required granted. The EPA can use a comment plans. Other tools, such as EJ screen, components as described above by opportunity on the initial submittal to can also be helpful. The EPA in its September 6, 2016, the EPA will review advise the state whether aspects of the continued outreach with states during the submittal. If the state does not draft initial submittal and overall plan the implementation phase will also submit an initial submittal by development are appropriate for provide resources to assist them in September 6, 2016, that contains the purposes of meeting the requirements of engaging with communities. The EPA three required components, the EPA the final rule so that the state will be believes that through the provision of able to procure the extension through an these resources states will also more 843 Guidance on Considering Environmental acceptable initial submittal and submit easily be able to address this required Justice During the Development of Regulatory a final plan by the extended deadline. component of the initial submittal Actions. http://epa.gov/environmentaljustice/ The EPA notes the comment period on regarding public engagement, including resources/policy/considering-ej-in-rulemaking- the initial submittal is only one with vulnerable communities, by guide-final.pdf. May 2015. 844 opportunity the EPA has to assist a state September 6, 2016. Ibid. 845 Considering Environmental Justice in in the state plan development process. In addition to the resources the EPA Permitting. http://www.epa.gov/ The EPA has historically worked with intends to provide to states, there are environmentaljustice/plan-ej/ states throughout the state plan existing resources states can take permitting.html#actions.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00198 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64859

will notify the state by letter, within 90 actions needed for a state to be granted requires individual participating states days, that the agency cannot grant the an extension. In order to respond to to provide supplemental individual extension request based the state’s these comments, the EPA is clarifying submittals that provide state-specific initial submittal. The EPA will notify a that proposed or passed legislation or elements of the multi-state plan. The state by letter only if the initial regulations are not required in the common multi-state submittal must submittal does not address the three initial submittal due by September 6, address all relevant common plan required components. An extension for 2016. While a state may indicate elements and each individual submitting a final plan will be deemed consideration of multiple state plan participating state submittal must granted if the EPA does not deny the approaches in the initial submittal, the address all required plan components extension request based on the initial EPA is requiring that the state commit (including common plan elements, even submittal. The EPA has determined this to one approach in the 2017 update. if only through cross reference to the approach is authorized by, and This commitment must include draft or common plan submittal). Under this consistent with, 40 CFR 60.27(a) of the proposed legislation or regulations that approach, the combined common implementing regulations. must become final at the state level submittal and each of the individual For states that request and receive a prior to submitting a final plan participating state submittals would 2-year extension, the state must submit submittal to the EPA. While constitute the multi-state plan an update halfway through that commenters expressed concern with not submitted for EPA review. The joint extension, by September 6, 2017. In the being able to have legislation enacted in common submittal must be signed by proposal the EPA included a time to receive an extension until 2018, authorized officials for each of the states requirement regarding a 2017 check in. the EPA has determined that 2 years is participating in the multi-state plan and Because the EPA is finalizing that states a reasonable timeframe for a state to would have the same legal effect as an are able to get a 2-year extension decide on the type of approach it will individual submittal for each regardless of whether they are take in the final plan submittal and to participating state. submitting an individual or multi state draft legislation or regulations for this Second, the EPA is finalizing an final plan, the EPA believes it approach in order to timely meet the approach where all states participating appropriate to ensure through the 2017 extended September 6, 2018 deadline. in a multi-state plan separately make update that the state is making 4. Multi-State Plan Submittals individual submittals that address all continuous progress on its initial elements of the multi-state plan. These submittal and that it is on track to meet For states wishing to participate in a multi-state plan, the EPA is finalizing submittals would need to be materially the final plan submittal deadline of consistent for all common plan elements September 6, 2018. The EPA will also be three forms of submittal that states may choose for the submittal of a multi-state that apply to all participating states, and able to use the information provided would also address individual state- through the 2017 update to further assist plan. First, the EPA is finalizing its specific aspects of the multi-state plan. states in plan development. proposed approach where one multi- Each individual state plan submittal The final rule requires that states state plan submittal is made on behalf would need to address all required plan address in the 2017 update the of all participating states. The joint components. The EPA encourages states following components: submittal must be signed by authorized participating in this type of multi-state • A summary of the status with respect to officials for each of the states plan to use as much common material required components of the final plan, participating in the multi-state plan and as possible to ease review of the state including a list of which components are not would have the same legal effect as an plans. yet complete. • individual submittal for each These approaches will provide states A commitment to a plan approach (e.g., with flexibility in addressing single or multi-state, rate or mass emission participating state. The joint submittal performance level), including draft or must adequately address plan contingencies where one or more states proposed legislation and/or regulations. components that apply jointly for all submit plan components that are not • An updated comprehensive roadmap participating states and for each approvable. In such instances, these with a schedule and milestones for individual state in the multi-state plan, options simplify the EPA’s approval of completing the plan, including progress to including necessary state legal authority remaining common or individual date in developing a final plan and steps to implement the plan, such as state portions of a multi-state plan and help taken in furtherance of actions needed to regulations and statutes. Because the address contingencies during plan finalize a final plan. multi-state plan functions as a single development where a state fails to In order to assess whether a state is on plan, each of the required plan finalize its participation in a multi-state track to submit a final plan by the 2018 components (e.g., plan emission goals, plan, with minimal disruption to the extension deadline, the EPA is requiring program implementation milestones, submittals of the remaining that the 2017 update must contain a emission performance checks, and participating states. These additional progress update on components from reporting) would be designed and submittal approaches also facilitate the initial submittal and a list of which implemented by the participating states multi-state plans where the final plan components are still not on a multi-state basis. participating states are coordinating the complete. The EPA received comments from implementation of their plans but are The EPA is also requiring that the states requesting flexibility for multi- not taking on a joint multi-state 2017 update include a commitment to state plan submittals. In response to emission goal for affected EGUs. For the type of plan approach the state will these comments, the EPA is also example, states may seek to engage in a take in the final plan submittal. During finalizing two additional options on multi-state approach that links rate- the public comment period, many which it solicited comment. First, states based or mass-based emission trading commenters stated that legislative participating in a multi-state plan can programs through appropriate action would be required to enact this provide a single submittal—signed by authorizations (e.g. reciprocity final rule at the state level, and that the authorized officials from each agreements, or state regulations) that proposal did not provide enough time participating state—that addresses allow affected EGUs to use emission for legislative action or other regulatory common plan elements. This option allowances or RE/EE credits issued in

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00199 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64860 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

one state for compliance with an similar to that used for acting upon SIP proposal for this action, the EPA is emission standard in another state. submittals under section 110 of the proposing such regulations as part of the In order to avoid a multi-state plan CAA. The implementing regulations federal plan proposal for section 111(d). becoming unapprovable due to one state currently provide for the EPA to act on The EPA notes that this preamble (in submitting an unapprovable portion of a a final plan within 4 months after the section VIII.D) and final rule lay out multi-state plan, withdrawing from the deadline for submission, which is required components of state plans and multi-state plan, or failing to implement consistent with versions of section 110 all the requirements for a state plan the multi-state plan, states may include prior to the 1990 Amendments to the submittal, and therefore states have the express severability clauses if their CAA. 40 CFR 60.27(b). To be consistent necessary information at this time to multi-state plan is able to stand without with the current version of section 110, develop state plans. The upcoming further revision if one of the situations the EPA intends to adopt a timeline of completeness criteria will not add to or described above occurs. The severability 12 months to review final plan change these required components, but clause must specify how the remainder submittals upon receipt of complete only add a procedural step that allows of the multi-state plan or individual submittals, as is generally consistent the EPA to identify whether there are state plan would continue to function with the timing requirements of section absent or insufficient components in the with the withdrawal of a state or states, 110 with respect to complete SIP plan submittal that would render the and may also include pre-specified submittals. Such a timeline would also EPA unable to act on such submittal revisions. The EPA will evaluate the provide the EPA with adequate time for because it is incomplete. As we further appropriateness of such a clause as part review and rulemaking procedures, and explain in the federal plan proposal, a of its review of the multi-state plan ensuring an opportunity for public determination by the EPA that a plan submittal. notice and opportunity for comment. submittal is incomplete has the effect of 5. Process for EPA Review of State Plans We note, however, that we proposed a state having a still-pending statutory this timeline for review and action on obligation to submit a plan that meets Our proposal laid out the basic steps state plans in our proposal, but our the requirements of section 111(d). for the EPA’s review and action on proposal was specific to the timeline for The EPA is planning to propose an submitted state plans and, at some state plans submitted pursuant to this amendment to the section 111(d) length, discussed the required rule rather than for state plans implementing regulations that will add components of state plans, as further submitted under 111(d) generally.846 We the partial approval/disapproval and described in the preceding sections. We are finalizing as part of this rule that conditional approval mechanisms in received a number of thoughtful and state plans submitted to meet the section 110(k)(3) and (4) to the helpful comments on these issues. We requirements of this rule will be procedure for acting on section 111(d) are finalizing the basic requirements in reviewed and acted upon by the EPA plans. The input the agency received in this rule and are proposing, in the within 12 months of submission. response to the proposal for these companion proposed federal plan under Because such timeline would be guidelines indicated that the flexibility section 111(d), some additional appropriate to be made to 111(d) state provided by these mechanisms could be procedural elements we believe will be plans more generally, we are also useful getting state plans in place. The helpful to states, stakeholders and the proposing the appropriate revisions to EPA agrees, and is proposing to amend EPA moving forward. the implementing regulations as part of the implementing regulations as part of Following the September 6, 2016 the rulemaking for the federal 111(d) deadline for state plan submittals, the the federal plan proposal for section 111(d). plan. The EPA is not taking final action EPA will review plan submittals. For a on these changes in this action. state that submits an initial submittal by In addition, while the proposal and this final rule lay out in considerable The later timing for our action on September 6, 2016, and requests an partial approval/disapproval and extension of the deadline for the detail the required components of a state plan, the EPA believes that it conditional procedures does not create submission of a final state plan any issue with finalizing this rule. submittal, the EPA will determine if the would also be helpful to include in the rule a completeness determination These procedural adjustments will only initial submittal meets the minimum come into play after states have process, similar to that used for SIP requirements for an initial submittal. If submitted their plans and the EPA is submittals under section 110, which the state does not submit an initial required to act on them, and we intend will allow the EPA to determine submittal by September 6, 2016, that to finalize these procedural changes whether a final plan submittal contains contains the three required components, prior to September 6, 2016, when the the components necessary to enable the the EPA will notify the state by letter, first plan submittals would occur. Until EPA to determine through notice and within 90 days, that the agency cannot then, the EPA believes that every plan comment rulemaking whether such grant the extension request based the is submitted with the intent to be fully submittal complies with the state’s initial submittal. If the initial approvable and there is no need for requirements of section 111(d). This is submittal meets the minimum states to rely on the possibility of these requirements specified in the emission a procedural requirement under CAA procedures when developing their guidelines, the state’s request for a section 110(k)(1) for SIPs, and the EPA plans. Conditional approval and partial deadline extension to submit a final believes this requirement is appropriate approval/disapproval should be used to plan submittal will be deemed granted, to establish under section 111(d)’s deal with approvability issues that arise and the final plan submittal must be direction to the EPA to prescribe despite the best efforts of states and the submitted to the EPA by no later than through regulations a procedure similar EPA to work together to make sure a September 6, 2018. to that provided by section 110. submittal in the first instance is fully After receipt of a final plan submittal, However, because the EPA did not approvable. The EPA plans to finalize the EPA will review the plan submittal propose such regulations as part of the any changes in the implementing and, within 12 months, approve or regulations before the EPA is required to 846 The EPA proposed 12 months after the date disapprove the plan through a notice- required for submission of a plan or plan revision act on state submittals, so that the EPA and-comment rulemaking process to approve or disapprove such plan or revision or and states will have appropriate publicized in the Federal Register, each portion thereof. flexibility in the plan approval process.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00200 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64861

6. Failure To Submit a Plan the new participant and the multi-state data and assumptions, such as If a state does not submit a final plan plan of the current plan participants assumptions for current and future submittal by the applicable deadline, or could be addressed through the same economic conditions and technology submits a final plan the EPA determines plan modification submittal or cost and performance. Comments to be incomplete, the EPA will notify addressed under a plan modification received on this topic were generally the state by letter of its failure to submit. submittal comparable to the alternate supportive of allowing the use of The EPA will publish a Federal Register formats for multi-state plan submittals updated data in state plan modifications, citing that states should notice informing the public of its addressed in section VIII.E.4. The entry or exit of a state to/from a have the ability to determine whether finding of failure to submit. Upon a multi-state plan involves the the original data and assumptions or finding of failure to submit for a state, recalculation of the multi-state rate- updated data and assumptions are a regulatory clock will run requiring the based or mass-based CO2 goal for appropriate. The EPA is finalizing that EPA to promulgate a federal plan for affected EGUs in the participating states. new projections of emission such state no later than 1 year after the The recalculated multi-state rate-based performance, the projection methods, EPA makes the finding unless the state or mass-based CO2 goal must take into tools, and assumptions do not have to submits, and the EPA approves, a state account and ensure achievement of the match those used for the projection in plan during this time. Refer to the individual state rate-based or mass- the original demonstration of plan federal plan proposal for more details based CO2 goal for any state that is performance; they can be updated to on how and when a federal plan would joining the multi-state plan. If reflect the latest data and assumptions, be triggered. implementation of the individual state such as assumptions for current and 7. State Plan Modifications plan has triggered corrective measures future economic conditions and or backstop emission standards prior to technology cost and performance. a. Modifications to an approved state the plan modification, as described in As discussed in more detail in section plan. section VIII.F.3, the modification must VIII.G.2, the final rule has several During the course of implementation take into account the need to make up measures to ensure that it does not of an approved state plan, a state may for any shortfall in CO2 emission interfere with the industry’s ability to wish to update or alter one or more of performance in the individual state plan maintain reliability. One such measure the enforceable measures in the state prior to joining the multi-state plan. is that if a state cannot address a plan, or replace certain existing Where one or more states are leaving a reliability issue in accordance with an enforceable measures with new multi-state plan through a plan approved state plan, the state can measures. The EPA received broad modification, the process is similar and submit a request to the EPA to modify support for allowing states to submit the same considerations must be taken the state plan. See section VIII.G.2 for a modifications to approved state plans, into account in connection with the more detailed discussion of this issue. and we agree that this is an important states that are leaving the multi-state The EPA is not finalizing any aspect of this program. In this plan. circumstances under which a state may rulemaking, therefore, the EPA is As a result of these requirements and or may not revise its state plan, with the finalizing that a state may revise its state considerations, the EPA is finalizing exception that a state may not revise its plan, and states in a multi-state plan certain requirements for multi-state plan state plan in a way that results in the may revise their joint plan. Consistent modifications. A multi-state plan affected EGU or EGUs not meeting the with the timing for final plan submittals modification may be submitted to the requisite CO2 emission performance originally submitted by states, the EPA EPA at any time. However, an approved levels. will act on state plan revisions within multi-state plan modification may only b. Modifications to interim and final 12 months of a complete submittal. The take effect at the beginning of a new CO2 emission goals. EPA expects that the long plan interim or final plan performance As discussed in section VII, the final performance timeframes in this final period. These requirements are rule specifies that the state interim and rule and flexibility provided to states in necessary to ensure that the emission final CO2 emission goals for affected developing state plans will lessen the performance rates or state rate-based or EGUs in a state may be adjusted to need for modifications to approved state mass-based CO2 goals in the emission address changes within a state’s fleet of plans. guidelines are achieved. In addition, affected EGUs. If these changes occur A state may enter or exit a multi-state such requirements for the timing of the before a state submits its initial plan through a plan modification, with effective date of multi-state plan submittal or final plan, the state should certain limitations. Multiple modifications are necessary for indicate in its submittal the commenters stated that the EPA should coordination of the implementation of circumstance that necessitates the goal clarify the plan modification process in multi-state plans, especially where such adjustment and the revised interim or such instances. plans include a multi-state emission final CO2 emission goal. If the Where a state with a single-state trading approach. This approach is also circumstances occur after a state has an approved plan seeks to join a multi-state consistent with the approach the EPA is approved plan, a state must submit a plan, the state may submit a proposing for the implementation of modification to its approved plan. The modification of its plan indicating that federal plan, where relevant for a plan revision submittal must indicate it is joining the multi-state plan and state(s). the circumstance that necessitates the including the necessary plan The EPA solicited comment on goal adjustment, the revised interim components under the multi-state plan. whether, for new projections of and/or final CO2 emission goal, and the The current participants of the multi- emission performance included in a adjustments to the enforceable measures state plan will also need to submit a submitted plan modification, the in the plan. plan modification, to acknowledge the projection methods, tools, and new state participant and to recalculate assumptions used should match those 8. Plan Templates and Electronic the multi-state rate-based or mass-based used for the projection in the original Submittal CO2 goal. Functionally, both the demonstration of plan performance, or The EPA is finalizing the requirement modification of the single-state plan of should be updated to reflect the latest that submissions related to this program

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00201 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64862 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

be submitted electronically. Detailed instructions for accessing CDX The EPA received a number of Specifically, that includes negative and SPeCS will be outlined in the comments on the electronic submittal of declarations, state plan submittals ‘‘111(d) SPeCS User Guide: How to state plans. Some commenters preferred (including any supporting materials that submit state 111(d) plan material to the option to submit electronically are part of a state plan submittal), any EPA’’ which will be available on the rather than the requirement to do so. In plan revisions, and all reports required EPA’s Clean Power Plan Toolbox for the final rule, for the reasons discussed by the state plan. The rule provides that States. The EPA will provide SPeCS below, the EPA is requiring electronic files that are submitted to the EPA in an training for states prior to the state plan submittal of state plans and not electronic format may be maintained by submittal due date. allowing alternate options for plan states in an electronic format. The Once in CDX, SPeCS can be selected submittal (e.g. paper submittal). submission of the information by the from the Active Program Service List. Requiring electronic submittal is in authorized official must be in a non- The preparer (e.g., state representative keeping with current trends in data editable format. In addition to the non- compiling a state plan submittal) availability and will result in less editable version, the EPA is also assembles the submission package. The burden on the regulated community. requiring that all plan components preparer can upload files and complete Electronic submittal will facilitate two- designated as federally enforceable must electronic forms. However, the preparer way business communication between be submitted in an editable version as may not formally submit and sign states and the EPA, will guide states well, as discussed below. packages. Only registered authorized through the submittal process to ensure a. Submittal of an editable version of officials may submit and sign for the submission of all required plan federally enforceable plan components. state with the exception of draft components, and will enable states to To ensure that the EPA has the ability submittals. The EPA’s intent is to allow submit proposed plans to the EPA to identify, evaluate, merge, update and submittal of draft plans or parts of plans electronically for early EPA comments. track federally enforceable plan for early EPA review prior to formal Electronic submittal will also facilitate, components in a timely and submission by the authorized official expedite and promote national comprehensive manner, the EPA is and will allow preparers, as well as consistency in the EPA’s review of state requiring states to submit an editable authorized officials, to submit draft plans and promote transparency by copy of the specific plan components in documents. The authorized official will providing stakeholder-specific access to their submittals that are designated as be able to assemble submission updated information on state plan status federally enforceable, either effective and posting of plan requirements for packages and will be able to modify upon the EPA plan approval or as a state viewing by the public, government submission packages that a preparer has plan backstop measure. The editable regulators and regulated entities. The assembled. The key difference between version is in addition to the non- EPA recently implemented an electronic the preparer and the authorized official editable version. Examples of editable submittal process for SIPs under CAA is that the authorized official can submit file formats include Microsoft Word, section 110 and continues to explore and sign a package for formal EPA Apple Pages and WordPerfect. opportunities to increase the ease and review using an electronic signature. In b. Revisions to an approved plan. efficiency with which states and the the case of a multi-state plan, each States shall provide the EPA with regulated community can meet participating state’s authorized official both a non-editable and editable copy of regulatory data submittal requirements. any submitted revision to existing must provide an electronic signature. In summary, the EPA believes electronic approved federally enforceable plan The process has been designed to be submittal will be enormously beneficial components, including state plan compliant with the Cross-Media in terms of improving coordination and backstop measures. The editable copy of Electronic Reporting Rule (CROMERR), cooperation between the EPA and its any such submitted plan revision must under 40 CFR part 3, which provides state partners in developing approvable indicate the changes made, if any, to the the legal framework for electronic state plans. We note, however, that there existing approved federally enforceable reporting under all of the EPA’s may be some circumstances where plan components, using a mechanism environmental regulations. The having paper copies of the plan is such as redline/strikethrough. This framework includes criteria for assuring needed to facilitate public engagement, approach to identifying the changes that the electronic signature is legally and encourage states to take those made to the existing federally associated with an electronic document considerations into account. enforceable plan components is for the purpose of expressing the same d. Plan templates. consistent with the criteria for meaning and intention as would a In the proposal, the EPA requested determining the completeness of SIP handwritten signature if affixed to an comment on the creation of templates submissions set forth in Section 2.1(d) equivalent paper document. In other for initial submittals and final state plan of Appendix V to 40 CFR part 51. words, the electronic signature is as submittals. Multiple commenters c. Electronic submittal. equally enforceable as a paper signature. requested the EPA provide state plan It is the EPA’s experience that For more information on CROMERR, see templates. One commenter requested electronic submittal of information has the Web site: http://www.epa.gov/ templates for different plan designs (e.g. increased the ease and efficiency of data cromerr/. States who claim that a state a mass-based trading framework, a rate- submittal and data accessibility. The plan submittal or supporting based trading framework, multi-state EPA is developing the SPeCS, a web documentation includes confidential compliance and a utility-based portfolio accessible electronic system to support business information (CBI) must submit approach) and for specific plan this requirement that will be accessed at that information on a compact disc, components (e.g. how to incorporate a the EPA’s Central Data Exchange (CDX) flash drive, or other commonly used state RE standard and an EE program (http://www.epa.gov/cdx/). The EPA electronic storage media to the EPA. The into a state plan, how to assess the will pre-register authorized officials and electronic media must be clearly marked emission reductions delivered by RE plan preparers in CDX. See section as CBI and mailed to U.S. EPA/OAQPS/ and EE). The EPA has determined that VIII.E.2 for additional information on CORE CBI Office, Attention: State and the broad range of approaches states the pre-registration process for Local Programs Group, MD C539–01, may take in preparing individual or authorized officials and plan preparers. 4930 Old Page Rd., Durham, NC 27703. multi-state plans makes the

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00202 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64863

development of specific templates procedures). Therefore, Congress must the section 111(d) implementing challenging and likely not useful to have intended to give the EPA leeway regulations provide for extensions states. However, concurrent with this to create procedures for section 111(d) generally. We conclude, in view of the final rule, the EPA is proposing model state plans that somewhat vary from above discussion of ‘‘similar,’’ that the rules for both rate- and mass-based those in section 110, so long as the approach of initial submittals and programs in conjunction with the section 111(d) procedures are extensions of due dates as proposed are proposed federal plan. These effectively reasonably tied to the purpose and text reasonable procedures that, while not can serve as a template for states when of section 111(d). In other words, identical to the procedures in section preparing their state plan submittals. ‘‘similar’’ creates a gap in the statute 110, are still similar. The EPA will continue extensive that the EPA may reasonably fill. Some commenters argued that the 1- outreach to states and work closely with a. Initial submittals and extensions. year period for initial submittals and, them on the need for additional tools Initial submittals in this instance are even assuming an extension, the and guidance to facilitate the a reasonable gap-filling procedural step. additional 1- to 2-year period for final development of approvable state plans. As explained in our proposal, certain submittals were unreasonably short, aspects of section 111(d) plan particularly in light of the possibility 9. Legal Basis Regarding State Plan development for these particular that some state legislatures might need Process guidelines warrant our creation of this to act to provide adequate legal CAA section 111(d)(1) requires the procedural step, even though section authority for these particular plans. We EPA to promulgate procedures ‘‘similar’’ 110 does not provide for initial are not finalizing the 1-year extension to those in section 110 under which submittals. As explained above, though, for single state submittals, and we have states adopt and submit CAA section we are not bound under section addressed concerns about legal 111(d) plans. The EPA has interpreted 111(d)(1) to follow exactly the same authority for the initial submittals by this provision previously in the procedures. allowing states to identify remaining implementing regulations found in 40 With respect to the timing of initial legislative action in those submittals. CFR part 60 subpart B. As discussed submittals, final submittals, and With respect to the overall period of above, the EPA intends that planned extensions, we note that section 111 up to 3 years for submittals, we revisions to the part 60 implementing does not prescribe any particular continue to find it reasonable and regulations will clarify (among other deadlines, instead leaving it to EPA’s consistent with other deadlines in the things) whether certain procedures are discretion to establish ‘‘similar’’ CAA. First, section 110(a)(1) requires appropriate for the EPA’s action on CAA procedures to section 110. The states to submit a plan for section 111(d) state plans, and if so, implementing regulations for section implementation, maintenance, and precisely how those procedures should 111(d) plans require state plans to be enforcement of new NAAQS within 3 apply. The EPA is proposing these submitted within 9 months of years of promulgation of that NAAQS. revisions to the CAA section 111(d) finalization of emission guidelines. This is true even if the EPA promulgates implementing regulations in the notice Section 110(a)(1) provides that states a NAAQS for a previously non-criteria of proposed rulemaking for the federal should adopt and submit SIPs that pollutant. In that case, it is possible and plan being issued concurrently with this provide for implementation, even likely that at least some state final rule. In this section we discuss the maintenance, and enforcement of the agencies will lack statutory authority to legal basis for procedures that the EPA NAAQS within 3 years, or such shorter regulate the new pollutant. Nonetheless, is finalizing in this action: Initial period as the Administrator may Congress dictated that states should submittals, extensions, and plan prescribe.847 As further explained in submit section 110(a)(1) plans within 3 revisions. Section VIII.E., the EPA is providing years. First, by using the ambiguous word states with up to 3 years to submit a Furthermore, we note that under ‘‘similar,’’ Congress delegated authority final plan under this rule, contingent subpart 1 of Part D of Title 1, attainment to the EPA to determine precisely what upon the grant of an extension through plans are generally due no later than 3 procedures would govern 111(d) plans. an initial submittal due by September 6, years after designation of a ‘‘Similar’’ does not have an identical 2016. Section 110(a)(1) does not provide nonattainment area, and under other meaning as the word ‘‘same.’’ One any particular factors for the subparts of Part D, plans are due even definition of ‘‘similar’’ is ‘‘having Administrator to consider in prescribing more quickly. For example, under likeness or resemblance, especially in a a shorter period. Thus, the EPA’s subpart 4, attainment plans for general way.’’ The American College prescription of a shorter period for particulate matter are generally due 18 Dictionary 1127 (C.L. Barnhart, ed. either an initial submittal or a final plan months after designation, and under 1970). On the other hand, ‘‘same’’ is submittal is consistent with the subpart 5, the same deadline applies for defined as ‘‘alike in kind, degree, discretion granted in section 110(a)(1). attainment plans for sulfur oxides, quality; that is, identical’’ or We further discuss why the September nitrogen dioxide and lead. Developing ‘‘unchanged in character.’’ Id. at 1073. 6, 2016 initial submittal deadline is attainment plans may or may not Had Congress intended that the reasonable in Section VIII.E., and such require states to seek additional procedures for section 111(d) plans be deadline is achievable by states seeking legislative authority, but certainly in indistinguishable from those in section to submit a final plan within 3 years. terms of complexity they are similar to section 111(d) plans for this guideline. 110, Congress knew how to say so. See, We also note that section 110(b) In general, attainment plans must e.g., 36 U.S.C. 2352(b)(2)(B) (‘‘same provides for extensions of 2 years for contain (among other things) a procedures’’). And had Congress plans to implement secondary NAAQS, comprehensive inventory of sources of intended that the procedures for section that other provisions in part D provide the relevant pollutant and its precursors 111(d) plans be as close as possible to for extensions of due dates of attainment (which in populated areas can be very those in section 110, Congress knew plans in certain circumstances, and that how to say that. See, e.g., 38 U.S.C. numerous), control measures for those 4325(c) (agency ‘‘shall ensure, to the 847 Under this grant of authority to prescribe sources (including individualized maximum extent practicable, that the shorter deadlines, the EPA has in a number of control measures for the larger sources), procedures are similar to’’ certain other occasions required SIPs to be submitted in 1 year. and modeled demonstrations of

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00203 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64864 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

attainment (which in some instances state CO2 emission performance goal, compliance for each interim step 1, 2 requires photochemical grid modeling). and as explained above we can and 3 for the calendar years 2022–2024, Thus, it is reasonable to have the same reasonably require the same of 2025–2027 and 2028–2029, respectively. timeline for these section 111(d) plans revisions. For the final period, EGUs must have as Congress generally provided for It is also reasonable to tailor the emission standards that have schedules attainment plans in section 172(b). requirements of the demonstration to of compliance for each 2 calendar years b. State plan modifications. the magnitude of the revision. The EPA starting in 2030 (i.e., 2030–2031, 2032– Section 110(l) provides for states to has taken a similar approach to tailoring 2033, 2034–2035, etc.). If a backstop is revise their SIPs, as does 40 CFR 60.28 the requirements for a technical triggered for a state measures plan, the for section 111(d) plans. Section 110(l) demonstration that, under section schedule of compliance for the federally also sets out a standard for revisions: It 110(l), a SIP revision does not interfere enforceable emission standards must prohibits the EPA from approving a SIP with any applicable requirement begin no later than 18 months after the revision that would interfere with any concerning attainment of the NAAQS. If backstop is triggered and end at the end applicable requirement concerning a SIP revision does not relax the of the same compliance period. For attainment or reasonable further stringency of any SIP measure, then the example, if a backstop is triggered on progress, or any other applicable demonstration is simple. If the SIP July 1, 2025, the compliance period for requirement of the CAA. Under the revision does relax the stringency of SIP the backstop emission standards must existing section 111(d) implementing measures, then a qualitative or begin no later than January 1, 2027, and regulations, the Administrator will quantitative analysis may be necessary end on December 31, 2027. The next disapprove section 111(d) plan revisions to show non-interference, depending on compliance period for the backstop as unsatisfactory when they do not meet the nature of the revision, the current air emission standards would be January 1, the requirements of subpart B to part 60. quality in the area, and other factors. 2028–December 31, 2029. See 40 CFR 60.27(c)(3). However, the Finally, we proposed that revisions In the June 2014 proposal, the EPA implementing regulations do not set ‘‘should not result in reducing the proposed that the appropriate averaging forth a substantive standard like that in required emission performance for time for any rate-based emission section 110(l). affected EGUs specified in the original standard for affected EGUs be no longer Section 111(d)(1) does not mention approved plan. In other words, no than 12 months within a plan revisions (except indirectly through the ‘backsliding’ on overall plan emission performance period and no longer than reference to section 110) and, therefore, performance through a plan 3 years for a mass-based standard. The does not explicitly provide any modification would be allowed.’’ 79 FR EPA solicited comments on longer and substantive requirements for them. 34917/1. We received adverse shorter averaging times for emission There is, therefore, a gap in the statute comments that this standard did not standards included in state plans. The that the EPA may reasonably fill, since have a basis in section 111(d). EPA received comments stating that the many stakeholders commented on the According to commenters, since the proposed 12-month averaging was too desirability of states being able to standard for EPA approval of a section short and that there was no reason why modify their plans, and the EPA agrees. 111(d) plan is whether the plan is the compliance period under a rate- It is reasonable, at a minimum, that the satisfactory in establishing and based plan should be different from a state plan as revised should continue to providing for implementation and mass-based plan. Comments stated that provide for implementation and enforcement of standards of a multi-year averaging period is enforcement of the standards of performance that achieve the emission appropriate for rate-based and mass- performance, and to achieve the CO2 performance rates or goal, the same based plans to account for variations emission performance rates or state CO2 standard should apply to revisions. In that can occur in a single year, allowing emission performance goal. This is other words, the standard for revisions operators the flexibility they need to analogous to the substantive should be whether the plan as revised manage unforeseen events. The requirements of section 110(l), which as is satisfactory. We believe that our commenters also recommended that the explained above for section 110(a)(2), proposal was unclear as to this point, final rule use discrete 3-year periods for we may consider in determining how to and we agree that the standard for compliance reconciliation instead of the reasonably fill statutory gaps for section revisions should be the same as for rolling-average approach proposed. 111(d) plans. submittals. We have finalized this The EPA has considered all comments In our proposal, we stated that certain position. received on this matter and is finalizing revisions to state plans under these the compliance periods specified above, emission guidelines, those that revised F. State Plan Performance which respond to the comments by enforceable measures for affected EGUs, Demonstrations applying to both rate- and mass-based should satisfy some additional This section describes state plan programs, providing compliance periods conditions. First, the state should requirements related to compliance longer than 1 year, and establishing demonstrate that the plan continues to periods, monitoring and reporting for block compliance periods rather than a achieve the CO2 emission performance affected EGUs; plan performance rolling average approach. We agree with rates or state CO2 emission performance demonstrations; consequences if the comments that longer averaging periods goal. We proposed that this CO2 emission performance rates or state allow for operational and seasonal demonstration might be simple for CO2 emission goals are not met; and out- variability to even out. The EPA minor revisions, but for major revisions year requirements. finalizes that states can choose to set a more complete demonstration may be shorter compliance periods for their required. We are finalizing this 1. Compliance Periods, Monitoring and emission standards but none that are proposal. As legal basis for this position, Reporting Requirements for Affected longer than the compliance periods the we note that a demonstration is EGUs EPA is finalizing in this rulemaking. If necessary to show that a state plan For plans that include emission a state chooses to set shorter compliance provides for implementation of standards on affected EGUs, the EGU periods, we urge them to make efforts to standards of performance that achieve emission standards for the interim be cognizant of other deadlines facing the CO2 emission performance rates or period must have schedules of EGUs to assure that there will not be

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00204 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64865

conflicts. The EPA recognizes that the (including total net MWh output that is believes that the final monitoring and compliance periods provided for in this comprised of generation, and where reporting requirements (via ECMPS) rulemaking are longer than those applicable, useful thermal output address the issue of duplicative historically and typically specified in converted to net MWhs) on a quarterly requirements and alleviate concern CAA rulemakings. ‘‘The time over basis in accordance with 40 CFR part about lost flexibility raised by which [the compliance standards] 75. Note that this requirement applies commenters. extend should be as short term as for all types of state plans, regardless of 2. Plan Performance Demonstrations possible and should generally not whether the state chooses the option of exceed one month.’’ See e.g., June 13, the CO2 emission performance rates, a The state plan must include emission 1989 ‘‘Guidance on Limiting Potential to state rate-based CO2 emission goal, or a performance checks, and for state Emit in New Source Permitting’’ and state mass-based CO2 emission goal. measures plans, periodic program implementation milestones. The state January 25, 1995 ‘‘Guidance on In the June 2014 proposal, the EPA plan must provide for tracking of Enforceability Requirements for proposed that state plans must include emission performance, and for measures Limiting Potential to Emit through SIP monitoring, reporting and to be implemented if the emission and § 112 Rules and General Permits.’’ recordkeeping requirements for useful performance of affected EGUs in the However, the EPA has determined that energy output from affected EGUs. state does not meet the applicable CO the longer compliance periods provided Multiple commenters questioned 2 emission performance rates or state CO for in this rulemaking are acceptable in whether gross rather than net electrical 2 the context of this specific rulemaking emission goal during a performance production should be reported by period. because of the unique characteristics of affected EGUs and recommended that this rulemaking, including that CO is As discussed above in section VII, the 2 the EPA should utilize gross rather than agency is finalizing CO long-lived in the atmosphere, and this 2 emission net generation. Many commenters performance rates or state-specific CO rulemaking is focused on performance 2 recommended electricity be reported in emission goals that represent emission standards related to those long-term the form used in the 111(b) rules for levels to be achieved by 2030 and impacts. The distinction between these consistency between reporting emission levels to be achieved over the unique characteristics and the EPA’s requirements and simplification of 2022–2029 interim period, and over general practice regarding compliance calculation of emission limitations three interim steps of 2022–2024, 2025– periods is bolstered by the EPA between new and old sources. 2027 and 2028–2029. A state may guidance on appropriate averaging Commenters also stated that to the choose to define different interim step periods for emission limitations in extent the EPA seeks to provide emission levels for achieving its NAAQS implementation. For example, guidance to states regarding its preferred required 2022–2029 average the EPA guidance has stated that in monitoring and reporting procedures, performance rate. The EPA recognizes implementation of the ozone standards, the EPA should encourage states to the importance of ensuring that, during which have a short averaging period, the avoid imposing additional monitoring the 8-year interim period (2022–2029) averaging period for VOC emission and reporting burdens by taking for the interim performance rates or limitations should be correspondingly advantage of the monitoring interim state goal, a state is making short. See 51 FR 43857. A longer requirements that already exist to the steady progress toward achieving the averaging period for VOC emission greatest extent possible. For example, required level of emission performance. limitations (VOCs are one of the key the commenters noted that the 40 CFR For both emission standards plans and precursors to ozone formation) can part 75 monitoring procedures used to state measures plans, the final rule allow spikes in emissions that adversely comply with other programs, such as requires periodic checks on overall impact ambient air and violate the short the Title IV Acid Rain Program, provide emission performance leading to term ozone standards. This is precisely much of the data that would be needed corrective measures or implementation the opposite of the unique to demonstrate compliance under the of the backstop, if necessary, as characteristics cited above: the long- rule. Comments stated that the June described in section VIII.F.3 below. lived persistence of CO2 in the 2014 proposal appeared to mandate a States must demonstrate that the interim stratosphere and the intent of these monitoring approach that would steps were achieved at the end of the guidelines to address the long-term eliminate key flexibilities provided in first two interim step periods. impacts. the part 75 regulations, thus requiring In 2032 and every 2 years thereafter, State plans must contain requirements utilities to maintain separate document states must demonstrate that affected for tracking and reporting actual plan collection and reporting procedures and EGUs achieved the final performance performance during implementation, potentially eliminating important rates or state goal on average or which includes reporting of CO2 alternative monitoring options intended cumulatively, as appropriate, during emissions from affected EGUs. Affected to ensure representative, cost-effective each 2-year reporting period (i.e., 2030– EGUs must comply with emissions monitoring approaches are available. 31, 2032–33, 2034–2035 etc.). The monitoring and reporting requirements The commenters asked the EPA to multi-year performance periods for that are largely incorporated from 40 revise its proposal to make clear that the measuring actual plan performance CFR part 75 monitoring and reporting procedures established under part 75 against the performance rates or state requirements. The majority of affected will suffice or explain the need for any goals allow states some flexibility that EGUs are already familiar with the exceptions. Commenters indicated that accounts for seasonal operation of reporting requirements of part 75, and the rule should require all affected affected EGUs, and inclusion of RE and because of this, the EPA has chosen to EGUs to monitor CO2 emissions and net demand-side EE efforts. streamline the applicable reporting hourly electric output under 40 CFR For a rate-based plan, emission requirements for affected EGUs under part 75, and report the data using the performance is an average CO2 emission the state plans in the final rule. States EPA’s Emission Collection and rate for affected EGUs representing must require all affected EGUs to Monitoring Plan System (ECMPS) cumulative CO2 emissions for affected monitor and report hourly CO2 assuring a more uniform monitoring and EGUs over the course of each reporting emissions and net energy output reporting process for all EGUs. The EPA period divided by cumulative MWh

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00205 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64866 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

energy output 848 from affected EGUs must submit an annual report no later Considering the comments received over the reporting period, with rate than July 1 following the end of each and the goals of minimizing adjustments for qualifying measures, calendar year in the interim period. This unnecessary burdens on states and such as RE and demand-side EE annual report must include the status of ensuring program effectiveness, the EPA measures. For a mass-based plan, the implementation of programmatic has reduced the frequency of reporting emission performance is total tons of state measures milestones identified in of emissions data to every 3 years for the CO2 emitted by affected EGUs over the the state plan submittal. The annual first two interim steps and every 2 years reporting period. report that follows the end of each thereafter. However, the EPA is For emission standards plans, as reporting period (i.e., 2022–2024, 2025– finalizing that state reports are due to discussed in section VIII.D, the state 2027, and 2028–2029) must also include the EPA no later than July 1 following must submit a report to the EPA an emissions performance comparison the end of each reporting period. The containing the emissions performance for the reporting period, as described EPA believes states can design their comparison for each reporting period no above for the emission standards plan. state plans to receive the data and later than the July 1 following the end As discussed in section VIII.D, the information needed for these reports in of each reporting period (i.e., by July 1, emission comparison required in the a timely manner so that this 2025; July 1, 2028; July 1, 2030; July 1, July 1, 2030 report must compare the requirement can be met. Furthermore, 2032; and so on). As discussed in actual emissions from affected EGUs some of the state reporting section VIII.D, the emission comparison over the interim period (2022–2029) requirements, such as reporting of EGU required in the July 1, 2030 report must with the interim CO2 emission emissions, can be met through existing compare the actual emissions from performance rates or state CO2 emission reporting mechanisms (ECMPS) and affected EGUs over the interim period goal. The report is not required to would not place additional burdens on (2022–2029) with the interim CO2 include a comparison for the interim states. step 3 period, but must include the emission performance rates or state CO2 3. Consequences if Actual Emission actual emissions from affected EGUs emission goal. The report is not required Performance Does Not Meet the CO during the interim step 3 period. 2 to include a comparison for the interim Emission Performance Rates or State Beginning with the final period of 2030 step 3 period, but must include the CO2 Emission Goal actual emissions from affected EGUs and onward, states using a state during the interim step 3 period. measures plan must submit a biennial The EPA recognizes that, under The EPA notes that for certain types report no later than July 1 following the certain scenarios, an approved state plan might fail to achieve a level of of emission standards plans, with mass- end of each reporting period with an emission performance that meets the based emission standards in the form of emission performance comparison for emission guidelines or the level of an emission budget trading program, each reporting period, consistent with performance established in a state plan achievement of a state’s mass-based CO the reporting requirements for emission 2 for an interim milestone. Despite goal (including interim step goals and standards plans. successful implementation of certain final goal) will be assessed by the EPA In the June 2014 proposal, the EPA types of plans, emissions under the plan based on compliance by affected EGUs proposed that a state report is due to the could turn out to be higher than with their emission standards under the EPA no later than July 1 of the year projected at the time of plan approval program, rather than CO emissions immediately following the end of each 2 reporting period. The EPA requested because actual conditions vary from during a specific interim step period or comment on the appropriate frequency assumptions used when projecting final period. This approach is limited to of reporting of the different proposed emission performance. Emissions also plans with emission budget trading reporting elements, considering both the could theoretically exceed projections programs where compliance by affected goals of minimizing unnecessary because affected entities under a state EGUs with the emission standards will burdens on states and ensuring program plan did not fulfill their responsibilities, ensure that, on a cumulative basis, the effectiveness. In particular, the agency or because the state did not fulfill its state interim and final mass-based CO 2 requested comment on whether full responsibilities. goals are achieved.849 This approach reports containing all of the elements The final rule specifies the allows for CO allowance banking across 2 should only be required every 2 years consequences in the event that actual plan performance periods, including rather than annually and whether these emission performance under a state plan from the interim period to the final reports should be submitted does not meet, or is not on track to meet, period. As a result, CO2 emissions by electronically, to streamline the applicable interim and interim step affected EGUs could differ from the state transmission. CO2 emission performance rates or state mass-based CO2 goal during an The EPA mainly received adverse goals in 2022–2029, or does not meet individual plan performance period, but comments for requiring annual state the applicable final CO2 emission on a cumulative basis CO emissions 2 reporting; commenters stated that this performance rates or state CO2 emission from affected EGUs would not exceed requirement was too burdensome for goal in 2030–2031 or later. The what is allowable if the interim and both states and the EPA. Commenters determination that a state is not on track final CO2 goals are achieved. also requested that the EPA extend the to meet the applicable interim goal or Also as discussed in section VIII.D, due date of the annual report from July interim step goals in 2022–2029 or the states that choose a state measures plan 1 to at least December 31. Commenters applicable final goal in 2030–2031 or stated that because of the timing of later, or the CO2 emission performance 848 For EGUs that produce both electric energy current data collection and the need to rates, will be made through the actual output and other useful energy output, there would also be a credit for non-electric output, expressed leave time to organize and submit the performance checks to be included in in MWh. reports, allowing only 6 months after state reports of performance data 849 Emission budget trading programs in such the close of the year is problematic. described in section VIII.D.2.a above. plans establish CO2 emission budgets equal to or Commenters asked that the EPA For emission standards plans, the less than the state mass CO2 goal, as specified for the interim plan performance period (including consider reducing the amount of data final rule specifies that corrective specified levels in interim steps 1 through 3) and required if annual reporting was measures must be enacted once the final 2-year plan performance periods. required. triggered. Corrective measures apply

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00206 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64867

only to emission standard plans in identify corrective measures and make approaches for which those provisions which full compliance by affected EGUs rule changes through state regulatory are required in individual state plans. would not necessarily lead to processes. The EPA will then act on the For multi-state plans using plan achievement of the emission plan revision within 12 months, approaches to which corrective performance rates or CO2 emission consistent with other plan revisions and measures or backstop requirements goals.850 For such plans, corrective with the timing for final plan submittals apply, all states that are party to the measures are triggered if actual CO2 originally submitted by states. The state multi-state plan would be subject to emission performance by affected EGUs must implement corrective measures corrective action or backstop is deficient by 10 percent or more within 6 months of the EPA’s approval requirements, and requirements to make relative to the specified level of of a plan revision adding them. up the past CO2 emission performance emission performance in the state plan For states using the state measures shortfall, if those requirements were for the step 1 or step 2 interim approach, the EPA is finalizing the triggered. This is because multi-state performance periods. Corrective backstop requirement as described in plans are joint plans (even if created measures also are triggered if actual section VIII.C.3 of this preamble. As through separate state submittals). That emission performance fails to meet the discussed in section VIII.D.2, the would not be the case for coordinated specified level in the plan for the 8-year determination that a state using the state individual state plans linked through interim period 2022–2029, or for any 2- measures approach is not on track to interstate ERC or emission allowance year final goal performance period meet the applicable interim goal or trading. In the case of coordinated (beginning in 2030). In such cases, the interim step goals in 2022–2029, or the individual state plans, for plan types state report must include a notification applicable final goal in 2030–2031 or subject to corrective measure or to the EPA that corrective measures later, is based on checks that must be backstop requirements, the state where have been triggered. If, in the event of included in state reports that must be the CO2 emission performance such an exceedance, the EPA submitted annually during the interim deficiency occurs would be required to determines that corrective measures period and biennially during the final implement corrective measures or have been triggered and the state has period. The state must annually report backstop requirements for affected failed to notify the EPA, the EPA will on its progress in meeting its EGUs, as applicable, and remedy the inform the affected EGUs that corrective programmatic state measures milestones past CO2 emission performance measures have been triggered.851 during the interim period. In addition, shortfall. When corrective measures are the state must report actual emission triggered, if the state plan does not Multiple commenters requested that performance checks, similar to the corrective measures not be required in already contain corrective measures, the requirements discussed above for state must submit to the EPA a plan the case of a catastrophic, emission standards plans, in 2025, 2028, uncontrollable event. We recognize that revision including corrective measures 2030, and every 2 years thereafter. If, at that adjust requirements or add new there are potential system emergencies the time of the state report to the EPA, that cannot be anticipated that could measures. The corrective measures must the state did not meet the programmatic both ensure future achievement of the cause a severe stress on the electricity state measures milestones for the system for a length of time such that the CO2 emission performance rates or state reporting period, or the performance multi-year requirements in a state plan CO2 emission goal and achieve check shows that the plan’s actual CO2 may not be achievable by certain additional emission reductions to offset emission performance warrants any emission performance shortfall that affected EGUs without posing an implementation of backstop otherwise unmanageable risk to occurred during a performance period. requirements,852 the state must include The shortfall must be made up as reliability. We are finalizing a reliability in the state report a notification to the safety valve, which includes an initial expeditiously as practicable. The state EPA that the backstop has been plan revision submission must explain period of up to 90 days during which a triggered. If, in the event of such an reliability-critical affected EGU or EGUs how the corrective measures both make exceedance, the EPA determines that up for the shortfall and address the state will not be required to meet the the backstop has been triggered and the emission standard established for it plan deficiency that caused the state has failed to notify the EPA, the shortfall. The state must submit the under the state plan but rather will meet EPA will inform the affected EGUs that an alternative standard. While the initial revised plan to the EPA as expeditiously 853 the backstop has been triggered. 90-day period is in use, the emissions of as practicable and within 24 months For multi-state plans, corrective after submitting the state report the affected EGU or EGUs that exceed measure or backstop provisions would their obligations under the approved indicating the exceedance. The 24- be required for the same plan month time period allows time to state plan will not be counted against the state’s overall goal or emission 852 As explained in section VIII.C.3.b., state 850 To be specific, corrective measures measures plans must require the backstop to take performance rate for affected EGUs and requirements apply to all emission standard plan effect if actual CO2 emission performance fails to will not be counted as an exceedance designs that do not mathematically assure that the meet the level of emission performance specified in that would otherwise trigger corrective plan performance level will be achieved when all the plan over the 8-year interim performance period measures under an emission standard affected EGUs are in compliance with their (2022–2029), or for any 2-year final goal emission standards, regardless of electricity performance period. The plan also must require the plan type or an exceedance that would production and electricity mix. Corrective measures backstop to take effect if actual emission trigger a backstop under a state requirements apply, for example, to emission performance is deficient by 10 percent or more measures plan type. Use of the standards plans that include standards on affected relative to the performance levels that the state has reliability safety valve will not alter or EGUs that differ from the emission performance chosen to specify in its plan for the interim step 1 rates in the guidelines. Backstop requirements period (2022–2024) or the interim step 2 period abrogate any other obligations under the apply to state measures plans. (2025–2027). approved state plan. After the initial 851 The EPA notes that as part of the proposed 853 The EPA notes that as part of the proposed period of up to 90 days, the reliability- federal plan rulemaking, it is proposing a regulatory federal plan rulemaking, it is proposing a regulatory critical affected EGU is required to mechanism to call plans in the instances of mechanism to call plans in the instances of substantial inadequacy to meet applicable substantial inadequacy to meet applicable continue to operate under the original requirements or failure to implement an approved requirements or failure to implement an approved state plan emission standard or an plan. plan. alternative standard as part of the

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00207 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64868 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

reliability safety valve, and the state regulations will clarify (among other including any prior shortfall that had must revise its plan to accommodate things) whether the EPA has authority accumulated if the plan fell short of the changes needed to respond to ongoing to call for plan revisions under section goal in prior years. There is no reliability requirements and to ensure 111(d) when a state’s plan is not corresponding requirement in than any emissions excess of the complying with the requirements of this attainment planning to increase the applicable state goals or performance guideline, and if so, precisely what stringency of the plan by an amount that rates occurring after the initial period of procedures should apply. The EPA is somehow makes up for any shortfall in up to 90 days are accounted for and proposing these revisions to the 111(d) attainment from prior years; instead the offset. See section VIII.G.2.e of this implementing regulations in the notice revised plan must demonstrate preamble. of proposed rulemaking for the federal attainment going forward, and other Multiple commenters supported the plan. The EPA is not taking final action more stringent requirements (such as inclusion of strong enforcement now on this issue or the related change requirements for best available control measures for ensuring the interim and to the implementing regulations. measures) may be triggered. final goals are met, including the a. Legal basis for corrective measures. This distinction is the natural result required use of corrective measures The EPA discussed the concept of of the difference between these when triggered. Other commenters corrective measures in our 1992 General guidelines and NAAQS attainment provided feedback as to the percentage Preamble for the Implementation of planning. In this case, we are finalizing that actual emission performance would Title I of the CAA Amendments of 1990. guidelines representing technology- need to exceed the level of emission 57 FR 13498 (Apr. 16, 1992). The based standards for a pollutant with performance specified in the statewide General Preamble sets out four general cumulative and long-lasting effects. If a plan to trigger corrective measures. principles that apply to all SIPs, plan falls short of a performance goal, Some commenters supported the trigger ‘‘including those involving emissions then in effect the standards of that we are finalizing (actual emissions trading, marketable permits and performance in the plan have failed to or emission rate performance that is 10 allowances.’’ Id. at 13568. The fourth reflect the BSER over the corresponding percent or more than the specified level principle, accountability, means (among period. Due to the cumulative effects of of emission performance in the state other things) that ‘‘the SIP must contain CO2, it is possible to remedy this failure plan for the interim step 1 or step 2 means . . . to track emission changes at by requiring the plan to be revised in performance periods), while some sources and provide for corrective such a way that the standards of recommended a lower or higher trigger. action if emissions reductions are not performance in the revised plan will The agency is finalizing the trigger at achieved according to the plan.’’ In the reflect the BSER over the cumulative the level of 10 percent for the interim General Preamble, we noted that Part D plan period, and this can be done by step 1 or step 2 performance periods. of Title I explicitly provided for this in requiring the revised plan to make up Ten percent is a reasonable level to certain instances by requiring the shortfall from the previous period. ensure that when deficiencies in state milestones and contingency measures. In short, the flexibility that these plan performance begin to emerge, Some commenters noted that the guidelines provide should not come at corrective measures (or backstop contingency measures explicitly the cost of allowing the standards of requirements) will be implemented required by part D are required to be performance to reflect less than the promptly to avoid emissions shortfalls adopted in the attainment plan and BSER over the long run.854 (or minimize the extent of shortfalls) ready to implement when a milestone is Some commenters noted that 111(d) relative to the 8-year interim goal and not achieved or the area fails to attain does not contain explicit provisions the final goal, which reflect the BSER. the relevant NAAQS. These commenters regarding corrective measures, and they The 10 percent figure also provides therefore concluded that corrective therefore inferred that the EPA is not latitude for a state’s emission measures for 111(d) plans should authorized to require them. That improvement trajectory during the likewise already be adopted in the inference is mistaken. The requirement interim period to deviate a bit from its 111(d) plan and ready to implement. We for 111(d) plans to ‘‘provide for planned path without triggering these disagree. Under Part D, contingency implementation and enforcement’’ of requirements, as the state initiates or measures are not expected to fully bring the standards of performance is ramps up programs to meet the 8-year the area into attainment. In fact, this ambiguous and does not directly speak interim goal and final goal. would not be possible given the to whether corrective measures should The EPA requested comment on difficulty of predicting in advance or should not be required. There is whether the agency should promulgate exactly what measures would be needed therefore a gap for the EPA to fill. While to fully attain. A better analogue in Part a mechanism under CAA section 111(d) the discussion above about Part D does D for the corrective measures in these similar to the SIP call mechanism in not independently provide any guidelines is the primary way Part D CAA section 110. Under this approach, authority to fill this gap, the fact that addresses failure to attain: The state is after the agency makes a finding of the Congress created a scheme with stages required to revise its plan in various plan’s failure to achieve the CO2 of planning in Part D suggests that it ways within a certain time in order to emission performance rates or state CO2 would be reasonable, if appropriate, to bring about attainment. See, e.g., section emission goal during a performance fill this gap in 111(d) in a similar way. period, the EPA would require the state 179(d). This is analogous to what we are In this guideline, it is appropriate for to cure the deficiency with a new plan requiring for corrective measures. Thus, emission standards plans to fill this gap within a specified period of time. If the part D contingency measures are unlike with corrective measures if triggered. state still lacked an approved plan by the corrective measures in this rule. There are two ways an emission However, the requirement to revise an the end of that time period, the EPA standards plan can provide for attainment plan in response to failure to would have the authority to promulgate implementation of standards of a federal plan under CAA section attain differs somewhat from the performance that achieve the CO2 111(d)(2)(A). 79 FR 34830, 34908/1–2 corrective measures in these guidelines. (June 18, 2014). Under these guidelines, the corrective 854 Similar considerations apply to the The EPA intends that planned measures must make up the difference requirement under the state measures approach to revisions to the part 60 implementing by which the plan fell short of the goal, revise the plan to make up the shortfall.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00208 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64869

emission performance rates or requisite emission performance for affected EGUs authorized the EPA to reasonably state CO2 emission performance goal. represented by the final CO2 emission require permanence. Other CAA section First, the state can set emission performance rates or state CO2 emission 111(d) emission guidelines set emission standards that necessarily achieve the goal must continue to be maintained in limits to be met permanently.’’ 79 FR performance rates or goal, even if the the years after 2030. 34830, 34908/2 (June 18, 2014). We also affected EGUs in the future vary in their As noted above, the state plan must requested comment on whether ‘‘we relative amounts of electricity demonstrate that plan measures are should establish BSER-based state generated. Second, the state can set projected to achieve the final emission performance goals that extend further emission standards that are performance level by 2030. In addition, into the future (e.g. beyond the demonstrated to achieve the the state plan must identify proposed planning period), and if so, performance rates or goal based on requirements that continue to apply what those levels of improved assumptions about the relative amounts after 2030 and are likely to maintain performance should be.’’ Id. at 34908/3. of electricity generated, but which may affected EGU emission performance We received adverse comment on turn out to not actually achieve the goal meeting the final goal. The state plan establishing BSER-based state even if all affected EGUs comply. This would be considered to provide for performance goals beyond the proposed is analogous to an attainment plan that maintenance of emission performance planning period. Commenters argued demonstrated attainment by the consistent with the final goal if the plan that we did not have a sufficient basis applicable attainment date, but due to measures used to demonstrate projected at this time to determine what those unpredicted economic changes actually achievement of the final goal by 2030 future goals should be. We agree and failed to attain. In this second case, the will continue in force and not sunset. have decided not to establish such EPA interprets the ambiguous language After implementation, the state is goals. We are finalizing, though, that the ‘‘provide for implementation . . . of required to compare actual plan level of emission performance for standards of performance’’ in the performance against the final goal on a affected EGUs represented by the final context of achieving the performance 2-year average basis starting in 2030, goal should continue to be maintained, rate or emissions goal, to mean that at and to implement corrective measures for the reasons given in our proposal the time the plan is submitted it must or a backstop if triggered. and quoted above. contain some mechanism to check the In the proposal, the EPA noted that The general structure of the CAA progress of the plan and correct course. ‘‘CAA section 111(b)(1)(B) calls for the supports our interpretation. Section The EPA has determined that, for this EPA, at least every eight years, to review 111(d) plans establish standards of particular rule, the minimum and, if appropriate, revise federal performance that reflect the BSER, a mechanism is the set of milestones and standards of performance for new technology-based standard. Generally provisions for corrective measures sources’’ in order to assure regular speaking, in the future technology will specified in this rule. Indeed, not updating of performance standards as only improve, and correspondingly the requiring corrective measures in the technical advances provide technologies CAA does not provide explicit processes case of deficient plan performance that are cleaner or less costly. The to relax technology-based standards. In would undercut the viability of state proposal ‘‘requests comment on the contrast, the provisions in Part D of title plan options other than emission implications of this concept, if any, for I that address attainment of health-based standard plans with uniform rates CAA section 111(d).’’ 79 FR 34830, standards, the NAAQS, explicitly applied to all affected EGUs within the 34908/3 (June 18, 2014). provide that once the NAAQS are We acknowledge the obligation to state. attained, emission reduction measures review section 111(b) standards as may be relaxed so long as the NAAQS 4. Out-Year Requirements: Maintaining stated. The EPA is not finalizing any are maintained. The absence in section or Improving the Level of Emission position with respect to any 111(d) of explicit provisions for future Performance Required by the Emission implications of this concept for section relaxation of emission reduction Guidelines 111(d). We are promulgating rules for measures, as compared to Part D, The agency is determining CO section 111(d) state plans that will 2 supports our interpretation that the emission performance rates and state establish standards of performance for emission reductions continue to be on- CO emission goals for affected EGU existing sources to which a section 2 going after the CO emission emission performance based on 111(b) standard of performance would 2 performance rates or state CO emission application of the BSER during apply if such sources were new sources, 2 goals are achieved in 2030. This is specified time periods. This raises the within the definition in section consistent with our past practice for question of whether affected EGU 111(a)(2) of ‘‘new source.’’ It is not section 111(d) rules, which do not emission performance should be necessary to address at this time contain any provision that in the future maintained at the 2030 level—or instead whether subsequent review and/or removes or relaxes the promulgated should be further improved—once the appropriate revision of the guidelines. In light of the persistence of final CO2 emission performance rate or corresponding section 111(b) standard CO2 as a pollutant and its long-term state CO2 emission goal is met in 2030. of performance have any implications impacts, it is particularly critical in This involves questions of performance for review and/or revision of this rule. rate and goal-setting as well as questions a. Legal basis for maintaining these guidelines to explicitly provide for about state planning. The EPA believes emission performance. continuing emission reductions. that Congress either intended the In the proposal, the EPA proposed G. Additional Considerations for State emission performance improvements ‘‘that the level of emission performance Plans required under CAA section 111(d) to be for affected EGUs represented by the maintained or, through silence, final goal should continue to be 1. Consideration of a Facility’s authorized the EPA to reasonably maintained.’’ The EPA explained that ‘‘Remaining Useful Life’’ and ‘‘Other require maintenance. Other CAA section ‘‘Congress either intended the emission Factors’’ 111(d) emission guidelines set emission performance improvements required This section discusses the way in limits that do not expire. Therefore, the under CAA section 111(d) to be which the final emission guidelines EPA is finalizing that the level of permanent or, through silence, address the CAA section 111(d)(1)

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00209 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64870 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

provision requiring the Administrator, (2) Physical impossibility of installing c. How these emission guidelines in promulgating 111(d) regulations, to necessary control equipment; or permit states to consider remaining ‘‘permit the State in applying a standard (3) Other factors specific to the facility useful life and other facility-specific of performance to any particular source (or class of facilities) that make factors. under a [111(d)] plan . . . to take into application of a less stringent standard The EPA notes that, in general, the consideration, among other factors, the or final compliance time significantly implementing regulation provisions for remaining useful life of the existing more reasonable. remaining useful life and other facility- source to which such standard applies.’’ This provision was amended in 1995 specific factors are relevant for emission The final guidelines permit a state, in (60 FR 65387, December 19, 1995), and guidelines in which the EPA specifies a developing its state plan, to fully is now prefaced with the language presumptive standard of performance consider and take into account the ‘‘Unless otherwise specified in the that must be fully and directly remaining useful life of an affected EGU applicable subpart on a case-by-case implemented by each individual and other factors in establishing the basis for particular designated facilities existing source within a specified requirements that apply to that EGU, as or classes of facilities.’’ 40 CFR 60.24(f). source category. Such guidelines are discussed further below. Therefore, b. Our proposal regarding the similar to a CAA section 111(b) standard consideration of facility-specific factors implementing regulations. in their form. For example, the EPA Our proposal stated that the reference and in particular, remaining useful life, emission guidelines for sulfuric acid to ‘‘[u]nreasonable cost of control does not justify a state making further plants, phosphate fertilizer plants, resulting from plant age’’ in 60.24(f) adjustments to the performance rates or primary aluminum plants, Kraft pulp ‘‘implements’’ the statutory provision aggregate emission goal that the plants, and municipal solid waste on remaining useful life. We also stated guidelines define for affected EGUs in a landfills specify emission limits for that the implementing regulations 856 state and that must be achieved by the sources. In the case of such emission ‘‘provide the EPA’s default structure for state plan. Thus, these guidelines do not guidelines, some individual sources, by implementing the remaining useful life provide for states to make additional virtue of their age or other unique provision of CAA section 111(d).’’ We goal adjustments based on remaining circumstances, may warrant special noted that the prefatory language useful life and other facility-specific accommodation. ‘‘unless otherwise specified in the In these final guidelines for state factors because they can fully consider applicable subpart’’ gives the EPA these factors in designing their plans. plans to limit CO2 from affected EGUs, discretion to alter the extent to which however, the agency does not specify a. Statutory and regulatory backdrop. the implementing rules applied if This section describes the statutory presumptive performance rates that appropriate for a particular source each individual EGU is to achieve in the and existing regulatory background category and guidelines. We requested concerning facility-specific absence of trading. Instead, these comment on our analysis of the existing guidelines provide collective considerations in implementation of implementing regulations and any section 111(d). performance rates for two classes of implications for our regulatory text in affected EGUs (steam generating units Section 111(d)(1)(A) requires states to respect to how these guidelines relate to submit a plan that ‘‘establishes and stationary combustion turbines), those regulations. and give states the alternative of standards of performance’’ for existing Commenters stated, among other sources. Under section 111(d)(1)(B), the developing plans to achieve a state things, that the sentence concerning emission goal for the collective group of plan must also ‘‘provide for ‘‘remaining useful life’’ was added in implementation and enforcement of all affected EGUs in a state. Providing the 1977 CAA Amendments and that states with the ability to consider such standards of performance.’’ therefore it could not be said that Finally, the last sentence of section facility-specific factors such as provisions from the 1975 implementing remaining useful life in designing their 111(d)(1) provides: ‘‘Regulations of the regulations ‘‘implement’’ the sentence. Administrator under this paragraph state plans is one of the fundamental The EPA does not think as a general reasons that the EPA designed the final shall permit the State in applying a matter that it is necessarily impossible rule in this way. In addition, the standard of performance to any that a pre-statutory amendment rule significant revisions since proposal to particular source under a plan could continue to serve as a reasonable address achievability concerns (e.g., submitted under this paragraph to take implementation of a post-statutory moving the start date from 2020 to 2022, into consideration, among other factors, amendment provision. However, we and other changes in interim and final the remaining useful life of the existing also think it is appropriate, as we state goals summarized in the next source to which such standard applies.’’ suggested in the June 2014 proposal, to section) will help to ensure that states The EPA’s 1975 implementing specify in the applicable subpart for in practice can consider remaining regulations 855 addressed a number of these guidelines that the provisions in useful life and other facility-specific facility-specific factors that might affect 60.24(f) should not apply to the class of factors in setting EGU requirements. Of requirements for an existing source facilities covered by these guidelines. course, EGUs vary considerably in age, under section 111(d). Those regulations As a result, regardless of whether the so remaining useful life is potentially provide that for designated pollutants, implementing regulations appropriately standards of performance in state plans implement the ‘‘remaining useful life’’ 856 See ‘‘Phosphate Fertilizer Plants; Final must be as stringent as the EPA’s provision in general, the relevant Guideline Document Availability,’’ 42 FR 12022 emission guidelines. Deviation from the consideration is that, as we now (Mar. 1, 1977); ‘‘Standards of Performance for New standard might be appropriate where explain, these particular guidelines Stationary Sources; Emission Guideline for Sulfuric the state demonstrates with respect to a Acid Mist,’’ 42 FR 55796 (Oct. 18, 1977); ‘‘Kraft ‘‘permit the State in applying a standard Pulp Mills, Notice of Availability of Final Guideline specific facility (or class of facilities): of performance to any particular source Document,’’ 44 FR 29828 (May 22, 1979); ‘‘Primary (1) Unreasonable cost of control under a plan submitted under this Aluminum Plants; Availability of Final Guideline resulting from plant age, location, or paragraph to take into consideration, Document,’’ 45 FR 26294 (Apr. 17, 1980); basic process design; ‘‘Standards of Performance for New Stationary among other factors, the remaining Sources and Guidelines for Control of Existing useful life of the existing source to Sources: Municipal Solid Waste Landfills, Final 855 40 FR 53340 (Nov. 17, 1975). which such standard applies.’’ Rule,’’ 61 FR 9905 (Mar. 12, 1996).

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00210 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64871

relevant to regulation of some units and with, the interconnected nature of the rates, or the state’s rate-based or mass- not others. electricity system. based CO2 emission goals, nor do they The guidelines capitalize on the Although this discussion emphasizes affect the state’s obligation to develop inherent flexibility offered by the CO2 state flexibility on plan design, it is and submit an approvable CAA section emission performance rates and by the important to note that the main 111(d) plan that adopts the CO2 state CO2 emission goals approach, intended beneficiaries of state flexibility emission performance rates or achieves allowing states flexibility on the form of are the affected EGUs themselves. As a the goal by the applicable deadline. the EGU standards that they include in key case in point, the EPA has After considering public comments CAA section 111(d) plans. A state could endeavored to craft the final guidelines discussed below and in the response to select a form of standards (e.g., to support and facilitate state plans that comments document, the EPA has marketable credits or permits, include trading systems, including retained this aspect of the proposed rule retirement of certain older facilities after interstate trading systems that can help for the reasons described below. their useful life, etc.) that avoids or EGUs continue to operate with the As noted above, the final guidelines diminishes concerns about facility- flexibility that they currently enjoy on provide aggregate emission goals for specific factors such as remaining useful regional grid levels. affected EGUs in each state, in addition life. If a state adopted the CO2 emission Trading can provide affected EGUs to the CO2 emission performance rates. performance rates for fossil fuel-fired that have a limited remaining useful life The guidelines also reflect a number of electric utility steam generating units with the flexibility to comply through changes from proposal to address and stationary combustion turbines in purchasing allowances or ERCs, thereby concerns about achievability of conjunction with rate-based trading, avoiding major capital expenditures that proposed state goals that were raised in though, the state would be taking would create long-term debt. By buying public comments, many of which were remaining useful life into consideration allowances or ERCs, affected EGUs with explicitly prompted by consideration of by allowing affected EGUs to comply a limited remaining useful life the remaining useful life issue. The using ERCs. In effect, under a trading contribute to achieving emission result is to afford states with broad program with repeating compliance reductions from the source category flexibility to design requirements for periods, a facility with a short during the years that they operate. affected EGUs to achieve the CO2 remaining useful life has a total outlay During its lifetime, a facility with a emission performance rates or state CO2 that is proportionately smaller than a short remaining useful life will need emission goals in ways that avoid facility with a long remaining useful fewer total credits or allowances than an requiring major capital expenditures, or life, simply because the first facility otherwise comparable facility with a imposing unreasonable costs, on those would need to comply for fewer long remaining useful life, but the affected EGUs that have a limited compliance periods and would need annualized cost to the two facilities is remaining useful life. State plans may proportionately fewer ERCs than the the same.857 use any combination of the emissions second facility. Buying ERCs would In part to help states address reduction methods represented by the avoid excessive up-front capital remaining useful life considerations, the building blocks, and may also choose to expenditures that might be final guidelines facilitate state plans that employ emission reduction methods unreasonable for a facility with a short employ trading in multiple ways: that were not assumed in calculating remaining useful life, and would reduce • state goals. the potential for stranded assets. By allowing trading under emission To be more specific, the EPA notes In addition to providing states with standards plans and state measures plans, that a state is not required to achieve the and under rate-based plans and mass-based flexibility on the form of the standards plans; same level of emission reductions with of performance in their plans, the • By defining national EGU performance respect to any one building block as guidelines leave to each state the design rates that make it easier for states to set up assumed in the EPA’s BSER analysis. A of the specific requirements that fall on rate-based trading regimes that allow for state may use any combination of each affected EGU in applying those interstate trading of ERCs; measures, including those not standards. To the extent that an • By clearly defining the requirements for specifically factored into the BSER by emission standard that a state may wish mass-based and rate-based trading systems to the EPA. The EPA has estimated to adopt for affected EGUs raises ensure their integrity; and reasonable rather than maximum • facility-specific issues, the state may By providing information on potential possible implementation levels for each make adjustments to a particular allocation approaches for mass-based trading. building block in order to establish EGU facility’s requirements on facility- In addition, the EPA is separately emission rates and state goals that are specific grounds, so long as any such proposing model trading rules for rate- achievable while allowing states to take adjustments are reflected (along with based and mass-based trading to assist advantage of the flexibility to pursue any necessary compensating emission states with design of these programs in some building blocks more aggressively, reductions to meet the state goal) in the the section 111(d) context. and others less aggressively, than is state’s CAA section 111(d) plan d. Why remaining useful life and reflected in the agency’s computations, submission. other facility-specific factors do not according to each state’s needs and Finally, we note that these guidelines warrant adjustments in the guidelines’ preferences. The guidelines provide permit states to use a rate or mass CO2 performance rates and state goals. further flexibility by allowing state emission goal, and that each of these Under the final guidelines, remaining plans to use emission reduction pathways allow states multiple design useful life and other facility-specific methods not reflected in the BSER. A choices. Under either pathway states considerations do not provide a basis for description of multiple emission can take into consideration remaining adjusting the CO2 emission performance reduction methods is provided in useful life and seek to avoid stranded sections VIII.I–K. assets. 857 Trading of course has other benefits beyond e. Response to key comments on The EPA believes that this approach helping to address remaining useful life concerns. remaining useful life. For example, trading can lower costs of achieving to permitting states to consider a given level of emission reduction and can provide In response to the proposed remaining useful life is appropriate economic incentives for innovation and guidelines, some commenters said that because it reflects, and is compatible development of cleaner technologies. the proposed state goals were

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00211 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64872 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

unachievable and therefore too stringent could cause changes in economic years under the book life assumptions to provide states, as a practical matter, competitiveness of particular EGUs that described above. This shows that the with the flexibility to consider would prompt their retirement before final rule allows flexibility for states to remaining useful life for individual the end of their economically useful preserve these units as part of their units. These commenters said the result lives. These commenters said the plans. would be premature retirements and proposed state goals were so stringent To put this analysis in perspective: stranded assets. that states would have no choice but to The EPA’s role is to set emission In the final guidelines, the EPA has adopt requirements that would result in guidelines that meet the statutory addressed the comments about lack of retirements of coal-fired capacity that requirements, which includes practical flexibility to consider had been built relatively recently or had consideration of cost in identifying the remaining useful life by revising key recently made pollution control BSER, as the EPA has done in these elements of the guidelines in ways that investments. In response to these guidelines. States have a broad degree of will ensure that the CO2 emission comments, the EPA has conducted a flexibility to design plans to achieve the performance rates and state CO2 stranded assets analysis which rates in the emission guidelines in a emission goals are achievable demonstrates that the CO2 emission manner that meets their policy considering cost. At the same time, the performance rates and state goals in the priorities, including ensuring cost- final guidelines maintain the broad final guidelines provide sufficient effective compliance. Although not a flexibility of each state to design its own flexibility to states to address stranded required component of the EPA’s compliance pathway, taking into asset concerns. The EPA shares the goal consideration of cost, this analysis account any facility-level concerns— of minimizing stranded assets. Although shows that the CO2 emission including remaining useful life—in nothing in section 111(d) explicitly bars performance rates in the final guidelines designing EGU requirements. a guideline that results in some facilities can be met without the retirement of The changes to the BSER and goal- becoming uneconomic before the end of affected EGUs before the end of their setting methodologies include: their useful lives, the EPA nonetheless book life, and without the retirement of affected EGUs before the end of the book • Starting the interim goal period in 2022 has striven to design the guidelines so rather than 2020, which allows more lead as to give states flexibility to develop life of capital-intensive pollution time for states and regulated entities and plans that include, for example, control retrofits installed on those helps to ensure that the interim goal is differential treatment of affected EGUs EGUs. Thus, according to this analysis, achievable or opportunities to rely on emissions the CO2 emission performance rates and • Revising the goal-setting formula and the trading, to allow power companies to state CO2 emission goals need not result state goals themselves in stranded assets. The EPA recognizes • recover their investments in generation Updating analyses of achievable levels of units. that power plant economics are improvement through the building blocks For purposes of the stranded assets determined by many aspects of markets that together represent the BSER, while keeping them at reasonable, rather than analysis, the EPA considered a potential that are outside of the EPA’s control, maximum, levels (thus creating headroom ‘‘stranded asset’’ to be an investment in such as wholesale power prices and which can, and is intended to, help to a coal-fired EGU (or in a capital- capacity prices, and that the compliance accommodate the range of ages of different intensive pollution control installed at path of least cost may involve retiring facilities) such an EGU) that retires before it is assets that have not fully depreciated. • Providing an explicit phase-in schedule for fully depreciated. Book life is the period Nonetheless, this analysis further meeting the revised interim goals, while over which long-lived assets are demonstrates the extent of flexibility also allowing a state the option of choosing depreciated for financial reporting available to states in designing their its own emission reduction trajectory purposes. The agency estimated typical plans to best serve the policy priorities The final guidelines also contain book life by researching financial of the state. Details are available in a changes to avoid certain inconsistencies statements of utility and merchant memorandum to the docket.858 between the goal-setting methodology generation companies in filings to the Several commenters said that the and accounting of reductions under Securities and Exchange Commission. statute does not authorize the EPA to state plans that could have made state The agency estimated the book life of require other facilities to achieve greater goals less achievable for some states. coal-fired EGUs to be 40 years, and reductions to compensate for a facility Together, the changes described above assumed a 20-year book life for that warrants relief based on remaining help to ensure that the CO2 emission pollution control retrofits. The book life useful life. One said that consideration performance rates and state CO2 of coal-fired EGUs (coal steam and of remaining useful life and other emission goals established in the final IGCC) is twice as long as the debt life relevant factors is a one-way ratchet that guidelines are achievable, and leave and the depreciation schedule used for provides relief to sources that cannot states with the practical ability to issue federal tax purposes. Although the book achieve the BSER, and that the EPA rules that take into account the life for environmental retrofits is often turns that approach on its head by remaining useful life of affected EGU. 15 years, the agency conservatively prohibiting a state from providing such As explained in the Legal assumed 20 years in this analysis. relief to a specific facility unless it can Memorandum accompanying this rule, The analysis examined coal identify another facility to ‘‘punish’’ by the EPA believes that Congress intended generation in the three large regional requiring additional emissions the remaining useful life provision to interconnections of the U.S. The reductions to offset that relief. provide a mechanism for states to avoid analysis found that in both 2025 and The EPA disagrees with these the imposition of unreasonable retrofit 2030, for each region, the amount of comments, which proceed from an costs on existing sources with relatively 2012 coal generation included in the incorrect premise. The EPA is not short remaining useful lives, a scenario final guidelines’ emission performance determining a BSER-based emission that could result in stranded assets. rate calculation—specifically, the level achievable by each individual However, commenters on the proposed generation remaining after the BSER facility without trading, and then rule raised a different stranded assets calculation—is greater than the amount concern not primarily related to retrofit of 2012 generation from coal-fired EGUs 858 Memorandum to Clean Power Plan Docket costs—a concern that the proposed rule that are not fully depreciated in those titled ‘‘Stranded Assets Analysis’’ dated July 2015.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00212 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64873

requiring better-than-BSER from some Heat rate improvements at affected State in applying a standard of facilities to make up for worse-than- EGUs may require capital investments. performance to any particular source BSER performance that a state However, states have flexibility to under a plan submitted under this authorizes for other facilities because of design their plan requirements; they are paragraph to take into consideration, a short remaining useful life. Rather, as not required to mandate heat rate among other factors, the remaining previously noted, the guidelines set CO2 improvements at plants that have useful life of the existing source to emission performance rates and state limited remaining useful life. In fact, a which such standard applies.’’ Here, we CO2 emission goals that represent the state can choose whether or not to discuss the legal basis for determining average or aggregate emission level require heat rate improvements at all. that the emission guidelines are achievable by affected EGUs based on The agency also notes that capital consistent with this statutory regional average estimates of the impact expenditures for heat rate improvements requirement. For details, please see the of applying the BSER to collective would be much smaller than capital Legal Memorandum. groupings of affected EGUs.859 In expenditures required for example, for Section 111(d)(1) only requires that estimating the amount of improvement purchase and installation of scrubbers to EPA emission guidelines permit states achievable through each building block remove SO2; a fleet-wide average cost to take into account remaining useful (e.g., improvement in heat rate or for heat rate improvements based life (among other factors), but section amount of generation shift to lower- primarily on best practices at coal-fired 111(d)(1) does not specify how the EPA emitting EGUs), the EPA has estimated generating units would not likely must permit that. In other words, the the average level achievable by EGUs in exceed $100/kW, compared with a meaning of the provision and the way a region rather than attempting to typical SO2 wet scrubber cost of $500/ that the EPA is to implement it in estimate the level achievable by each kW (costs vary with unit size).860 Even promulgating guidelines are not and every affected EGU in the absence if a state did choose to adopt specified further in the provision. The of trading. Thus, the fact that an requirements for heat rate provision is ambiguous and capable of individual facility may be unable, for improvements, the proposed guidelines implementation in several ways, and example, to achieve the average level of would allow states to regulate affected therefore the EPA has discretion to heat rate improvement assumed in goal- EGUs through flexible regulatory interpret and apply it. Furthermore, setting is consistent with the EPA’s approaches that do not require affected section 111(d)(1) does not suggest that analysis, and does not undermine the EGUs to incur large capital costs (e.g., states must be given carte blanche to EPA’s determination of CO2 emission averaging and trading programs). Under consider remaining useful life in any performance rates and state CO2 the EPA’s final approach—establishing way that can be imagined. As detailed emission goals. The Legal Memorandum state goals and providing states with above in sections VIII.G.1.c–e, these discusses additional reasons that the flexibility in plan design—states have guidelines permit states to take into agency disagrees with comments that flexibility to make exactly the kind of account remaining useful life in a the guideline must permit adjustments judgments necessary to avoid requiring number of reasonable ways and thus the in the guidelines’ CO2 emission capital investments that would result in guidelines satisfy the statutory performance rates and state CO2 stranded assets. obligation. emission goals based on remaining Remaining useful life and other The phrase ‘‘remaining useful life’’ useful life considerations. factors, because of their facility-specific also appears in the visibility provisions An additional reason that the EPA nature, are potentially relevant as states of section 169A. There, in determining believes that consideration of remaining determine requirements that are directly best available retrofit technology useful life and other facility-specific applicable to affected EGUs. If relief is (BART), the state (or the EPA) must take factors does not warrant adjustments to due a particular facility, the state has an into consideration (among other factors) state goals is that the design of the available toolbox of emission reduction ‘‘the remaining useful life of the guidelines does not mandate that states methods that it can use to develop a source.’’ 42 U.S.C. 7491(g)(2); see also impose requirements that would call for section 111(d) plan that will achieve the id. (g)(1) (reasonable progress). In the substantial capital investments at CO2 emission performance rates or state context of the visibility program, we affected EGUs late in their useful life. CO2 emission goals on time. The EPA have interpreted this provision to mean Multiple methods are available for therefore concludes that the remaining that the remaining useful life should be reducing emissions from affected EGUs useful life of affected EGUs, and the considered when calculating the that do not involve capital investments other facility-specific factors identified annualized costs of retrofit controls. See by the owner/operator of an affected in the existing implementing 40 CFR Pt. 51, App. Y, IV.D.4.k.1. This EGU. For example, generation shifts regulations, should not be regarded as a annualized cost is then used to among affected EGUs, and addition of basis for adjusting the CO2 emission determine a cost effectiveness, in dollars new RE generating capacity do not performance rates or a state CO2 per ton of pollutant removed on an generally involve capital investments by emission goal, and should not relieve a annual basis. As a result, a technology the owner/operator at an affected EGU. state of its obligation to develop and with a large initial capital cost that Additional emission reduction methods submit an approvable plan that achieves might have a reasonable cost- available to states that do not entail that goal on time. effectiveness for a facility with a long significant capital costs at affected EGUs f. Legal considerations regarding remaining useful life would have a are discussed elsewhere in this remaining useful life. Section 111(d)(1) much higher and possibly unreasonable preamble. requires the EPA in promulgating cost-effectiveness for a facility with a section 111(d) regulations to ‘‘permit the short remaining useful life. 859 The EPA expects that states that choose to Although section 111(d)(1) is different 860 adopt the national CO2 emission performance rates Heat rate improvement methods and related than section 169A(g)(2) and need not be for all of their EGUs would permit ERC trading, capital costs are discussed in the GHG Mitigation interpreted in the same way, we would rather than requiring each facility to meet the Measures TSD; SO2 scrubber capital costs are from note (as discussed in detail in sections applicable rate without trading. In effect, the the documentation for the EPA’s IPM Base Case presence of trading means that the EGU v5.13, Chapter 5, Table 5–3, available at http:// VIII.G.1.c–e, section 5.11 of the performance rates can be achieved by each EGU www.epa.gov/airmarkets/documents/ipm/Chapter_ Response to Comments document, and involved in trading. 5.pdf. the Legal Memorandum) that (for

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00213 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64874 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

example) a trading program under these consideration of remaining useful life, consider the reliability of the electric section 111(d) guidelines only requires prohibits that outcome. system. There are also numerous compliance on a periodic basis and does remedies that are routinely employed 2. Electric Reliability not require any initial capital when there is a specific local or regional expenditures. Thus, over the life of the The final rule features overall reliability issue. These include facility, a facility with a short remaining flexibility, a long planning and transmission system upgrades, useful life will need fewer total credits implementation horizon, and a wide installation of new generating capacity, or allowances than an otherwise range of options for states and affected calling on demand response, and other comparable facility with a long EGUs to achieve the CO2 emission demand-side actions. remaining useful life, but the performance rates or state CO2 emission Additionally, planning authorities annualized cost to the two facilities is goal. This design reflects, among other and system operators constantly the same. In other words, under a things, the EPA’s commitment to consider, plan for, and monitor the trading program remaining useful life of ensuring that compliance with the final reliability of the electricity system with a source is automatically accounted for rule does not interfere with the both a long-term and short-term in the way it is accounted for under the industry’s ability to maintain the perspective. Over the last century, the visibility program. reliability of the nation’s electricity electric industry’s efforts regarding Some commenters stated that the supply. Comments from state, regional electric system reliability have become EPA’s interpretation of remaining useful and federal reliability entities, power multidimensional, comprehensive, and life is impermissible. These commenters companies and others, as well as sophisticated. Under this approach, claimed that states, if they wish to take consultation with the Department of planning authorities plan the system to into account remaining useful life at one Energy (DOE) and Federal Energy assure the availability of sufficient affected EGU, must relax the stringency Regulatory Commission (FERC), helped generation, transmission, and inform a number of changes made in of the emission standard for that EGU. distribution capacity to meet system this final rule to address reliability. In Then, the state would be compelled to needs in a way that minimizes the addition, FERC conducted one national 861 increase the stringency of emission likelihood of equipment failure. and three regional technical conferences standards at other affected EGUs in Long-term system planning happens at on the proposed rule in which the EPA order to achieve the state performance both the local and regional levels with participated and at which the issue of goal. According to these commenters, all segments of the electric system reliability was raised by numerous section 111(d) does not allow this needing to operate together in an participants. efficient and reliable manner. In the outcome. As discussed throughout the preamble First, the commenters are mistaken in short-term, electric system operators and TSDs, the electricity sector is operate the system within safe operating their premise. As discussed in section undergoing a period of intense change. VIII.G.1, section 5.11 of the Response to margins and work to restore the system While the change in the resource mix 862 Comments document, the Legal quickly if a disruption occurs. has accelerated in recent years, wind, Mandatory reliability standards apply to Memorandum, and in the example solar, other RE, and EE resources have immediately above, states can impose how the bulk electric system is planned been reliably participating in the and operated. For example, the exact same emission standards on electric sector for a number of years. two affected EGUs and still take into transmission operators and balancing Many of the potential changes to the authorities have to develop, maintain, account remaining useful life through electric system that the final rule may and implement a set of plans to mitigate the availability of trading. In other encourage, such as shifts to cleaner operating emergencies.863 words, states need not relax an emission sources of power and efforts to reduce standard here and strengthen an As the electricity market changes and electricity demand, are already well new challenges emerge, electric system emission standard there in order to take underway in the electric industry. To into account remaining useful life. regulators and industry participants the extent that the final rule accelerates make changes to how the electric system Thus, these guidelines permit states to these changes, there are multiple take into account remaining useful life is designed and operated to respond to features well embedded in the these challenges. For example, without any of the effects commenters electricity system that ensure that expressing reliability and rate concerns are concerned about. electric system reliability will be about fuel assurance issues, FERC Second, even if states decide to relax maintained. Electric system reliability is recently issued an order requiring ISOs/ emission standards at one EGU, on the continually being considered and RTOs to report on the status of their basis of remaining useful life or any planned for. For example, in the Energy efforts to address market and system other factor, nothing in the last sentence Policy Act of 2005, Congress added a performance associated with fuel of section 111(d)(1) prohibits these section to the Federal Power Act to assurance.864 In February of 2015, guidelines from requiring the state plan make reliability standards mandatory Midcontinent Independent System to still meet the CO2 emission and enforceable by FERC and the North performance rates or state CO2 emission American Electric Reliability 861 Casazza, J. and Delea, F., Understanding goal. In fact, that sentence is completely Corporation (NERC), the Electric Electric Power Systems: An Overview of the silent on the issue. Thus, the EPA has Reliability Organization which FERC Technology, the Marketplace, and Government the discretion to determine what should designated and oversees. Along with its Regulations, IEEE Press, at 160 (2010). be the concomitant effects if a state standards development work, NERC 862 Id. chooses to consider remaining useful conducts annual reliability assessments 863 NERC Reliability Standard EOP–001–2.1b— Emergency Operations Planning, available at http:// life in a particular way. In this case the via a 10-year forecast and winter and www.nerc.net/standardsreports/standards concomitant effect of a state relaxing summer forecasts; audits owners, summary.aspx. one emission standard may be that the operators, and users for preparedness; 864 Centralized Capacity Markets in Regional state must make up for it elsewhere in and educates and trains industry Transmission Organizations and Independent System Operators, 149 FERC ¶ 61,145 (2014). FERC order to meet the goal, but nothing in personnel. Numerous other entities such generally defines fuel assurance as ‘‘generator section 111(d)(1), including the as FERC, DOE, state PUCs, ISOs/RTOs, access to sufficient fuel supplies and the firmness statutory requirement to permit and other planning authorities also of generator fuel arrangements’’. Id. P 5.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00214 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64875

Operator (MISO), California As with numerous prior CAA between states, and other multi-state Independent System Operator regulations affecting the electric power approaches that will further support Corporation (CAISO), New York sector, environmental requirements for electric system reliability. Independent System Operator (NYISO), this industry are accommodated within Second, the final rule provides Southwest Power Pool (SPP), ISO New the existing extensive framework sufficient time to ensure system England (ISO–NE), and PJM established by federal and state law to reliability. The final rule retains the Interconnection (PJM) each filed a ensure that electricity production and 2030 date for the final period, which report with FERC highlighting their delivery are balanced on an ongoing commenters largely supported as efforts to respond to fuel assurance basis and planned sufficiently to ensure reasonable and not a concern for concerns.865 This is just one of many reliability and affordability into the reliability, and addresses one of the key examples where electric system future. In addition, changes that the issues that commenters pointed to as a regulators and industry participants EPA is making in this final rule respond reliability-related concern by both recognize a potential reliability issue directly to the comments and the moving the start of the interim period and are proactively searching for suggestions that we received on from 2020 to 2022 and adjusting the solutions. reliability and provide further assurance interim goals to provide a more gradual The EPA’s approach in this final rule that implementation of the final rule phasing-in of the initial reduction is consistent with our commitment to will not create reliability concerns. requirement and thus a more gradual ensuring that compliance with the final First, the final rule allows significant emissions reduction trajectory or glide rule does not interfere with the flexibility in how the applicable CO2 path to the final 2030 goals. These industry’s ability to maintain the emission performance rates or the changes deliver on the intent of the reliability of the nation’s electricity statewide CO2 goals are met. Given the proposal to afford states and affected supply. Many aspects of the final rule’s differing characteristics of the electric EGUs the latitude to determine their design are intended to support system grid within each state and region, there own emissions reduction schedules over reliability, especially the long are many paths to meeting the final the interim period. Both FERC’s May 15, compliance period and the basic design rule’s requirements that can be taken 2015 letter 867 and the comment record that allows states and affected EGUs while continuing to maintain a reliable made it clear that providing sufficient flexibility to include a large variety of electricity supply. As further described time for planning and implementation is approaches and measures to achieve the elsewhere in section VIII, states can essential to ensuring electric system environmental goals in a way that is develop plans to meet the CO2 emission reliability. The EPA has responded by tailored to each state’s and utility’s performance rates or state CO2 emission providing additional time to allow for energy resources and policies. Despite goals by choosing from a variety of state planning and implementation of the the flexibility built into the design of the plan types and approaches that afford final rule requirements, while at the proposal, and the long emission states and affected EGUs appropriate same time allowing enough time reduction trajectory, many commenters flexibility. EE and other measures that between the beginning of the interim expressed concerns that the proposed were not included in the determination period and 2030 to achieve state goals rule could jeopardize electric system of the BSER can strengthen a state’s or emission performance rates. We note reliability. We note that the EPA has ability to establish a plan to meet the that the final rule does not require that received similar comments in EPA CO2 emission performance rates or state all states have met their interim goal or rulemakings dating as far back as the CO2 emission goals by providing a performance rate by 2022 but rather that 1970s. The EPA has always taken and considerable amount of headroom above they meet it on average or cumulatively, continues to take electric system the levels of the rates and goals. EE as appropriate, during the 2022 to 2029 reliability comments very seriously. especially, because it reduces load, can period. These reoccurring comments with provide assurance that reliability can As a result of these changes, the states regard to reliability notwithstanding, the and will be maintained. Additionally, themselves will have a meaningful electric industry has done an excellent the final rule offers opportunities for opportunity—which, again, many job of maintaining reliability, including trading among affected EGUs within and commenters suggested the timing and when it has had to comply with stringency of the proposal failed to environmental rules with much shorter RTO with a substantial amount of coal-fired create despite our intent to do so—to compliance periods and much less capacity and generation, discussed the success of determine the timing, cadence and PJM’s market design in assuring that PJM met and sequence of actions needed for states flexibility than this final rule provides. exceeded target reserve margins while MATS was Now, more than ever, the electric being implemented. See Statement of Andrew Ott, and sources to meet final rule industry has tools available to maintain PJM Executive Vice President-Markets, FERC requirements while accommodating the reliability, including mandatory and Technical Conference on Centralized Capacity ongoing activity needed to ensure 866 Markets in Regional Transmission Organizations system reliability. The final rule enforceable reliability standards. and Independent System Operators, AD13–7–000, at 3, 7 (Sept. 25, 2013), available at http:// provides more than 6 years before 865 For example, ISO–NE and PJM each filed www.ferc.gov/EventCalendar/EventDetails.aspx? reductions are required and an 8-year ‘‘pay-for-performance’’ proposals to address fuel ID=6944&CalType=&CalendarID=116&Date=09/25/ period from 2022 to 2029 to meet assurance in their regions. FERC recently acted on 2013&View=Listview. At the FERC national Clean interim goals. Moreover, while the final ISO–NE market rule changes providing increased Power Plan Technical Conference, Michael J. market incentives in capacity, energy, and ancillary Kormos, PJM Executive Vice President-Operations, rule requires each state to submit a plan services markets for generators to be available to said that PJM’s markets have proven, ‘‘resilient by September 6, 2016, we recognize that meet their obligations during reserve shortages. ISO enough to respond to different policy initiatives some states may need more than 1 year New England Inc., 147 FERC ¶ 61,172 (2014). . . . Whether it is the Sulfur Dioxide Trading to complete all of the actions needed for Additionally, FERC conditionally approved a PJM Program of the 1990s, the MATS rule or individual ‘‘pay-for-performance’’ proposal that creates a new state RPS initiatives, the markets have been able to their final state plans, including capacity product to provide greater assurance of send the appropriate price signals that produce delivery of energy and reserves during emergency competitive outcomes.’’ See Michael J. Kormos, PJM 867 On May 15, 2015, the five FERC conditions, establishing credits for superior Executive Vice President, Statement at FERC Commissioners sent a letter to Acting Assistant performance and charges for poor performance. PJM Technical Conference on EPA’s Clean Power Plan, Administrator Janet McCabe regarding the EPA’s Interconnection, L.L.C., 151 FERC ¶ 61,208 (2015). AD15–4–000, at 3 (Feb. 19, 2015), available at Clean Power Plan proposal. See FERC letter, 866 For example, Andrew Ott, then Executive Vice http://www.ferc.gov/CalendarFiles/20150213081 available at http://ferc.gov/media/headlines/2015/ President-Markets and current President of PJM, an 650-Kormos,%20PJM.pdf. ferc-letter-epa.pdf.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00215 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64876 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

consideration of reliability. Therefore, address their reliability concerns. For technologies, the outcome could be that states have the opportunity to receive an example, many commenters state that the system is more robust and faces extension for submitting a final plan. If allowing additional time to comply fewer risks to electric reliability. the state needs additional time to could help in meeting the final rule One specific concern raised by many submit a final plan, then the state may requirements while addressing their commenters is that the proposed plan submit an initial submittal by reliability concerns. Some commenters development schedule may not leave September 6, 2016, that must address suggest that additional time would sufficient time to conduct reliability three required components sufficiently allow them to evaluate potential planning between the development of to demonstrate that a state is able to reliability impacts and system changes state plans and the proposed start of the undertake steps and processes necessary that need to be made to comply with interim period in 2020. To address these to timely submit a final plan by the final rule requirements while allowing concerns and to support a more effective extended date of September 6, 2018. affected EGUs time to meet interim CO2 reliability planning process, the EPA is Third, we are including in the final emissions goals. The EPA also received moving the start of the interim period rule a requirement that each state comment that market-based approaches from 2020 to 2022 and adjusting the demonstrate in its final state plan have features that could help support interim goals to provide a gradually submittal that it has considered reliability, and therefore we should phased-in initial reduction requirement reliability issues in developing its plan. encourage states to join or form regional and a more gradual glide path to the This was suggested by a number of market-based programs. Commenters final 2030 goals. This more gradual commenters, and we agree that it is a also stated that the EPA should require application of the BSER over the 2022– useful element to state plan states to consult with grid operators 2029 interim period provides the state development. who would analyze the impact of state with substantial latitude in selecting the Fourth, the final rule provides a plans on reliability. A number of emission reduction glide path for mechanism for a state to seek a revision commenters also suggested that the EPA affected EGUs over that period. As to its plan in order to address changes should include some sort of reliability noted above, the final rule also provides in circumstances that could have safety valve in the final rule. We note states with up to 3 years to adopt and reliability impacts if not accommodated that many participants at the FERC submit their final state plans, and in the plan. The long compliance technical conferences on the proposed afterwards states can, if necessary, timeframe, with several interim steps, rule also discussed a reliability safety revise their plans, as discussed in naturally provides opportunities for valve in great detail with many section VIII.E.7. This timing gives states, working with their utilities and suggestions for how such a reliability system planners and operators the reliability entities, to assess how mechanism could be designed. The EPA opportunity to do what they have implementation is proceeding, identify appreciates these and all the comments already been doing; looking ahead to unforeseen changes that may warrant we received regarding the interaction of forecast potential contingencies that plan revisions, and work with the EPA the proposal and electric reliability. We pose reliability risks and identifying to make necessary revisions. Similarly, have carefully considered all comments, those actions needed to mitigate those the ready availability of emissions consulted further with FERC and risks. The final rule allows states to trading as a compliance tool affords incorporated many of the suggested develop a pathway over the interim EGUs ample flexibility to integrate changes in this final rule. period that reflects their own compliance with both routine and b. Final rule flexibility. circumstances, such as reflecting critical reliability needs. In issuing this final rule, the EPA planned additions and changes in Fifth, in response to a variety of considered public comments on the generation mix and potentially taking comments, we are providing a reliability potential interaction between the advantage of opportunities for trading of safety mechanism that provides a path proposal and electric reliability. While credits or allowances by affected EGUs for a state to come to the EPA during an we have made every effort to develop within and between states. Because immediate, unforeseen, emergency guidelines that would allow states and achievement of the emission rates or situation that threatens reliability to utilities to steer clear of potential goals can be demonstrated over several notify the EPA that an affected EGU or reliability disruptions, a number of years, state plans can accommodate EGUs may need to temporarily comply commenters argued that the possibility situations where, for example, it may with modified emission standards to of an unanticipated reliability event take time to develop new generation, respond to this kind of reliability cannot be entirely eliminated. It is pipelines, or transmission while still concern. important to note that there are many providing many options for meeting the Sixth and finally, we are committed to factors that influence system reliability final rule requirements and planning for maintaining an ongoing relationship and, given the complexity of the electric the reliability of the system. with FERC and DOE as this final rule is grid, electric system planners and c. Considering reliability during state implemented to help ensure continued operators likely will not completely plan development process. reliable electric generation and avoid reliability issues, even in the Under CAA section 111(d)(1)(B), state transmission. absence of these guidelines. The EPA plans must provide for the We provide more details about these designed the final rule to ensure to the implementation and enforcement of various elements of the final rule, as greatest extent possible that actions standards of performance for affected well as other features of the rule that taken by states and affected EGUs to EGUs. The EPA does not believe a state support system reliability, below. comply with the final rule do not that establishes standards of a. Summary of key comments. increase potential reliability issues or performance for affected EGUs without The EPA received a number of complicate their resolution. In fact, to taking reliability concerns into comments regarding the proposed rule the extent that meeting final rule consideration satisfactorily provides for and electric reliability. Many requirements results in the reduction of the implementation of such standards of commenters provided specific, useful demand, upgrades in transmission performance as required by CAA section ideas regarding changes that could be efficiency and infrastructure, and 111(d)(1)(B), as a serious reliability made to the proposal to specifically investment in new, more efficient issue would disrupt the state’s provision

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00216 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64877

of implementation of the state plan. process, any response and or multi-state plans, are less likely to Therefore, the EPA is requiring that recommendations from the planning face a potential conflict between state each state demonstrate as part of its authority, and the state’s response to plan requirements and the maintenance final state plan submission that it has those recommendations in its final state of reliability. States that participate in considered reliability issues while plan submittal to the EPA. This multi-state programs will be better able developing its plan in order to ensure consultation is designed to inform how to weather unexpected reliability risks. that standards of performance can be the state might adjust its plan for Events not anticipated at the time of implemented and enforced as required meeting the CO2 reduction requirements the final plan submittal—such as the by the CAA. If system reliability is under this guideline; the consultation is retirement of a large low- or zero- threatened, the ability of affected EGUs not a basis for relaxing that requirement. emitting unit—may trigger the request to meet the requirements of this final While we consider this process to be an for state plan revisions. It may also be rule could be compromised if they are effective way for a state to demonstrate the case that affected EGU-specific required to operate beyond the emission that it considered reliability in emission standards in a state plan are standards established in state plans in developing its final state plan, a state proving to be too inflexible to allow the order to maintain the reliability of the may provide other comparable support plan to accommodate market or other electric grid. The requirement that states for a demonstration that it has changes in the power sector. In such consider reliability as part of the considered reliability during the state instances, there should be a lead time development of state plans is therefore plan development process.868 Also as between the announced retirement of designed to ensure that state plans are discussed elsewhere in this preamble, the unit and the need to amend the state flexible enough to avoid this kind of the EPA encourages states to include plan. Therefore, the state should be able potential conflict between maintaining state utility regulators and the state to utilize the revisions process that the reliability and providing for the energy offices in the development of the EPA provides. implementation of emission standards state plan. These agencies have The EPA will review a plan revision for affected EGUs as required by the expertise that can help to assure that per the implementing regulation CAA. state plans complement the state’s requirements of 40 CFR part 60.28. If the state’s request for a state plan revision A number of commenters, notably power sector. The EPA believes that this requirement to demonstrate must be addressed in an expedited ISOs and RTOs, also discussed consideration of reliability will provide manner to assure a reliable supply of reliability concerns in the context of an effective reliability evaluation in the electricity, the state must document the state plans and pointed out that state plan development process. It risks to reliability that would be planning and anticipation of change are should further help states avoid any addressed by the plan revision by among the essential ingredients of conflicts between state plans and the providing the EPA with a separate ensuring the ongoing reliability of the maintenance of reliability during analysis of the reliability risk from the electricity system. To that end, they implementation of the state plan and ISO/RTO or other planning authority. recommended that as states are associated emission standards. Finally, This analysis should be accompanied by developing state plans, their activity we also encourage states as they develop a statement from the ISO/RTO or other include the consideration of the their plans to consider, to the extent planning/reliability authority that there reliability needs of the region in which possible, other potential issues that may are no practicable alternative affected EGUs operate and of the impact affected EGUs. For example, an resolutions to the reliability risk. In this potential impact of actions to be taken affected EGU may be in an ISO/RTO case, the EPA will conduct an expedited in compliance with state plans. that puts certain deadlines on generators review of the state plan revision.869 Therefore, we are requiring that each that may not line up perfectly with state e. Reliability safety valve. state demonstrate in its final state plan plan deadlines. In this section we describe a submittal that it has considered d. State plan modifications. reliability safety valve, available to reliability issues in developing its plan. If, during the implementation of a states with affected EGUs providing One particularly effective way in which state plan, a reliability issue cannot be reliability-critical generation in states can make this demonstration is by addressed within the range of actions or emergency circumstances. Specifically consulting with the relevant ISOs/RTOs mechanisms encompassed in an and as discussed below the reliability or other planning authorities as they approved state plan, the state can safety valve provides i) a 90-day period develop their plans and documenting submit a plan revision to the EPA to during which the affected EGU will not this consultation process in their state amend its plan. In such a circumstance, be required to meet the emission plan submissions. If a state chooses to the state plan may need to be adjusted standard established for it under the consider reliability through consultation to enable affected EGUs to continue to state plan but rather will meet an with the ISO/RTO or other planning meet final rule requirements without alternative standard, and ii) a period authority, the EPA recommends that the causing an otherwise unmanageable beginning after the initial 90 days state request that the planning authority reliability threat. In all cases the plan during which the reliability-critical review the state plan at least once revision must still ensure the affected affected EGU may be required to during the plan development stage and EGUs meet the emission performance continue to operate under an alternative provide its assessment of any reliability level set out in the 111(d) final rule. standard rather than under the original implications of the plan. Additionally, Whether or not these circumstances state plan emission standard, as needed we encourage states that are considering occur will depend in part upon how in light of the emergency circumstances, reliability through an ISO/RTO or other each state designs its state plan. States and the state must during this period planning authority consultation process that design plans with a high level of revise its plan to accommodate changes to have a continuing dialogue with flexibility, such as market-based plans those entities during development of 869 The EPA will still undertake notice and their final state plan. While following 868 While the EPA is requiring that the states comment rulemaking per the requirements of the the recommendations of the planning demonstrate that they have considered reliability in Administrative Procedures Act when acting on such developing their plans, state plan submissions will state plan revision, but intends to prioritize review authority would not be mandatory, the not be evaluated substantively regarding reliability of plan revisions needed to address reliability state should document its consultation impacts. concerns.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00217 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64878 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

needed to respond to ongoing reliability plan may not be achievable by certain the EGU to operate at an emission requirements. Any emissions in excess affected EGUs without posing an standard that is an alternative to the of the applicable state goals or otherwise unmanageable risk to emission standard originally specified performance rates occurring after the reliability. In particular, there could be in the relevant state plan, subject to initial 90-day period must be accounted extremely serious events, outside the confirmation by the further for and offset. control of affected EGUs, that would documentation described below.870 Many commenters expressed require an affected EGU or EGUs Within 7 days of submitting the initial concerns that a serious, unforeseen operating under an inflexible state plan notification, the state must submit a event could occur during the final rule to temporarily operate under modified second notification providing implementation period that would emission standards to respond to this documentation to the appropriate EPA require immediate reliability-critical kind of reliability concern. Examples of regional office that includes a full responses by system operators and such an event could include, a description of the reliability concern affected EGUs that would result in catastrophic event that damages critical and why an unforeseen, emergency unplanned or unauthorized emissions or vulnerable equipment necessary for situation that threatens reliability increases. After reviewing the reliable grid operation; a major storm requires the affected EGU or EGUs to comments, we believe that it is highly that floods and causes severe damage to operate under modified emission unlikely that there would be a conflict a large NGCC plant so that it must shut standards (including discussion of why between activities undertaken under an down; or a nuclear unit that must cease the flexibilities provided under the approved state plan and the generating unexpectedly and therefore state’s plan are insufficient to address maintenance of electric reliability, other affected EGUs need to run so as to the concern). The state must also except in the case of a state plan that exceed their requirements under the describe in its documentation how it is puts relatively inflexible requirements approved state plan. This is not an all- coordinating or will coordinate with on specific EGUs. While some have inclusive list, but the examples relevant reliability coordinators and pointed out that severe weather or other illustrate several key attributes of the planning authorities to alleviate the short-term events could potentially kinds of circumstances in which the problem in an expedited manner, and conflict with state plans, we note that reliability safety valve would apply. indicate the maximum time that the most of those events are of short First, the event creating the reliability state anticipates the affected EGU or duration and would not require major— emergency would be unforeseeable, EGUs will need to operate in a manner if any—adjustments to emission brought about by an extraordinary, inconsistent with its or their obligations standards for affected EGUs or to state unanticipated, potentially catastrophic under the state’s approved plan, and the plans. For example, during an event like event. Second, the relief provided modified emission standards or levels at the extreme cold experienced in periods would be for EGUs compelled to operate which the affected EGU or EGUs will be of the winter of 2013–2014, affected for purposes of providing generation operating at during this period if it has EGUs may need to run at a higher level without which the affected electricity changed from the initial notification. for a short period of time to grid would face some form of failure. The documentation must also include a accommodate increased demand and/or Third, the EGU or EGUs in question written concurrence from the relevant short-term unavailability of other would be subject to the requirements of reliability coordinator and/or planning generators. However, because a state plan that imposes emissions authority confirming the existence of compliance by affected EGUs will be constraints such that the EGU or EGUs’ the imminent reliability threat and demonstrated over 2–3 years, such a supporting the temporary modification operation in response to the reliability short-term event would not cause request or an explanation of why this emergency resulted in levels of affected EGUs to be out of compliance kind of concurrence cannot be provided. emissions that violated those with their applicable emission Additionally, if the relevant planning constraints. We do not anticipate that standards. States can also ensure that authority has conducted a system-wide EGUs operating under a plan that this is true by developing plans that or other analysis of the reliability permitted emissions trading would meet allow adequate compliance flexibility to concern, the state must include that these criteria. accommodate such short-term events. information in its request. If the state We note that we have included in this The final guidelines provide a fails to submit this documentation on a final rule a number of different features reliability safety valve for these types of timely basis, the EPA will notify the designed to facilitate emissions trading situations. If an emergency situation state, which must then notify the between and among EGUs on an arises, the state must submit an initial affected EGU(s) that they must operate interstate basis—and have done so, in notification to the appropriate EPA or resume operations under the original no small part, in response to comments regional office within 48 hours that it is approved state plan emission standards. from states and stakeholders seeking to necessary to modify the emission It is important to note that the affected put in place or operate under state-level standards for a reliability-critical EGUs must continue to monitor and and interstate emissions trading affected EGU or EGUs for up to an report their emissions and generation regimes. Affected EGUs operating in initial 90 days. The notification must pursuant to requirements in this final those circumstances and operating, in include a full description, to the extent rule and under the state plan during any addition, subject to state plans that it is known at the time, of the short-term modification. For the incorporate flexible glide paths and emergency situation that is being duration of the up to 90-day short-term trading would be able to accommodate addressed. It must also identify with modification, the emissions of the an unanticipated reliability event. particularity the affected EGU or EGUs affected EGU or EGUs that exceed their We recognize, however, that affected that are required to run to assure obligations under the approved state EGUs operating in a state with a reliability. It must also specify the relatively inflexible state plan could modified emission standards at which 870 The EPA reserves the right to review such face unanticipated system emergencies the affected EGU or EGUs will operate. notification, and in the event that the EPA finds such notification is improper, the EPA may that could cause a severe stress on the The EPA will consider this notification disallow the short-term modification and affected electricity system for a length of time to be an approved short–term EGUs must continue to operate under the original such that the requirements in that state’s modification to the state plan, allowing approved state plan emission standards.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00218 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64879

plan will not be counted against the exceptional situations. In addition, this effect on electric reliability. One notable state’s overall goal or emission reliability safety valve applies only to change pertains to the start of the performance rate for affected EGUs. this final rule and has no effect on CAA interim period, which is now 2022 Such a modification will not alter or requirements to which the state or the rather than 2020. Another important abrogate any other obligations under the affected EGUs are otherwise subject. As change to the final rule is a more approved state plan. discussed earlier, we are providing gradual phase-in of the BSER for During this short-term modification states with the flexibility to design affected EGUs over the interim period period, the EPA expects that the source, programs that allow affected EGUs to (from 2022 through 2029). The final rule the state and the relevant reliability meet compliance obligations while also provides considerable flexibility coordinator and/or planning authority responding to reliability needs, even in and multiple pathways to states, will assess whether the reliability issue emergency situations. This flexibility including allowing their EGUs to use can be addressed in a way that would means that a conflict between the multi-state trading and other allow the EGU or EGUs to resume requirements of the state plan and approaches, which would allow operating under the original approved maintenance of reliability should be essential units to continue to meet their state plan within the 90-day period or extremely rare. We recognize, however, compliance obligation while generating whether revisions to the state plan need that a state with an inflexible plan could even at unplanned but reliability-critical to be made to address the unexpected be faced with more than one emergency levels. In addition, we have included in circumstances for the longer term (the and in this case the reliability safety the final rule a reliability safety valve unexpected unavailability of a nuclear valve may be used more than once. If provision that can be utilized in certain unit, for example). the state finds that a second reliability emergency situations. These changes, in The EPA recognizes that an emergency arises that conflicts with the addition to already existing industry emergency may persist past 90 days. At state plan, the state must submit a mechanisms and planning least 7 days before the end of the initial revision to its state plan so that the state requirements, will help to ensure that 90-day reliability safety valve period, plan is flexible enough to assure that industry will be able to maintain the state must notify the appropriate such conflicts do not recur and that the electric reliability. The EPA is confident EPA regional office whether the state is providing for the that the final rule will cut harmful reliability concern has been addressed implementation of the standards of electric power plant pollution while and that the EGU or EGUs can resume performance for affected EGUs as maintaining a reliable electric grid meeting the original emission standards required by the CAA. because the final rule provides industry established in the state plan prior to the f. Coordination among federal with the time and flexibility needed to short-term modification. partners. continue its current and ongoing If there still is a serious, ongoing The EPA, DOE, and FERC have agreed planning and investing to modernize reliability issue at the end of the short- to coordinate efforts to help ensure and upgrade the electric power system. term modification period that continued reliable electricity generation In June of 2015, M.J. Bradley & necessitates the EGU or EGUs to emit and transmission during the Associates issued a report that beyond the amount allowed under the implementation of the final rule. The enumerated a set of useful guiding state plan, the state must provide to the three agencies have developed a principles for studying and evaluating EPA a notification that it will be coordination strategy that reflects their the reliability impacts of the final submitting a state plan revision and joint understanding of how they will rule.871 The report enumerated six submit the plan revision as work together to monitor final rule principles: (1) A study should be expeditiously as possible, specifying in implementation, share information, and transparent about the assumptions and the notice the date by which the resolve any difficulties that may be data used; (2) a study should accurately revision will be submitted. The state encountered. This strategy is based on reflect the existing status of the grid in must document the ongoing emergency the successful working relationship that its modeling assumptions; (3) a study with a second written concurrence from the three agencies established in their should clearly identify the base case and the relevant reliability coordinator and/ joint effort to work together to monitor not confuse what will happen as a result or planning authority confirming the reliability during MATS of the final rule with what would have continuing urgent need for the EGU or implementation. happened anyway; (4) where possible, a EGUs to operate beyond the g. Analyses of the reliability impacts study should contain sensitivities and requirements of the state plan and that of the proposal. probabilities as they are looking into the there is no other reasonable way of The EPA appreciates that a large future which is necessarily uncertain; addressing the ongoing reliability number of entities from many different (5) a study should reflect the flexibility emergency but for the EGU or EGUs to industry perspectives have published provided to states to allow them to operate under an alternative emission reports and analysis with respect to design compliance approaches to standard than originally approved under electric reliability and the 111(d) maximize reliability; and (6) a study the state plan. In this event, the EPA proposed rule. We take concerns about should provide realistic and reliability- will work with the state on a case-by- reliability very seriously, and we focused results. These principles are case basis to identify an emission appreciate the attention given to this helpful to keep in mind when reviewing standard for the affected EGU or EGUs issue in the comments and shared with recent studies. for the period before a new state plan us in public forums. It is important to NERC published its analyses of the revision is approved. After the initial note that these studies were conducted proposed rule in November 2014 and 90-day period, any excess emissions prior to promulgation of this final rule, again in April 2015.872 The EPA beyond what is authorized in the and thus were only able to consider original approved state plan will count electric reliability with respect to the 871 M.J. Bradley & Associates, Guiding Principles against the state’s overall goal or proposal. The EPA has made changes for Reliability Assessments Under EPA’s Clean emission performance rate for affected and improvements to the proposal in Power Plan (June 3, 2015), available at http:// www.mjbradley.com/node/295. EGUs. response to comments and new 872 North American Electric Reliability The EPA intends for this reliability information, and some of the changes Corporation, Potential Reliability Impacts of EPA’s safety valve to be used only in are relevant to the final rule’s potential Continued

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00219 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64880 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

appreciates NERC’s attention to, and of coal units at risk for retirement, ERCOT stated that its modeling interest in, the proposed rule. However, finding that 14 GW of coal may be at identified two potential reliability we note that like some other studies, risk.876 SPP performed a resource problems—impacts of units retiring and NERC assumes considerably less adequacy analysis that assumes planned increased levels of renewable generation flexibility than actually is provided to retirements plus the EPA’s projected on the ERCOT grid.881 As noted above, states and EGUs in this final rule. The retirements, but did not similarly the final rule gives additional time for final rule provides states with account for the building of new compliance, providing needed time to considerable time and latitude in generation capacity.877 While we obtain new or replacement generation designing plans that are tailored to the appreciate MISO’s and SPP’s concerns necessary as some existing generators system in which their EGUs operate, regarding retirements and the potential retire. Moreover, affected EGUs needed which should be reflected in any that reserves will fall below reserve for reliability should be able to employ reliability analysis. Also, the NERC requirement levels, it is important to the flexibilities afforded to them as they study does not fully reflect the current consider the many ways in which states seek lower and zero-emitting generation. electric grid. For example, the amount can develop plans that account for their Finally, we note that ERCOT has a of RE generation that NERC assumes for potential reliability concerns. The final history of notable success in integrating 2020 is similar to levels of generation rule continues to give states significant RE into its electric grid, giving ERCOT that we see today whereas projections flexibility in how they comply with significant expertise regarding for 2020 are considerably higher.873 requirements, including both BSER challenges that may arise with the Further, NERC conflates retirements that measures and measures that were not addition of new RE in order to comply may happen as a result of the rule with included in the determination of the with the final rule. In fact, a recent those that are already planned. The BSER as a means to comply. For Brattle Group report used ERCOT as a Brattle Group has also reviewed NERC’s example, demand-side EE measures can case study for how to effectively November 2014 initial analysis of the greatly assist states and affected EGUs in integrate a large number of RE into the proposed rule, noting that it is meeting the standards and/or state plan. electric grid.882 important to distinguish between Many studies assume that state plans PJM conducted its own analysis at the concerns about the building blocks and will simply apply the BSER and do not request of the Organization of PJM reliability concerns about compliance recognize the large number of States (OPSI).883 This analysis is with state plans.874 The Brattle Group compliance approaches and consistent with many of the M.J. concluded that there are real world opportunities that states and affected Bradley guiding principles. PJM solutions to NERC’s concerns. These EGUs have available to them. The designed various scenarios to capture include making use of the many flexible Analysis Group recently analyzed the impact of the proposed rule under options available to states under the rule reliability considerations in MISO as the a series of assumptions. Because the to mitigate reliability risks. region considers how to comply with EPA had not yet issued the final rule, Multiple ISOs/RTOs also provided the final rule.878 The Analysis Group PJM cautioned against using the report analyses of the proposed rule, including found that despite the large amount of as a reliability analysis or predictor of MISO, PJM, ERCOT, and SPP.875 For coal-fired generating capacity that will the future. PJM stated that, since 2007, example, MISO conducted an analysis likely be retired in MISO in the coming PJM’s capacity markets have helped to years, the entities responsible for attract 35,000 MWs of additional Proposed Clean Power Plan (Nov. 5, 2014), electric system reliability in MISO are generation. Even though 26,000 MWs available at http://www.nerc.com/news/Pages/ prepared to collaboratively address any will retire between 2009 and 2016, the Reliability-Review-of-Proposed-Clean-Power-Plan- Identifies-Areas-for-Further-Study,-Makes- reliability issues that arise and that PJM capacity market has procured Recommendations-for-Stakeholders.aspx; North there is a ‘‘strong tool kit for managing sufficient resources to maintain American Electric Reliability Corporation, Potential ‘Essential Reliability Services’ needed to reliability. Reliability Impact of EPA’s Proposed Clean Power assure high-quality electric service.’’ 879 WECC also produced a study which is Plan: Phase 1 (Apr. 21, 2015), available at http:// 884 www.nerc.com/news/Pages/Assessment-Uses- ERCOT also performed an analysis, part of a longer-term, phased effort. Scenario-Analysis-to-Identify-Potential-Reliability- modeling numerous scenarios.880 The assumptions, methodology, and Risks-from-Proposed-Clean-Power-Plan.aspx. limitations were all clearly presented, 873 EIA, Annual Energy Outlook 2015, with 876 MISO, Analysis of EPA’s Proposal to Reduce and there was extensive involvement by Projections to 2040, April 2015, available at http:// CO2 Emissions from Existing Units, at 14 (Nov. 12, a range of stakeholders. WECC stated www.eia.gov/forecasts/aeo/pdf/0382(2015).pdf. 2014), available at https://www.misoenergy.org/ 874 Brattle Group, EPA’s Clean Power Plan and Library/Repository/Communication%20Material/ that it is embarking on a phased-study Reliability, Assessing NERC’s Initial Reliability EPA%20Regulations/AnalysisofEPAProposal process that seeks to ‘‘provide the Review (Feb. 2015), available at http://info.aee.net/ ReduceCO2Emissions.pdf. industry with unbiased and hs-fs/hub/211732/file-2486162659-pdf/PDF/EPAs- 877 SPP, SPP’s Reliability Impact Assessment of Clean-Power-Plan-Reliability- the EPA’s Proposed Clean Power Plan, (Oct. 8, 881 Brattle.pdf?t=1434398407867. 2014), available at http://www.spp.org/ ERCOT, ERCOT Analysis of the Clean Power 875 See MISO, Analysis of EPA’s Proposal to publications/CPP%20Reliability%20Analysis%20 Plan, at 9 (Nov. 17, 2014), available at http://www. ercot.com/content/news/presentations/2014/ Reduce CO2 Emissions from Existing Units (Nov. Results%20Final%20Version.pdf. 12, 2014), available at https://www.misoenergy.org/ 878 Analysis Group, Electric System Reliability ERCOTAnalysis-ImpactsCleanPowerPlan.pdf. Library/Repository/Communication%20Material/ and EPA’s Clean Power Plan: The Case of MISO 882 Brattle Group, Integrating Renewable Energy EPA%20Regulations/AnalysisofEPAProposal (June 8, 2015), available at http://www.analysis Into the Electricity Grid: Case Studies Showing How ReduceCO2Emissions.pdf; PJM, PJM group.com/uploadedfiles/content/insights/ System Operators are Maintaining Reliability (June Interconnection Economic Analysis of the EPA publishing/analysis_group_clean_power_plan_ 2015), available at http://info.aee.net/integrating- Clean Power Plan Proposal (Mar. 2, 2015), report miso_reliability.pdf. renewable-energy-into-the-electricity-grid. listed at http://www.pjm.com/documents/ 879 Analysis Group, Electric System Reliability 883 PJM, PJM Interconnection Economic Analysis reports.aspx; SPP, SPP’s Reliability Impact and EPA’s Clean Power Plan: The Case of MISO, at of the EPA Clean Power Plan Proposal (Mar. 2, Assessment of the EPA’s Proposed Clean Power 2 (June 8, 2015), available at http:// 2015), report listed at http://www.pjm.com/ Plan, (Oct. 8, 2014), available at http:// www.analysisgroup.com/uploadedfiles/content/ documents/reports.aspx. www.spp.org/publications/CPP%20Reliability% insights/publishing/analysis_group_clean_power_ 884 WECC, EPA Clean Power Plan: Phase I— 20Analysis%20Results%20Final%20Version.pdf; plan_miso_reliability.pdf. Preliminary Technical Report (Sept. 19, 2014), ERCOT, ERCOT Analysis of the Clean Power Plan 880 ERCOT, ERCOT Analysis of the Clean Power available at https://www.wecc.biz/_layouts/15/ (Nov. 17, 2014), available athttp://www.ercot.com/ Plan (Nov. 17, 2014), available at http://www.ercot. WopiFrame.aspx?sourcedoc=/Reliability/140912_ content/news/presentations/2014/ERCOTAnalysis- com/content/news/presentations/2014/ERCOT EPA-111(d)_PhaseI_Tech-Final.pdf& ImpactsCleanPowerPlan.pdf; and Analysis-ImpactsCleanPowerPlan.pdf. action=default&DefaultItemOpen=1.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00220 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64881

independent analysis of this issue.’’ 885 experience job losses can also take In addition to POWER, however, the WECC concluded that the effects of the advantage of the opportunities for job EPA encourages states to use economic proposal on resource adequacy may be growth or otherwise transition to and labor market analysis to identify minimal but that resource adequacy healthy, sustainable economic growth. where they can deploy strategies to: (1) cannot be fully assessed without The EPA’s illustrative analysis indicates Provide a range of employment and realistic and/or proposed compliance that there may be some additional job training assistance to workers, and scenarios.886 losses in sectors related to coal economic development assistance to Analysis Group analyzed the extraction and generation that are communities affected by the rapid proposed rule, finding that it provides attributable to implementation of this changes underway in the power sector states and affected EGUs with a wide rule. At the same time, the EPA’s and closely related industries, to range of options and operational illustrative analysis indicates that there diversify their economies, attract new discretion that can prevent reliability may be new jobs in the utility power sources of investment, and create new issues while also reducing carbon sector associated with both improving jobs; and (2) mobilize existing education 887 pollution and costs. Analysis Group the efficiency of fossil fuel-fired power and training resources, including those noted that some of the concerns raised plants, construction and operation of of community and technical colleges by stakeholders about the proposed rule new natural gas-fired and RE and registered apprenticeship programs, assume ‘‘inflexible implementation, are production, and actions to increase to ensure that both incumbent and new based upon worst-case scenarios, and demand-side EE. Consideration of these workers are trained for the skills assume that policy makers, regulators, effects in the context of the particulars necessary to meet employer demand for and market participants will stand on of the state plan can help states craft new workers in the utility, construction the sidelines until it is far too late to plans that, to the extent possible, meet and related sectors, that such training 888 act’’ to ensure reliability. It stated multiple environmental, economic, and includes career pathways for members that these assumptions are not workforce development goals. of low-income communities and other consistent with past actions. vulnerable communities to attain We appreciate the time that multiple The Partnerships for Opportunity and employment in these sectors, and that entities took to analyze and consider the Workforce and Economic Revitalization such training results in validated skill potential impacts of the proposed rule. (POWER) Initiative is a new interagency certifications for workers. As we issue the final rule and states effort led by the Economic Development 4. Workforce Considerations draft plans to implement the rule, we Administration in the Department of look forward to further analysis by these Commerce. POWER was launched to Some stakeholders commented that, and other groups. Such analysis can respond to current trends in the power to ensure that emission reductions are provide states with needed resources to sector: ‘‘The United States is undergoing realized, it is important that help them design state plans that will a rapid energy transformation, construction, operations and other augment the efforts of the industry to particularly in the power sector. This skilled work undertaken pursuant to maintain electric reliability. transformation is producing cleaner air state plans is performed to and healthier communities, and specifications, and is effective, safe, and 3. Consideration of Effects on spurring new jobs and industries. At the timely. A good way to ensure a highly Employment and Economic same time, it is impacting workers and proficient workforce is to require that Development communities who have relied on the workers have been certified by: (1) An States in designing their state plans coal industry as a source of good jobs apprenticeship program that is should consider the effects of their and economic prosperity, particularly in registered with the U.S. DOL, Office of plans on employment and overall Appalachia, where competition with Apprenticeship or a state economic development to assure that other coal basins provides additional apprenticeship program approved by the opportunities for economic growth pressure.’’ 889 The POWER Initiative the DOL; (2) a skill certification aligned and jobs that the plans offer are aligns, leverages, and targets economic with the U.S. DOE Better Building manifest. To the extent possible, states and workforce development assistance Workforce Guidelines and validated by should try to assure that any to communities and workers affected by a third party accrediting body communities that can be expected to changes in the coal industry and the recognized by DOE; or (3) other skill utility power sector. The POWER certification validated by a third party 885 WECC, EPA Clean Power Plan: Phase I— Initiative is competitively awarding accrediting body. Preliminary Technical Report, at 1 (Sept. 19, 2014), planning assistance and implementation available at https://www.wecc.biz/_layouts/15/ 5. Tenth Amendment Legal WopiFrame.aspx?sourcedoc=/Reliability/140912_ grants with funding from the Considerations EPA-111(d)_PhaseI_Tech-Final.pdf&action=default Department of Commerce, Department &DefaultItemOpen=1. of Labor, Small Business Some commenters have raised 886 WECC, EPA Clean Power Plan: Phase I— Administration, and the Appalachian concerns that the emission guidelines Preliminary Technical Report, at 30 (Sept. 19, Regional Commission to partnerships and requirements for 111(d) state plans 2014), available at https://www.wecc.biz/_layouts/ violate principles of federalism 15/WopiFrame.aspx?sourcedoc=/Reliability/ anchored in impacted communities. 140912_EPA-111(d)_PhaseI_Tech-Final.pdf These grants will help communities embodied in the U.S. Constitution, &action=default&DefaultItemOpen=1. organize themselves, develop particularly the Tenth Amendment. 887 Analysis Group, Electric System Reliability comprehensive strategic plans that chart These commenters claim that states will and EPA’s Clean Power Plan Tools and Practices their economic future, and execute be unconstitutionally ‘‘coerced’’ or (Feb. 2015), available at http:// ‘‘commandeered’’ into taking certain www.analysisgroup.com/uploadedfiles/content/ coordinated economic and workforce insights/publishing/electric_system_reliability_and_ development activities based on their actions in order to avoid the prospect of epas_clean_power_plan_tools_and_practices.pdf. strategic plans.890 either a federal 111(d) plan applying to 888 Analysis Group, Electric System Reliability sources in the state, or of losing federal and EPA’s Clean Power Plan Tools and Practices, funds. at ES–3 (Feb. 2015), available at http:// 889 http://www.eda.gov/power/. www.analysisgroup.com/uploadedfiles/content/ 890 https://www.whitehouse.gov/the-press-office/ We disagree on both fronts. First, the insights/publishing/electric_system_reliability_and_ 2015/03/27/fact-sheet-partnerships-opportunity- prospect of a federal plan applying to epas_clean_power_plan_tools_and_practices.pdf. and-workforce-and-economic-revitaliz. sources in a state does not ‘‘coerce’’ or

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00221 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64882 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

‘‘commandeer’’ that state into 111. To the contrary, we believe that continued to consult with state submitting its own satisfactory plan. Far imposition of a federal plan rather than organizations including the Association from violating principles of federalism, sanctions is the appropriate path in the of Air Pollution Control Agencies this rule provides states with the initial context of this program. Accordingly, (AAPCA), Environmental Council of the opportunity to submit a satisfactory regardless of whether the EPA could States (ECOS), National Association of state plan, and provides states flexibility theoretically apply discretionary Clean Air Agencies (NACAA), National in developing that plan. If a state sanctions against states in the section Association of Regulatory Utility declines to take advantage of that 111(d) context, the final rule forbids the Commissioners (NARUC), National opportunity, affected EGUs in that state agency from exercising any such Association of State Energy Officials will instead be subject to a federal plan authority. We have included in this rule (NASEO) and the National Governors that satisfies statutory requirements.891 a provision that prohibits the agency Association (NGA). This approach is consistent with from imposing sanctions in the event Some states indicated that they ordinary cooperative federalism regimes that a state fails to submit or implement wanted the EPA to create resources to that federal courts have routinely a satisfactory plan under this rule. As assist with state plan development, upheld against Tenth Amendment states consider whether to take especially resources related to challenges.892 advantage of the opportunity to develop accounting for RE and demand-side EE Second, states that decline to take state plans, they can be assured that the in state plans. They requested clear certain actions under this rule will not EPA will not withdraw federal funding methodologies for estimating emission face the prospect of sanctions, such as should they decline to participate. reductions from RE and demand-side EE withdrawn federal highway funds. CAA 6. Title VI policies and programs so that these section 111 does not contain sanctions could be included as part of their provisions, and we are finalizing States that are recipients of EPA compliance strategies. Stakeholders said financial assistance must comply with revisions to these emission guidelines that these tools and metrics should all federal nondiscrimination statutes making explicit that the EPA will not build upon the EPA’s ‘‘Roadmap for that together prohibit discrimination on withhold federal funds from a state on Incorporating Energy Efficiency/ the bases of race, color, national origin account of that state’s failure to submit Renewable Energy Policies and (including limited-English proficiency), or implement an approvable 111(d) state Programs into State and Tribal disability, sex and age. These laws plan. Implementation Plans,’’ as well as the include: Title VI of the Civil Rights Act Some commenters pointed to section State Energy Efficiency Action of 1964; Section 504 of the 110(m) as a possible source of the EPA’s Network’s ‘‘Energy Efficiency Program 893 Rehabilitation Act of 1973; Section 13 of sanction authority. Section 110(m) Impact Evaluation Guide.’’ In addition, grants the EPA discretionary authority the Federal Water Pollution Control Act Amendments of 1972; Title IX of the stakeholders requested clear guidance to withhold some federal highway funds on how to measure the impacts of RE under certain conditions. However, Education Act Amendments of 1972; and the Age Discrimination Act of 1975. and demand-side EE programs using section 110(m) requires the EPA to established EM&V protocols. adopt regulations to ‘‘establish criteria Compliance with these The EPA also heard that states would for exercising’’ this discretionary nondiscrimination statutes is a like guidance on plan development to authority, and the only EPA regulations recipient’s separate and distinct be released at the same time as this final implementing section 110(m) apply to obligation from compliance with rule. This guidance should include SIPs submitted under section 110.894 environmental regulations. In other The EPA never intended to even words, all recipients are required to allowable programs and policies for imply that we would contemplate using ensure that all aspects of their state compliance, examples of compliance this authority to encourage state plans do not violate any of the federal pathways, clear information on multi- participation in this rule under section nondiscrimination statutes, including state plan development, and Title VI. identification of tools. 891 Among other things, a federal plan will The EPA’s Office of Civil Rights As a result of this feedback, in implement standards of performance subject to (OCR) is responsible for carrying out consultation with U.S. DOE and other specific statutory requirements. See 42 U.S.C. compliance with these federal federal agencies, the EPA continued to 7411(a)(1). The APA and CAA would prohibit the refine its toolbox of decision support imposition of any federal plan that is ‘‘arbitrary, nondiscrimination statutes and does so capricious, an abuse of discretion, or otherwise not through a variety of means including: resources at: http://www2.epa.gov/ in accordance with law.’’ 5 U.S.C. 706(2)(a). Complaint investigation; agency- www2.epa.gov/cleanpowerplantoolbox. Particularly given these independent constraints on initiated compliance reviews; pre-grant The site includes information on the EPA’s authority with respect to any potential regulatory requirements, including state federal plan, the prospect of any such plan would award assurances and audits; and not commandeer states or coerce them into technical assistance and outreach plan guidance and state plan decision submitting their own state plans. activities. Anyone who believes that any support. The state plan guidance section 892 See, e.g., Hodel v. Va. Surface Mining & of the federal nondiscrimination laws serves as a central repository for the Reclamation Ass’n, Inc., 452 U.S. 264, 283–93 final emission guidelines, RIA, guidance (1981); Texas v. EPA, 726 F.3d 180, 196–97 (D.C. enforced by OCR have been violated by Cir. 2013) (noting that ‘‘Supreme Court precedent a recipient of EPA financial assistance documents, TSDs and other supporting repeatedly affirm[s] the constitutionality of federal may file an administrative complaint materials. The state plan decision statutes that allow States to administer federal with the EPA’s OCR. support section includes information to programs but provide for direct federal help states evaluate different administration if a State chooses not to administer H. Resources for States To Consider in approaches and measures they might it’’). Developing Plans 893 Other commenters point to CAA section 179 consider as they initiate plan as a possible direct source of this sanctions As part of the stakeholder outreach development. This section includes, for authority. However, the mandatory sanctions and comment processes, the EPA asked example, a summary of existing state outlined in section 179 clearly apply only in the states what the agency could do to climate and RE and demand-side EE contexts of nonattainment SIPs and responses to SIP Calls made under CAA section 110(k)(5). See facilitate state plan development and policies and programs, information on 42 U.S.C. 7509(a). implementation. In addition, after the electric utility actions that reduce CO2, 894 40 CFR 52.30 (defining ‘‘plan or plan item’’). comment period closed, the EPA and tools and information to estimate

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00222 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64883

the emissions impact of RE and reported CO2 emissions and/or energy section 111(b) rule for new sources demand-side EE programs. output by an affected EGU. These requires that, if a new affected EGU uses The EPA notes that our inclusion of actions include: CCS to meet the applicable CO2 a measure in the toolbox does not mean • heat rate improvements; emission limit, the EGU must report in that a state plan must include that • fuel switching to a fossil fuel with lower accordance with 40 CFR part 98 subpart measure. In fact, inclusion of measures carbon content (e.g., from coal to natural gas); PP (Suppliers of Carbon Dioxide), and • 896 integrated RE; and the captured CO must be injected at a provided at the Web site does not • CHP, including retrofit of an affected 2 necessarily imply the approvability of EGU to a CHP configuration, or revising the facility or facilities that report in an approach or method for use in a state useful energy outputs (electrical and thermal) accordance with 40 CFR part 98 subpart plan. States will need to demonstrate at an affected EGU already operating in a RR (Geologic Sequestration of Carbon that any measure included in a state CHP configuration.897 Dioxide).900,901 See 40 CFR 60.5555(f). plan meets all relevant criteria and Heat rate improvements, fuel Taken together, these requirements adequately addresses elements of the switching, integrating RE and CHP ensure that the amount of captured and plan components discussed in section would not require any additional sequestered CO2 will be tracked as VIII.D of this preamble. accounting or monitoring and reporting, appropriate at project- and national- levels, and that the status of the CO2 in I. Considerations for CO2 Emission because under the emission guidelines affected EGUs are already required to its sequestration site will be monitored, Reduction Measures That Occur at including air-side monitoring and Affected EGUs monitor and report CO2 emissions at the stack level, and to monitor and report reporting. As detailed in the preamble This section describes a range of useful energy outputs. Stack monitoring for the CAA section 111(b) standards for emission reduction actions that may be new EGUs, the EPA found that there is would reflect reductions in CO2 taken at affected EGUs that reduce CO2 emissions from efficiency ample evidence that CCS is technically emissions from an affected EGU and/or improvements, changes in fuel use feasible and that partial CCS can be improve its CO2 emission rate, and the (including incorporation of RE), and implemented at a new fossil fuel-fired accounting treatment for these actions other on-site changes. steam generating EGU at a cost that is in a state plan. Some of these actions do reasonable and that is consistent with not necessitate additional accounting, 2. Actions With Additional Accounting the cost of other dispatchable, non- monitoring or reporting requirements. and Reporting Requirements NGCC generating options. In the June Such actions are discussed in section Certain actions that may be taken at 2014 proposal, the EPA noted that CCS VIII.I.1 below, and include heat rate an affected EGU to reduce CO2 technology at existing EGUs would improvements, fuel switching from one emissions, specifically application of entail additional considerations beyond fossil fuel to another, integration of RE CCS and CCU, and use of biomass, those at issue for newly constructed into EGU operations, and combined heat require additional accounting and EGUs. Specifically, the cost of and power (CHP) expansion or retrofit. reporting. integrating a retrofit CCS system into an Other actions, however, do necessitate a. Application of CCS. Affected EGUs existing facility may be expected to be additional accounting, monitoring, or may utilize retrofit CCS technology to substantial, and some existing EGUs reporting requirements. These include reduce reported stack CO2 emissions may have space limitations and thus use of CCS, CCU and biomass, as from the EGU.898 Affected EGUs that may not be able to accommodate the discussed in section VIII.I.2 below. apply CCS under a state plan must meet expansion needed to install the The discussion in this section applies the same monitoring, recordkeeping and equipment to implement CCS. Further, for both rate-based and mass-based reporting requirements for sequestered the EPA noted that aggregated costs of plans. Additional accounting CO2 as new units that implement CCS applying CCS as a component of the considerations for mass-based plans are to meet final standards of performance BSER for the large number of existing discussed in section VIII.J. Additional under CAA section 111(b) for new fossil fuel-fired steam EGUs would be accounting considerations for rate-based EGUs.899 Specifically, the final CAA substantial and would be expected to plans, including how actions that affect the cost and potentially the substitute for generation from affected 896 ‘‘Integrated RE’’ refers to RE that is directly supply of electricity on a national basis. EGUs or avoid the need for generation incorporated into the mechanical systems and Because there are lower-cost systems of operation of the EGU. An example is a solar thermal emission reduction available to reduce from affected EGUs may be used in a energy system used to preheat boiler feedwater. state plan to adjust the CO2 emission Such approaches reduce the amount of fossil fuel emissions from existing plants, the EPA rate of an affected EGU, are discussed in heat input per unit of useful energy output. 897 section VIII.K. The emission reduction potential from CHP Stationary Sources: Electric Utility Generating stems from the unit using less fuel for producing Units. 1. Actions Without Additional useful electrical and thermal outputs than would be 900 The final CAA section 111(b) rule finalizes required to run separate electrical and thermal amendments to subpart PP reporting requirements, Accounting and Reporting units. The emission reduction would depend on the specifically requiring that the following pieces of Requirements type of affected EGU and available steam hosts in information be reported: (1) The electronic GHG the vicinity of the affected EGU. A conventional Many actions will reduce the reported Reporting Tool identification (e-GGRT ID) of the combustion turbine generator, for example, EGU facility from which CO2 was captured, and (2) CO2 emissions or CO2 emission rate of converted into a CHP unit could effectively result the e-GGRT ID(s) for, and mass of CO2 transferred an affected EGU, without the need for in a reduction of 25 percent or more in the reported to, each GS site reporting under subpart RR. As additional accounting or monitoring and CO2 emission rate. The potential retrofitte EGU CHP noted, the final 111(b) rule also requires that any market consists of converted simple cycle turbines, affected EGU unit that captures CO2 to meet the reporting requirements beyond the older steam plants in urban areas, and combined applicable emission limit must transfer the required CEMS tracking of actual stack cycle units near beneficial thermal loads. captured CO2 to a facility that reports under 40 CFR 898 CO2 emissions and tracking of actual Addition of retrofit CCS technology should not part 98 subpart RR. energy output.895 The effect of these trigger CAA section 111(b) applicability for 901 Under final requirements in the CAA 111(b) modified or reconstructed sources. Pollution NSPS, any well receiving CO2 captured from an actions will result in changes in control projects do not trigger NSPS modifications affected EGU, be it a Class VI or Class II well, must and addition of CCS technology does not count report under subpart RR. A UIC Class II well’s 895 Monitoring and reporting requirements for toward the capital costs of reconstruction for NSPS. regulatory status does not change because it 899 affected EGU CO2 emissions and useful energy Standards of Performance for Greenhouse Gas receives such CO2, nor does it change by virtue of output are addressed in section VIII.F. Emissions from New, Modified, and Reconstructed reporting under subpart RR.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00223 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64884 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

did not propose nor finalize CCS as a Potential alternatives to storing CO2 in committed to working collaboratively component of the BSER for existing geologic formations are emerging and with stakeholders to evaluate the EGUs. may offer the opportunity to offset the efficacy of alternative utilization However, the EPA noted that CCS cost of CO2 capture. For example, technologies, to address any regulatory may be a viable CO2 mitigation captured anthropogenic CO2 may be hurdles, and to develop appropriate technology at some existing sources and stored in solid carbonate materials such monitoring and reporting protocols to that it would be available to states and as precipitated calcium carbonate (PCC) demonstrate CO2 reductions. to sources as a compliance option. or magnesium or calcium carbonate, In the meantime, state plans may Numerous commenters agreed with the bauxite residue carbonation, and certain allow affected EGUs to use qualifying EPA’s proposed determination that CCS types of cement through mineralization. CCU technologies to reduce CO2 technology is not part of the BSER The carbonate materials produced can emissions that are subject to an building blocks for existing EGUs. Other be tailored to optimize performance in emission standard, or those that are commenters opposed inclusion of CCS specific industrial and commercial counted when demonstrating requirements in state plans and applications. For example, these achievement of the CO2 emission provided specific reasons why CCS carbonate materials have been used in performance rates or a state rate-based would not be applicable in certain the construction industry and, more or mass-based CO2 emission. State plans states. Many commenters felt that CCS recently and innovatively, in cement must include analysis supporting how technology is not adequately production processes to replace the proposed qualifying CCU technology demonstrated and is not economically Portland cement. results in CO2 emission mitigation from practical at this time. Other commenters The Skyonics Skymine® project, affected EGUs and provide monitoring, argued that CCS is an available which opened its demonstration project reporting, and verification requirements technology and that it can be in October 2014, is an example of to demonstrate the reductions. The EPA implemented at more EGUs than captured CO2 being used in the would then review the appropriateness predicted by EPA modeling. production of carbonate products. This and basis for the analysis and the Some commenters noted that there are plant converts CO2 into commercial verification requirements in the course opportunities to reduce the cost of CCS products. It captures over 75,000 tons of of its review of the state plan. implementation by selling the captured CO2 annually from a San Antonio, c. Application of biomass co-firing CO2 for use in Enhanced Oil Recovery Texas, cement plant and converts the and repowering. (EOR) operations. One commenter CO2 into other products including The EPA received multiple comments expressed concern that federal sodium carbonate and sodium supporting the use of biomass requirements under the Greenhouse Gas 902 bicarbonate. Other companies— feedstocks as a means of reducing CO2 Reporting Program—specifically the including Calera 903 and New Sky 904— emissions within state plans. Several requirement (mentioned above) to report also offer commercially available commenters also asserted that states under 40 CFR part 98 subpart RR— technology for the beneficial use of should be able to determine how would foreclose, rather than encourage, captured CO2. These processes can be biomass can be used in their plans. the use of captured CO for EOR. The 2 utilized in a variety of industrial Additionally, the EPA received a range EPA received similar public comments applications—including at fossil fuel- of comments regarding the valuation of on the CAA 111(b) proposal for new fired power plants. CO emissions from biomass EGUs. The EPA disagrees with the 2 However, consideration of how these combustion. Some argued that all commenters’ assertions and addressed emerging alternatives could be used to biomass feedstocks should be those in the preamble for the final meet CO2 emission performance rates or considered ‘‘carbon neutral,’’ while standards of performance and in the state CO emission goals would require Response-to-Comments (RTC) document 2 others maintained that only the full a better understanding of the ultimate for the CAA 111(b) NSPS rulemaking. stack emissions from biomass fate of the captured CO and the degree The EPA noted that the cost of 2 combustion should be counted. As to which the method permanently compliance with subpart RR is not discussed in the next section, the isolates the captured CO or displaces significant enough to offset the potential 2 revised Framework for Assessing other CO emissions from the revenue for the EOR operator from the 2 Biogenic Carbon Dioxide for Stationary atmosphere. 905 sale of produced oil for CCS projects Sources and 2012 Science Advisory Several commenters also suggested Board peer review of the 2011 Draft that are reliant on EOR. The costs that algae-based CCU (i.e., the use of associated with subpart RR are Framework find that it is not algae to convert captured CO2 to useful scientifically valid to assume that all relatively modest, especially in products—especially biofuels) should comparison with revenues from an EOR biogenic feedstocks are ‘‘carbon neutral, be recognized for its potential to reduce but that the net biogenic CO2 field. emissions from existing fossil-fueled After consideration of the variety of atmospheric contribution of different EGUs. comments we received on this issue, we biomass feedstocks can vary and Unlike geologic sequestration, there are confirming our proposal that CCS is depends on various factors, including are currently no uniform monitoring not an element of the BSER, but it is an feedstock type and characteristics, and reporting mechanisms to available compliance measure for a state production practices, and, in some demonstrate that these alternative end plan. EGUs implementing CCS would cases, the alternative fate of the uses of captured CO result in overall 906 need to follow reporting requirements 2 feedstock. Other comments focused reductions of CO emissions to the established in the final CAA section 2 on the use of sustainably-derived atmosphere. As these alternative 111(b) rule for new affected EGUs. agricultural and forest biomass b. Application of CCU. technologies are developed, the EPA is feedstocks, including stakeholders who The EPA received comments 902 suggesting that carbon capture and http://skyonic.com/technologies/skymine. 905 www.epa.gov/climatechange/downloads/ 903 http://www.calera.com/beneficial-reuse-of- Framework-for-Assessing-Biogenic-CO2- utilization (CCU) technologies should co2/process.html. Emissions.pdf. also be allowed as a CO2 emission rate 904 http://www.newskyenergy.com/index.php/ 906 www.epa.gov/climatechange/ghgemissions/ adjustment measure for affected EGUs. products/carboncycle. biogenic-emissions.html.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00224 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64885

supported and those against such emissions from combustion of fossil management practices and feedstocks as approvable elements, and fuels. sustainability, including the Oregon those who wanted further definition of The SAB peer review panel agreed Indicators of Sustainable Forests, that these feedstocks. As discussed above that the use of biomass feedstocks promote environmentally, economically and in more detail below, these final derived from the decomposition of and socially sustainable management of guidelines provide that states can biogenic waste in landfills, compost state forests. California’s Forest Practice include qualified biomass in their plans facilities or anaerobic digesters did not Regulations support sustained and include provisions for how constitute a net contribution of biogenic production of high-quality timber while qualified biomass feedstocks or CO2 emissions to the atmosphere. And considering ecological, economic and feedstock categories will be determined. further, information considered in social values, and the state’s preparing the second draft of the The EPA will review the Greenhouse Gas Reduction Fund Framework, including the SAB peer appropriateness and basis for provides resources for forestry projects review and stakeholder input, supports determining qualified biomass to improve forest health, maintain feedstocks or feedstock categories in its the finding that use of waste-derived feedstocks 908 and certain forest-derived carbon storage and avoid GHG review of the approvability of a state emissions from pests, wildfires and plan. industrial byproducts (such as those without alternative markets) are likely conversion to non-forest uses. (1) Considerations for use of biomass to have minimal or no net atmospheric Several states focus on sustainable in state plans. contributions of biogenic CO2 bioenergy, as seen with the The EPA recognizes that the use of emissions, or even reduce such impacts, sustainability requirements for eligible some biomass-derived fuels can play a when compared with an alternate fate of biomass in the Massachusetts RPS, role in controlling increases of CO2 disposal. which, among other requirements, levels in the atmosphere. The use of In addition, as detailed in the limits old growth forest harvests. Many some kinds of biomass has the potential President’s Climate Action Plan,909 part states employ complementary programs to offer a wide range of environmental of the strategy to address climate change that together work to address benefits, including carbon benefits. includes efforts to protect and restore sustainable forestry practices. For However, these benefits can typically our forests, as well as other critical example, Wisconsin uses a state forest only be realized if biomass feedstocks landscapes including grasslands and sustainability framework that provides a are sourced responsibly and attributes of wetlands, in the face of a changing common system to measure the the carbon cycle related to the biomass climate. This country’s forests currently sustainability of the state’s public and feedstock are taken into account. play a critical role in addressing carbon pollution, removing more than 13 private forests, in conjunction with a In November 2014, the agency series of voluntary best management released a second draft of the technical percent of total U.S. GHG emissions each year.910 Conservation and guideline manuals for sustainable report, Framework for Assessing woody biomass and agriculturally- Biogenic Carbon Dioxide for Stationary sustainable management can help ensure our forests and other lands will derived biomass. In addition to state- Sources. The revised Framework, and specific programs, some states also the EPA’s Science Advisory Board continue to remove carbon from the atmosphere while also improving soil actively participate in sustainable forest (SAB) peer review of the 2011 Draft management or certification programs Framework, finds that it is not and water quality, reducing wildfire risk through third-party entities such as the scientifically valid to assume that all and enhancing forests’ resilience in the Sustainable Forestry Initiative (SFI) and biogenic feedstocks are ‘‘carbon neutral’’ face of climate change. and that the net biogenic CO Many states have recognized the the Forest Stewardship Council (FSC). 2 importance of forests and other lands for atmospheric contribution of different For example, in addition to other state climate resilience and mitigation, and biogenic feedstocks generally depends sustainability programs, New York has have developed a variety of sustainable on various factors related to feedstock certified more than 780,000 acres of forestry policies, RE incentives and characteristics, production, processing state forestland to both SFI and FSC’s standards, and GHG accounting and combustion practices, and, in some sustainable forest management procedures. Some states, for example cases, what would happen to that programs. SFI and FSC have certified Oregon and California, have programs feedstock and the related biogenic more than 63 and 35 million acres of that recognize the multiple benefits that emissions if not used for energy forestland across the U.S., respectively. forests provide, including biodiversity production.907 The revised Framework and ecosystem services protection as These examples demonstrate how also found that the production and use well as climate change mitigation states already use diverse strategies to of some biogenic feedstocks and through carbon storage. Oregon has promote sustainable forestry and subsequent biogenic CO emissions 2 several programs focused on best forest agricultural management while realizing from stationary sources will not their unique economic, environmental inevitably result in increased levels of 908 and RE goals. As states evaluate options Types of waste-derived biogenic feedstocks CO2 to the atmosphere, unlike CO2 may include: Landfill gas generated through the for meeting the emission guidelines, decomposition of MSW in a landfill; biogas they may consider how sustainably- 907 generated from the decomposition of livestock Specifically, the SAB found that ‘‘There are derived biomass and sustainable circumstances in which biomass is grown, waste, biogenic MSW, and/or other food waste in harvested and combusted in a carbon neutral an anaerobic digester; biogas generated through the forestry and agriculture programs, such fashion but carbon neutrality is not an appropriate treatment of waste water, due to the anaerobic as the examples highlighted above, may a priori assumption; it is a conclusion that should decomposition of biological materials; livestock help them control increases of CO2 be reached only after considering a particular waste; and the biogenic fraction of MSW at waste- feedstock’s production and consumption cycle. to-energy facilities. levels in the atmosphere. In addition, There is considerable heterogeneity in feedstock 909 www.whitehouse.gov/sites/default/files/ the EPA’s work on assessing biogenic image/president27sclimateactionplan.pdf. types, sources and production methods and thus CO2 emissions from stationary sources 910 net biogenic carbon emissions will vary www.epa.gov/climatechange/Downloads/ may also help inform states’ efforts to considerably.’’ www.epa.gov/climatechange/ ghgemissions/US-GHG-Inventory-2015-Chapter-6- ghgemissions/biogenic-emissions.html. Land-Use-Land-Use-Change-and-Forestry.pdf. assess the role of different biogenic

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00225 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64886 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

feedstocks in their plans and broader industrial byproduct feedstocks, based verification and establishing measures climate strategies.911 on the conclusions supported by a to maintain transparency, including The EPA is engaging in a second variety of technical studies, including disclosure of relevant documentation round of targeted peer review on the the revised Framework for Assessing and reports. State plan submittals must revised Framework with the SAB in Biogenic Carbon Dioxide for Stationary include measures for tracking and 2015.912 As part of this technical Sources. The use of such waste-derived auditing performance to ensure that process, and as the EPA and states and certain industrial byproduct biomass used meets the state plan implement these emission guidelines, biomass feedstocks would likely be requirements for qualified biomass and the EPA will continue to assess and approvable as qualified biomass in a associated biogenic CO2 benefits. Details closely monitor overall bioenergy state plan when proposed with on how to adjust CO2 rates through the demand and associated landscape measures that meet the biomass use of qualified biomass feedstocks are conditions for changes that might have monitoring, reporting and verification provided in section VIII.K.1. requirements discussed below and other negative impacts on public health or the The EPA will review the measures as required elsewhere in these environment. appropriateness and basis for proposed (2) Additional considerations and emission guidelines. Given the importance of sustainable qualified biomass and biomass requirements for biomass fuels. treatment determinations and related The EPA anticipates that some states land management in achieving the carbon goals of the President’s Climate accounting, monitoring and reporting may consider the use of certain biomass- measures in the course of its review of derived fuels used in electricity Action Plan, sustainably-derived agricultural and forest biomass a state plan. The EPA’s determination generation as a way to control increases that a state plan satisfactorily proves of CO2 levels in the atmosphere, and feedstocks may also be acceptable as qualified biomass in a state plan, if the that proposed biomass fuels qualify will include them as part of their state would be based in part on whether the plans to meet the emission guidelines. state-supplied analysis of proposed qualified feedstocks or feedstock plan submittal demonstrates that Not all forms of biomass are expected to proposed state measures for qualified be approvable as qualified biomass (i.e., categories can adequately demonstrate that such feedstocks or feedstock biomass and related biogenic CO2 biomass that can be considered as an benefits are quantifiable, verifiable, approach for controlling increases of categories appropriately control increases of CO2 levels in the enforceable, non-duplicative and CO2 levels in the atmosphere). Affected permanent. The EPA recognizes that EGUs may use qualified biomass in atmosphere and can adequately monitor and verify feedstock sources and related CCS technology (described above in order to control or reduce CO2 section VIII.I.2.a) could be applied in emissions that are subject to an sustainability practices. Information in the revised Framework, the second SAB conjunction with the use of qualified emission standard requirement, or those biomass. that are counted when demonstrating peer review process, and the state and third party programs highlighted in the achievement of the CO2 emission (3) Biomass co-firing. performance rates or a state rate-based previous section can assist states when Affected EGUs may use qualified considering the role of qualified or mass-based CO2 emission goal. biomass co-fired with fossil fuels at an biomass in state plan submittals. State plan submissions must describe affected EGU. As discussed above in Regardless of what biomass feedstocks the types of biomass that are being are proposed, state plans must specify this section, not all forms of biomass are proposed for use under the state plan how biogenic CO emissions will be expected to be approvable and states and how those proposed feedstocks or 2 monitored and reported, and identify should propose biomass feedstocks and feedstock categories should be specific EM&V, tracking and auditing treatment of biogenic CO2 emissions in considered as ‘‘qualified biomass’’ (i.e., approaches for qualified biomass state plans, along with supporting a biomass feedstock that is feedstocks. As discussed in section analysis where applicable. The EPA will demonstrated as a method to control VIII.D.2, state plan submittals must review the appropriateness and basis for increases of CO2 levels in the such determinations and accounting include CO2 emission monitoring, atmosphere). The submission must also reporting and recordkeeping measures. measures in the course of its review of address the proposed valuation of In the case of sustainably-derived forest- a state plan. biogenic CO2 emissions (i.e., the and agriculture-derived feedstocks, this An affected EGU using qualified proposed portion of biogenic CO2 will also include measures for verifying biomass as a fuel must monitor and emissions from use of the biomass feedstock type, origin and associated report both its overall CO2 emissions feedstock that would not be counted sustainability practices. Section VIII.K and its biogenic CO2 emissions. If when demonstrating compliance with describes how state plan submittals biomass is to be used as means to an emission standard, or when must specify the requirements and control increases of CO2 levels in the demonstrating achievement of the CO2 procedures that EM&V measures must atmosphere in a state plan, the plan emission performance rates or a state meet. As discussed in section VIII.K, the must specify requirements for reporting rate-based or mass-based CO2 emission EPA is addressing potential EM&V biogenic CO2 emissions from affected goal). measures for qualified biomass in EPA’s EGUs. With regard to assessing qualified model trading rule and draft EM&V (4) Biomass repowering. biomass proposed in state plans, the guidance, such as measures that would EPA generally acknowledges the CO2 ensure that biomass-related biogenic Affected EGUs could fully repower to and climate policy benefits of waste- CO2 benefits are quantifiable, verifiable, use primarily qualified biomass. The derived biogenic feedstocks and certain non-duplicative, permanent and characteristics of affected EGUs, as forest- and agriculture-derived enforceable. discussed in section IV.D, include the State plan submittals must ensure that use of at least 10 percent fossil fuel for 911 As highlighted in a November 2014 all biomass used meets the state plan applicability of these emission memorandum to the EPA’s Regional Air Division guidelines. An EGU repowering with at Directors. www.epa.gov/climatechange/ requirements for qualified biomass and ghgemissions/biogenic-emissions.html. associated biogenic CO2 benefits, such least 90 percent biomass fuels instead of 912 www.epa.gov/sab. as using robust, independent third party fossil fuels becomes a non-affected

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00226 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64887

EGU.913 An EGU repowering with less EGUs. Unlike under a rate-based plan, budget trading program in a state plan than 90 percent biomass would remain no additional accounting is necessary in addresses affected EGUs and other fossil an affected EGU and therefore need to order to recognize these emission fuel-fired EGUs or emission sources, propose biomass feedstocks and reductions. pursuant to the approaches described in treatment of biogenic CO emissions in sections VIII.J.2.b–d below, the 2 2. Use of Emission Budget Trading state plans, along with supporting requirements that must be included in Programs analysis where applicable. the state plan are the federally This section addresses the use of enforceable emission standards in the J. Additional Considerations and emission budget trading programs in a state plan that apply specifically to Requirements for Mass-Based State mass-based state plan, including affected EGUs, and the requirements Plans provisions required for such programs that specifically require affected EGUs This section discusses considerations and the design of such programs in the to participate in and comply with the and requirements for different types of context of a state plan. This includes requirements of the emission budget mass-based state plans. This includes program design approaches that ensure trading program. This includes the mass-based state plans using emission achievement of a state mass-based CO2 requirement for an affected EGU to budget trading programs, and emission goal (or mass-based CO2 goal surrender emission allowances equal to coordination among such programs plus new source CO2 emission reported CO2 emissions, and meet where states retain individual mass CO2 complement) (section VIII.J.2.b), as well monitoring and reporting requirements emission goals. CAA section 111(d) as how states can use emission budget for CO2 emissions, among other requires states to submit, in part, a plan trading programs with broader source requirements. These requirements may that establishes standards of coverage and other flexibility features in be submitted as part of the federally performance for affected EGUs which a state plan, such as the programs enforceable state plan through reflect the BSER. The state plan must be currently implemented by California mechanisms with the appropriate legal satisfactory with respect to this and the RGGI participating states authority and effect, such as state requirement in order for the EPA to (section VIII.J.2.c). Section VIII.J.2.d regulations, Title V permit requirements approve the plan. As previously addresses other considerations for the for affected EGUs, and other possible described, states meet the statutory design of emission budget trading instruments that impose these requirements of 111(d) and the programs that states may want to requirements specifically with respect requirements of the final emission consider, such as allowance allocation to affected EGUs. Under this approach, guidelines by establishing emission approaches. Section VIII.J.3 addresses the full set of regulations establishing standards for affected EGUs that meet multi-state coordination among the emission budget trading program the performance rates, which reflect the emission budget trading programs used that applies to affected EGUs and other application of BSER as determined by in states that retain their individual fossil fuel-fired EGUs and other the EPA. This final rule allows states to state mass-based CO2 goals. emission sources (if relevant) must be alternatively establish emission a. State plan provisions required for a described as supporting documentation standards that meet rate-based or mass- mass-based emission budget trading in the state plan submittal for EPA to based goals. The state goals must be program approach. evaluate the approvability of the plan by equivalent to the performance rates in For a mass-based emission trading determining whether the affected EGUs order to reflect the application of the program approach, the state plan would will achieve the requisite goal. BSER as required by the statute and the include as its federally enforceable b. Requirement for emission budget final emission guidelines. Therefore, a emission standards requirements that trading programs to address potential state choosing a mass-based specify the emission budget and related leakage. implementation must address leakage as compliance requirements and In Section VII.D, the EPA specifies part of its mass-based plan in order to mechanisms. These requirements would that potential emission leakage must be satisfactorily establish emission include: CO2 emission monitoring, addressed in a state plan with mass- standards for affected EGUs that reflect reporting, and recordkeeping based emission standards. The EPA the BSER as set by the EPA. requirements for affected EGUs; received comments suggesting various provisions for state allocation of solutions to this concern, such as the 1. Accounting for CO 2 Emission allowances; provisions for tracking of inclusion of new sources under the rule Reduction Measures in Mass-Based allowances, from issuance through and quantitative adjustments to mass State Plans submission for compliance; and the CO2 goals for affected EGUs. In response As discussed in section VIII.I, process for affected EGUs to to this issue, the EPA has sought to give measures that occur at affected EGUs demonstrate compliance (allowance states flexibility in how they meet this will result in CO2 emission reductions ‘‘true-up’’ with reported CO2 emissions). requirement and base the acceptable that are automatically accounted for in Mass-based emission standards that take solutions on what will best suit a state’s reported CO2 emissions. Other measures the form of an emission budget trading unique characteristics and state plan that provide substitute generation for program must be quantifiable, verifiable, structure. affected EGUs or avoid the need for enforceable, non-duplicative and To address the potential for emission generation from affected EGUs, such as permanent. These requirements are leakage to new sources under a mass- demand-side EE, are automatically described in more detail at section based plan approach, which could accounted for under a mass-based plan VIII.D.2. prevent a mass-based program from to the extent that these measures reduce Where a state plan establishes mass- successfully achieving a mass-based reported CO2 emissions from affected based emission standards for affected CO2 goal consistent with BSER, the EPA EGUs only, the emission standards and is requiring that a state submitting a 913 For such an EGU to be considered non- the implementing and enforcing plan that is designed to meet a state affected, the EGU must be subject to a federally measures may be included in the state mass-based CO2 goal for affected EGUs enforceable or practically enforceable condition, expressed in (for example) a construction permit or plan as the full set of requirements demonstrate that the plan addresses and otherwise, that limits the amount of fossil fuel that implementing the emission budget mitigates the risk of potential emission may be used to 10 percent or less. trading program. Where an emission leakage to new sources. The following

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00227 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64888 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

options provide sufficient option, the mass-based plan includes standards for affected EGUs as part of demonstration that potential emission federally enforceable emission the mass-based state plan may be able leakage has been addressed in a mass- standards for affected EGUs, and the to submit a presumptively approvable based state plan: 914 supporting documentation for the plan plan. Such a plan would include 1. Regulate new non-affected fossil EGUs describes state-enforceable regulations federally enforceable emission as a matter of state law in conjunction with for, at a minimum, all new grid- standards for affected EGUs, and in the emission standards for affected EGUs in a connected fossil fuel-fired EGUs that supporting documentation of the plan, mass-based plan. If a state adopts an EPA- meet the applicability standards for would describe that the state is 915 provided mass budget that includes the EGUs subject to CAA section 111(b). regulating new sources under a mass state mass-based CO2 goal for affected EGUs States have the option of regulating a CO2 emission budget that is equal to or plus a new source CO2 emission wider array of sources if they choose, as complement, this option could be less than the state mass-based CO2 goal presumptively approvable. a matter of state law. for affected EGUs plus the EPA- 2. Use allocation methods in the state plan For this option, a state must adopt, as specified CO2 emission complement, in that counteract incentives to shift generation a matter of state law, a mass CO2 conjunction with the federally from affected EGUs to unaffected fossil-fired emission budget of sufficient size to enforceable emission standards for sources. If a state adopts allowance set-aside cover both affected EGUs under the provisions exactly as they are outlined in the affected EGUs. If the state plan is existing source mass CO2 goal provided designed to achieve the EPA provided finalized model rule, this option could be in this final rule, along with sufficient presumptively approvable. mass budget, plan performance will be 3. Provide a demonstration in the state CO2 emission tonnage to cover projected evaluated based on whether the existing plan, supported by analysis, that emission new sources. There are two pathways affected EGUs, regulated under the leakage is unlikely to occur due to unique that states can use for adopting such an federally enforceable state plan, and state characteristics or state plan design emission budget that applies to both new sources regulated as a matter of elements that address and mitigate the affected EGUs and new sources. The state law, together meet the total mass potential for emission leakage. EPA is providing a mass budget for each budget that includes the state’s mass In the first option, states may choose state that account for the state’s mass CO2 goal for affected EGUs and a to regulate new non-affected fossil fuel- CO2 goal for affected EGUs and a complementary emission budget for fired EGUs, as a matter of state law, in complementary emission budget for new sources. conjunction with federally enforceable new sources, referred to as the new emission standards for affected EGUs source CO2 emission complement. EPA-specified mass CO2 emission under a mass-based plan. This States that both adopt the EPA-provided budgets for each state, including the regulation of both new and existing mass budget, based on the state mass- state’s mass CO2 goal and a new source sources, as part of a state plan approach, based CO2 goal for affected EGUs plus CO2 emission complement, are provided is conceptually analogous to a method the new source CO2 emission in Table 14 below. The derivation of the that has been adopted by the mass-based complement, and regulate new sources new source CO2 emission complements systems adopted by California and the under this emission budget as a matter is explained in a TSD titled New Source RGGI participating states. To address of state law, in conjunction with Complements to Mass Goals, which is potential emission leakage under this federally enforceable emission available in the docket.

TABLE 14—NEW SOURCE COMPLEMENTS TO MASS GOALS

New source Mass goals 916 + new source complements complements State (short tons of CO2) (short tons of CO2) Interim Final Interim Final

Alabama ...... 856,524 755,700 63,066,812 57,636,174 Arizona ...... 1,424,998 2,209,446 34,486,994 32,380,197 Arkansas ...... 411,315 362,897 34,094,572 30,685,529 California ...... 2,846,529 4,413,516 53,873,603 52,823,635 Colorado ...... 1,239,916 1,922,478 34,627,799 31,822,874 Connecticut ...... 135,410 119,470 7,373,274 7,060,993 Delaware ...... 78,842 69,561 5,141,711 4,781,386 Florida ...... 1,753,276 1,546,891 114,738,005 106,641,595 Georgia ...... 677,284 597,559 51,603,368 46,944,404 Idaho ...... 94,266 146,158 1,644,407 1,639,013 Illinois ...... 818,349 722,018 75,619,224 67,199,174 Indiana ...... 939,343 828,769 86,556,407 76,942,604 Iowa ...... 298,934 263,745 28,553,345 25,281,881 Kansas ...... 260,683 229,997 25,120,015 22,220,822 Kentucky ...... 752,454 663,880 72,065,256 63,790,001 Louisiana ...... 484,308 427,299 39,794,622 35,854,321 Maine ...... 40,832 36,026 2,199,016 2,109,968 Maryland ...... 170,930 150,809 16,380,325 14,498,436 Massachusetts ...... 225,127 198,626 12,972,803 12,303,372 Michigan ...... 623,651 550,239 53,680,801 48,094,302 Minnesota ...... 286,535 252,806 25,720,126 22,931,173

914 915 916 The first two options need not be mutually In Table 14, we have provided a mass budget The state mass CO2 goals can be found in exclusive; they can both be implemented as part of for each state that includes the state mass-based Table 13 in section VII. a mass-based plan. CO2 goal and a projection for a new source CO2 emission complement.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00228 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64889

TABLE 14—NEW SOURCE COMPLEMENTS TO MASS GOALS—Continued

New source Mass goals 916 + new source complements complements State (short tons of CO2) (short tons of CO2) Interim Final Interim Final

Mississippi ...... 410,440 362,126 27,748,753 25,666,463 Missouri ...... 668,637 589,929 63,238,070 56,052,813 Montana ...... 421,674 653,801 13,213,003 11,956,908 Nebraska ...... 216,149 190,706 20,877,665 18,463,444 Nevada ...... 770,417 1,194,523 15,114,508 14,718,107 New Hampshire ...... 71,419 63,012 4,314,910 4,060,591 New Jersey ...... 313,526 276,619 17,739,906 16,876,364 New Mexico ...... 527,139 817,323 14,342,699 13,229,925 New York ...... 522,227 460,753 34,117,555 31,718,182 North Carolina ...... 692,091 610,623 57,678,116 51,876,856 North Dakota ...... 245,324 216,446 23,878,144 21,099,677 Ohio ...... 949,997 838,170 83,476,510 74,607,975 Oklahoma ...... 581,051 512,654 45,191,382 41,000,852 Oregon ...... 453,663 703,399 9,096,826 8,822,053 Pennsylvania ...... 1,257,336 1,109,330 100,588,162 90,931,637 Rhode Island ...... 70,035 61,791 3,727,420 3,584,016 South Carolina ...... 344,885 304,287 29,314,508 26,303,255 South Dakota ...... 46,513 41,038 3,995,462 3,580,518 Tennessee ...... 358,838 316,598 32,143,698 28,664,994 Texas ...... 5,328,758 8,516,408 213,419,599 198,105,249 Utah ...... 981,947 1,522,500 27,548,327 25,300,693 Virginia ...... 450,039 397,063 30,030,110 27,830,174 Washington ...... 531,761 824,490 12,211,467 11,563,662 West Virginia ...... 602,940 531,966 58,686,029 51,857,307 Wisconsin ...... 364,841 321,895 31,623,197 28,308,882 Wyoming ...... 1,185,554 1,838,190 36,965,606 33,472,602 Lands of the Navajo Nation ...... 809,562 1,255,217 25,367,354 22,955,804 Lands of the Uintah and Ouray Reservation ...... 84,440 130,923 2,645,885 2,394,354 Lands of the Fort Mojave Tribe ...... 37,162 57,619 648,264 646,138

Total ...... 33,717,871 41,187,289 1,878,255,620 1,709,291,348

States can, in the alternative, provide mass-based CO2 goal. If, rather than be considered presumptively their own projections for a new source designing a plan to achieve the EPA approvable. The allowance allocation CO2 emission complement to their provided mass budget, the state uses its alternative for addressing leakage was mass-based CO2 goals for affected EGUs. own projections for a new source chosen for the federal plan and model In the supporting documentation for the complement and the plan is approved to rule proposal because EPA does not state plan submittal, the state must meet this new source complement, plan have authority to extend regulation of specify the new source budget, specify performance will be evaluated based on and federal enforceability to new fossil the analysis used to derive such a new whether the existing affected EGUs, fuel-fired sources under CAA section source CO2 emission complement, and regulated under the federally 111(d), and therefore we cannot include demonstrate that under the state plan enforceable state plan, meet the state’s them under a federal mass-based plan affected EGUs in the state will meet the mass CO2 goal for affected EGUs. approach. state mass-based CO2 goal for affected The second demonstration option An updating output-based allocation EGUs as a result of being regulated allows states to use allowance allocation method allocates a portion of the total under the broader CO2 emission cap that methods that counteract incentives to CO2 emission budget to affected EGUs applied to both affected EGUs and new shift generation from affected EGUs to based, in part, on their level of sources. Such a projection should take unaffected fossil-fired sources. These electricity generation in a recent period into account the mass goal allocation approaches must be specified or periods. Therefore, the total quantification method outlined in in state plans as part of the provisions allocation to an EGU that is eligible to section VII.C and the CO2 Emission for state allocation of allowances receive allowances from an output- Performance Rate and Goal required under a mass-based plan based allowance set-aside is not fixed, Computation TSD, including the fact approach (see section VIII.J.2.a). The but instead depends on its generation. that the mass-based state goals already EPA is proposing the inclusion of two Under this approach, each eligible incorporate a significant growth in allocation strategies as part of the mass- affected EGU may receive a larger generation from historical levels. The based approach in the proposed federal allowance allocation if it generates EPA will evaluate the approvability of plan and model rule: Updating output- more. Therefore, eligible affected EGUs the plan based on whether the federally based allocations and an allowance set- will have an incentive to generate more enforceable emission standards for aside that targets RE. These options are in order to receive more allowances, affected EGUs in conjunction with the described in more detail below. If a state aligning their incentive to generate with state-enforceable regulatory were to adopt allowance set-aside new sources. requirements for new sources will result provisions exactly as they are outlined This allocation method can be in the affected EGUs meeting the state in the finalized model rule, they could implemented through the creation of a

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00229 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64890 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

set-aside that reserves a subset of the VIII.L. That section also describes how affected EGUs (or for affected EGUs plus total allowances available to sources, the EPA has structured this final rule to new fossil fuel-fired EGUs meeting and distributes them based upon the either prevent or minimize the potential applicable requirements under state criteria described above. Because the for foregone emission reductions from law) would also be aligned with the total number of allowances is limited, differential incentives that may result interim and final plan performance this allocation approach will not exceed from state plan implementation. These periods. This approach would limit total the overall state mass-based CO2 goal for safeguards include placing restrictions CO2 emissions from affected EGUs (or affected EGUs. Instead, it merely on interstate trading when there could total CO2 emissions from affected EGUs modifies the distribution of allowances be a risk of such differential incentives. and new fossil fuel-fired EGUs meeting in a manner designed to mitigate Additionally, the nature of the CO2 applicable requirements under state potential emission leakage. emission performance rates and state law) during the interim and final plan The other allocation strategy included rate-based CO2 goals helps to minimize performance periods to an amount equal as part of the mass-based approach in these potential effects, as does the to or less than the state’s mass-based the proposed federal plan and model MWh-accounting method for adjusting CO2 goal (or mass-based CO2 goal plus rule is a set-aside of allowances to be the CO2 emission rates of affected EGUs new source CO2 emission complement). allocated to providers of incremental under rate-based plans. Under this approach, compliance by RE. A set-aside can also be allocated to However, without a better affected EGUs with the mass-based providers of demand-side EE, or to both understanding of the different emission standards in a plan would RE and demand-side EE. The increased mechanisms that states may ultimately ensure that the state achieves its mass- availability of RE generation can serve choose to meet the emission guidelines, based CO2 goal for affected EGUs (or as another source of generation to satisfy and how different requirements in mass-based CO2 goal plus new source electricity demand. Increased demand- different states may interact, the EPA CO2 emission complement). No further side EE will reduce the demand that cannot project every potential demonstration would be necessary by sources need to meet. Therefore, both differential incentive that could lead to the state to demonstrate that its plan RE and demand-side EE can serve to a loss of CO2 emission reductions. would achieve the state’s mass-based reduce the incentive that new sources Therefore, once program CO2 goal (or mass-based CO2 goal plus have to generate, and therefore align implementation begins, the EPA will new source CO2 emission complement). their incentives with affected EGUs. assess how emission performance across For this type of plan, where the Thus, increased RE and demand-side states may be affected by the interaction emission budget is equal to or less than EE, supported by a dedicated set-aside, of different regulatory structures the state mass CO2 goal (or mass-based can also serve to address potential implemented through state plans. Based CO2 goal plus new source CO2 emission emission leakage. upon that evaluation, the EPA will complement),917 the EPA would assess If a state is submitting a plan with an determine whether there are potential achievement of the state goal based on allocations approach that differs from concerns and what course of action may compliance by affected EGUs with the that of the finalized model rule, the state be appropriate to remedy such concerns. mass-based emission standards, rather should also provide a demonstration of c. Emission budget trading programs than reported CO2 emissions by affected how the specified allocation method that ensure achievement of a state CO2 EGUs during the interim plan will provide sufficient incentive to goal. performance periods and final plan A mass-based emission budget trading counteract potential emission leakage. performance periods. This approach Finally, a state can provide a program can be designed such that would allow for allowance banking demonstration that emission leakage is compliance by affected EGUs will between performance periods, including unlikely to occur, without achieve the state mass-based CO goal. 2 the interim and final performance implementing either of the two Under this approach, a state plan would periods outlined in this final rule. strategies above, as a result of unique establish CO emission budgets for 2 Banking provisions have been used factors, such as the presence of existing affected EGUs during the interim and extensively in rate-based environmental state policies addressing emission final plan performance periods that are programs and mass-based emission leakage or unique characteristics of the equal to or lower than the applicable budget trading programs. This is state and its power sector that will state mass-based CO goals specified in 2 because banking reduces the cost of mitigate the potential for emission section VII. A mass-based emission attaining the requirements of the leakage. This demonstration must be budget trading program can also be supported by credible analysis. The EPA designed such that compliance by regulation. The EPA has determined will determine if the state has provided affected EGUs in conjunction with new that the same rationale and outcomes a sufficient demonstration that potential fossil fuel-fired EGUs meeting apply under a CO2 emission rate emission leakage has already been applicable requirements under state law approach, in that allowing banking will reduce compliance costs. Banking adequately addressed, or if additional will achieve a mass-based CO2 goal plus encourages additional emission action is required as part of the state new source CO2 emission complement. plan. Under this approach, a state would reductions in the near-term if economic to meet a long-term emission rate Aside from the possible incentives for establish CO2 emission budgets under emission leakage addressed in this state law for affected EGUs plus new constraint, which is beneficial due to section, there may be other potential sources during the interim and final social preferences for environmental generation incentives across states and plan performance periods that are equal improvements sooner rather than later. unit subcategories that could increase to or lower than the applicable state It is also beneficial when addressing pollutants that are long-lived in the CO2 emissions, particularly in an mass-based CO2 emission goal plus the atmosphere, such as CO2, and where environment where various states are new source CO2 emission complement implementing a variety of state plan specified in Table 14 in section VIII.J.2.b increasing atmospheric concentration of approaches in a shared grid region. above, and describe such emission 917 As specified for the interim plan performance Some examples of these incentives, budgets in the supporting period (including specified levels in interim steps particularly those that were specified by documentation of the state plan. Under 1 through 3) and the final two-year plan commenters, are discussed in section either program, compliance periods for performance periods.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00230 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64891

the pollutant leads to increasing adverse standards in the state plan that apply budget in certain circumstances, atmospheric impacts. specifically to affected EGUs, and the compliance by affected EGUs with the Banking also provides long-term requirements that specifically require mass-based emission standards would economic signals to affected emission affected EGUs to participate in and not necessarily ensure that CO2 sources and other market participants comply with the requirements of the emissions from affected EGUs do not where actions taken today will have emission budget trading program. This exceed the state’s mass-based CO2 goal economic value in helping meet tighter includes the requirement for an affected (or mass-based CO2 goal plus new emission constraints in the future, EGU to surrender emission allowances source CO2 emission complement). provided those emission sources expect equal to reported CO2 emissions, and However, states could modify such that the banked ERCs or emission meet monitoring and reporting programs to remove flexibility allowances may be used for compliance requirements for CO2 emissions, among mechanisms that functionally expand in the future. Linking short-term and other requirements. These requirements the emission budget, such as out-of- long-term economic incentives, which may be submitted as part of the sector offsets and certain cost allows owners or operators of affected federally enforceable state plan through containment reserve mechanisms, and EGUs and other market participants to mechanisms with the appropriate legal submit the program under an emission assess both short-term and long-term authority and effect, such as state standards plan type. incentives when making decisions about regulations, relevant Title V permit Where a state chooses to retain such compliance approaches or emission requirements for affected EGUs, and flexibility mechanisms as part of an reduction investments, reduces long- other possible instruments that impose emission budget trading program, the term compliance costs for affected EGUs these requirements specifically with program may only be implemented as and ratepayer impacts. In addition, the respect to affected EGUs.919 Under this part of a state measures plan type increased temporal flexibility provided approach, the full set of regulations because these state flexibility by banking would further help address establishing the emission budget trading mechanisms would not assure CO2 potential electric reliability concerns, as program that applies to affected EGUs emissions from affected EGUs do not banked ERCs can be used to meet and other fossil fuel-fired EGUs and exceed the state’s mass-based CO2 goal emission standard requirements for an other emission sources (if relevant) must (or mass-based CO2 goal plus new affected EGU. be described as supporting source CO2 emission complement). A d. Addressing emission budget trading documentation in the state plan description of the state measures plan programs with broader source coverage submittal. This structure is appropriate type and related requirements is and other flexibility features. to ensure that states with an emission provided in section VIII.C.3. As described in section VIII.C above, budget trading program that addresses Under this type of approach, the state under the emission standards plan type, both affected EGUs and other fossil fuel- would be required to include a a mass-based emission budget trading fired EGUs do not inappropriately demonstration,921 in its state plan program with broader source coverage submit requirements regarding entities and other flexibility features may be submittal, of how its state measures, in other than affected EGUs for inclusion designed such that compliance by conjunction with any emission in the federally enforceable state plan. standards on affected EGUs, would affected EGUs (or compliance by Such state programs could include a affected EGUs plus new fossil fuel-fired achieve the state mass-based CO2 goal number of different design elements. (or mass-based CO2 goal plus new EGUs meeting applicable requirements This includes broader program scope, under state law) would assure source CO2 emission complement). This where a program includes other demonstration would include a achievement of the applicable state emission sources beyond affected EGUs projection of the total CO2 emissions mass-based CO2 goal (or mass-based CO2 subject to CAA section 111(d) and new goal plus new source CO emission from the fleet of affected EGUs that 2 fossil fuel-fired EGUs, such as industrial complement).918 would occur as a result of compliance sources. Programs might also include However, emission budget trading with the emission standards in the plan. programs, including those currently design elements that make allowances Section VIII.D.2 discusses how such implemented by California and the available in addition to the established demonstrations could address design RGGI participating states, include a emission budget. This includes project- elements of emission budget trading number of different design elements that based offset allowances or credits from programs with broader scope and functionally expand the emission GHG emission reduction projects additional compliance flexibility budget under certain circumstances. If a outside the covered sector and cost mechanisms, such as those included in state chose, it could apply such mass- containment reserve provisions that the California and RGGI programs. Once based emission standards, in the form of make additional allowances available at the plan is implemented, if the mass- 920 an emission budget trading program that specified allowance prices. based CO2 goal is not achieved during differs in design from that outlined in In the case where an emission budget a plan performance period, the backstop section VIII.J.2.c above. These types of trading program contains elements that federally enforceable emission emission budget trading programs must functionally expand the emission standards included in the state plan that be submitted as a part of a state apply to affected EGUs would be 919 measures plan type. Where an emission This approach for establishing federally implemented, as described in section enforceable emission standards based on 922 budget trading program addresses requirements for affected EGUs subject to a broader VIII.C.3.b. affected EGUs and other fossil fuel-fired emission budget trading program that also covers EGUs, the requirements that must be non-affected emission sources is addressed in 921 A demonstration of how a plan will achieve included in the state plan are the section VIII.J.2.d. above. a state’s rate-based or mass-based CO2 goal (or mass- 920 For example, both the California and RGGI based CO2 goal plus new source CO2 emission federally enforceable emission programs allow for the use of allowances awarded complement) is one of the required plan to GHG offset projects to be used to meet a specified components, as described in section VIII.D.2. 922 918 Section VIII.J.2.a describes how state plan portion of an affected emission source’s compliance Achievement of the state mass-based CO2 goal submittals must include as requirements, or obligation. The RGGI program contains a cost would be determined based solely on stack CO2 describe as part of supporting documentation, containment allowance reserve that makes available emissions from affected EGUs. Where a state relevant aspects of such emission budget trading additional allowances up to a certain amount, at program includes the ability of an affected emission programs. specified allowance price triggers. Continued

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00231 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64892 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

e. Considerations for mass-based administers, including the Acid Rain system.925 State plans using a specified emission budget trading programs. Program (70 FR 25162), Clean Air EPA-approved tracking system would be The EPA notes that while an emission Interstate Rule (70 FR 25162), and deemed by the EPA as ready for budget trading program included in an Cross-State Air Pollution Rule (76 FR interstate linkage upon approval of the emission standards plan must be 48208). Under this approach, states state plan. No additional EPA approval designed to achieve a state mass-based would still track reported unit-level CO2 would be necessary for states to link CO2 goal (or mass-based CO2 goal plus emissions—while evaluating their emission budget trading programs, new source CO2 emission complement), compliance at the facility level— and affected EGUs in those states could states have wide discretion in the design allowing them to track increases and engage in interstate trading subsequent of such programs, provided the decreases of CO2 emissions at to EPA plan approval. emission standards included in the plan individual EGUs. A state would indicate in its plan are quantifiable, verifiable, enforceable, 3. Multi-state coordination: Mass- submittal that its emission budget non-duplicative, and permanent. based emission trading programs. trading system will use a specified EPA- (1) Allowance allocation. A key An individual state may provide for approved tracking system. The state example is state discretion in the CO2 the use of CO2 allowances issued by would also indicate in the regulatory allowance allocation methods included another state(s) for compliance with the provisions for its emission budget in the program.923 This includes the mass-based emission standards in its trading program that it would recognize methods used to distribute CO2 plan. This type of state plan would as usable for compliance any emission allowances and the parties to which include requirements that enable allowance issued by any other state with allowances are distributed. For example, affected EGUs to use allowances issued an EPA-approved state plan that also if a state chose, it could include CO2 in other states for compliance under the uses the specified EPA-approved allowance allocation provisions that state’s emission budget trading program. tracking system. provide incentives for certain types of This type of state plan must also States could also adopt such a complementary activities, such as RE indicate how CO2 allowances will be collaborative emission trading approach generation, that help achieve the overall tracked from issuance through use for over time (through appropriate state CO2 emission limit for affected EGUs compliance, through either a joint plan revisions if the plan is not already established under the program. In tracking system, interoperable tracking structured as ready-for-interstate- addition, a state could use its allocation systems, or use of an EPA-administered trading), without requiring all of the provisions to encourage investments in tracking system.924 original participating states to revise RE and demand-side EE in low-income Two different implementation their EPA-approved plans. communities. States could also use CO2 approaches could be used to create such Under the second implementation allowance allocation provisions to links. A state could submit a ‘‘ready-for- approach, a state could specify the other provide incentives for early action, such interstate-trading’’ plan using an EPA- states from which it would recognize as RE generation or demand-side EE approved tracking system, but the plan issued emission allowances as usable savings that occur prior to the beginning would not identify links with other for compliance with its emission budget of the interim plan performance period states. A state could also submit a plan trading program. The state would in 2022. For example, a state could with specified bilateral or multilateral indicate in the regulatory provisions for include CO2 allowance allocation links that explicitly identify partner its emission budget trading program that provisions where CO2 allowances are states. emission allowances issued in other distributed to RE generators based on Interstate allowance linkages would identified partner states may be used by MWh of RE generation that occurs prior not affect the approvability of each affected EGUs for compliance. Such to 2022. Such provisions might be state’s individual plan. However, plans must indicate how allowances addressed through a finite set-aside of different considerations apply for the will be tracked from issuance through CO2 allowances that are available for approvability of an individual plan with use for compliance, through either a allocation under these provisions. This such links, based on whether the joint tracking system, interoperable set-aside could be additional to a set- emission budget trading program in the tracking systems, or EPA-administered aside created by the state for the CEIP plan applies only to affected EGUs or tracking system. The EPA would assess discussed in section VIII.B.2. includes other emission sources, and if the design and functionality of this (2) Facility-level compliance. If a state the plan is designed to meet a state tracking system(s) when reviewing chose, it could evaluate compliance mass-based CO2 goal for affected EGUs individual submitted state plans. (i.e., allowance true-up) under its only or to meet a mass-based CO2 goal Under this approach, states could also emission budget trading program at the plus a new source CO2 emission join such a collaborative emission facility level, rather than at the complement). trading approach over time. However, individual unit level. The EPA has Under the first ‘‘ready-for-interstate- all participating states would need to adopted facility-level compliance in the trading’’ implementation approach, a revise their EPA-approved plans. If the emission budget-trading programs it state would indicate in its state plan expanded linkage is among previously that its emission budget trading program source to use GHG offsets to meet a portion of its approved plans with mass-based will be administered using an EPA- emission standards, approval of the plan allowance compliance obligation, no ‘‘credit’’ is approved (or EPA-administered) applied to reported CO2 emissions by the affected revision would be limited to assessing EGU. The use of offset allowances or credits in such emission and allowance tracking the functionality of the shared tracking programs merely allows an affected EGU to emit a system or interoperable tracking systems ton of CO2 in the amount of submitted offset 924 The emission standards in each individual allowances or credits. In all cases, there is no state plan must include requirements that address 925 adjustment applied to reported stack emissions of the issuance of CO2 allowances and tracking of CO2 The EPA would designate tracking systems CO2 from an affected EGU when determining allowances from issuance through use for that it has determined adequately address the compliance with its emission limit. compliance. The description here addresses how integrity elements necessary for the issuance and 923 Allowance allocation refers to the methods those requirements will be implemented through tracking of emission allowances. Under this used to distribute CO2 allowances to the owners or the use of a joint tracking system, interoperable approach, a state could include in its plan such a operators of affected EGUs and/or other market tracking systems, or an EPA-administered tracking designated tracking system, which has already been participants. system. reviewed by the EPA.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00232 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64893

in order to maintain the integrity of the new source CO2 emission complement). standard, rather than reported CO2 926 linked programs. CO2 emissions from affected EGUs in emissions from affected EGUs. a. Considerations for linked emission both states could not exceed the total (2) Links with emission budget trading budget trading programs. combined CO2 emission budgets under programs that include a broader set of For individually submitted plans, the emission standards in the two states. emission sources. State plans may interstate emission allowance linkages A net ‘‘import’’ of CO2 allowances from involve emission budget trading would not affect the approvability of one state would mean that allowable programs that include affected EGUs, each state’s plan. However, CO2 emissions in the other net applicable new fossil fuel-fired EGUs if approvability of an individual linked ‘‘exporting’’ state are less than that a plan includes a new source CO2 plan would differ based on the structure state’s established emission budget. On emission complement, and other non- 929 of the emission budget trading program a multi-state basis, CO2 emissions from affected emission sources. included in the plan. These differences affected EGUs could not exceed the sum Generally, such plans must for plan approvability address of the states’ emission budgets. demonstrate that the mass-based CO2 distinctions among programs that goal for affected EGUs (or mass-based Under this approach, if the emission include only affected EGUs and CO goal plus new source CO emission budget for the mass-based emission 2 2 programs that cover a broader set of complement) in a state will be achieved, standard in each plan is equal to or emission sources, as well as if the plan as a result of implementation of the lower than the state’s mass-based CO is designed to meet a state mass-based 2 emission budget trading program.930 goal (or aggregated mass-based CO goal CO goal for affected EGUs only or to 2 Where a program includes other non- 2 plus new source CO emission meet a mass-based CO goal plus a new 2 affected emission sources (i.e., non- 2 complement, if applicable), compliance source CO emission complement. affected emission sources that are not 2 by affected EGUs with the mass Differences in approval criteria are subject to a new source CO emission emission standard in a state 927 would 2 necessary to ensure that each individual complement) and is linked with other ensure that cumulatively the mass CO state plan demonstrates it will achieve 2 programs,931 the state plan submittal goals (or mass-based CO goals plus new a state’s mass-based CO emission goal 2 must include a demonstration that the 2 source CO emission complements) of for affected EGUs (or mass-based CO 2 mass-based CO goal (or mass-based CO 2 the linked states are achieved. As a 2 2 goal plus new source CO emission goal plus new source CO emission 2 result, achievement of an individual 2 complement). The accounting applied to complement) will be achieved, state’s mass CO goal (or mass-based individual plans to assess whether a 2 considering the emission allowance CO goal plus new source CO emission state achieves its mass-based CO goal 2 2 links with other programs. The EPA, in 2 complement) would be assessed by the (or mass-based CO goal plus new determining the approvability of each 2 EPA based on compliance by affected source CO emission complement) will state’s plan under this approach, would 2 EGUs with the mass-based emission also differ, based on whether an evaluate the linkages between plans. standards in the state plan, rather than emission budget trading program Specifically, the EPA would evaluate reported CO emissions by affected includes only affected EGUs (or affected 2 whether the linkages would enable the EGUs in the state.928 EGUs and applicable new fossil fuel- affected EGUs (or affected EGUs in fired EGUs) or a broader set of emission The same accounting approach will conjunction with applicable new fossil sources. These considerations are apply for such plans in all cases, even fuel-fired EGUs) in each participating addressed below, for both types of if the state is linked to another state state to meet the state’s applicable mass- emission budget trading program that emission budget trading programs. based CO2 goal (or mass-based CO2 goal includes a broader set of emission (1) Links among emission budget plus new source CO2 emission trading programs that only include sources (e.g., sources beyond affected complement). affected EGUs or affected EGUs and EGUs, or beyond affected EGUs plus During plan implementation, the EPA applicable new fossil fuel-fired EGUs. applicable new fossil fuel-fired EGUs), would assess whether the affected EGUs Where the emission budget trading as described below. In all cases, where in a state achieved the state’s mass- programs in each plan apply only to a state plan includes an emission budget based CO2 goal (or mass-based CO2 goal affected EGUs subject to the final rule trading program that applies only to plus new source CO2 emission (or emission budget trading programs affected EGUs (or beyond affected EGUs complement) as follows. Reported CO2 that apply to affected EGUs under the plus applicable new fossil fuel-fired state plan and applicable new fossil EGUs), and includes compliance 929 This may apply under both an emission fuel-fired EGUs under state law), and timeframes that align with plan standards plan and a state measures plan. Section include compliance timeframes for performance periods, achievement of a VIII.J.2.a describes how state plan submissions must include as requirements, or describe as part of affected EGUs that align with the state mass CO2 goal (or mass-based CO2 supporting documentation, relevant aspects of such interim and final plan performance goal plus new source CO2 emission emission budget trading programs. periods, both plans would functionally complement) will be assessed by the 930 Under a program that applies to affected EGUs be meeting an aggregated multi-state EPA based on whether affected EGUs and other emission sources, compliance by affected comply with the mass-based emission EGUs with the emission standard—a requirement to mass-based goal (or aggregated mass- surrender emission allowances equal to reported based CO2 goal plus new source CO2 emissions—will not assure that a state’s CO2 mass 927 emission complement), but without Compliance by an affected EGU with the goal (or mass-based CO2 goal plus new source CO2 formally aggregating the goal (or emission standard is demonstrated based on emission complement) is achieved. As a result, a surrender to the state of a number of CO2 further demonstration is required in the plan that aggregated mass-based CO2 goal plus allowances equal to its reported CO2 emissions. compliance by affected EGUs with the program will 928 This approach is warranted because under result in CO2 emissions from affected EGUs that are 926 Depending on the specific regulatory such linked programs, CO2 emissions from affected at or below a state’s CO2 mass goal (or mass-based provisions in the emission standards in their EGUs in one state that exceed a state’s mass CO2 CO2 goal plus new source CO2 emission approved state plans, participating states may also goal (or mass-based CO2 goal plus new source CO2 complement). need to revise their implementing regulations (and emission complement) would be accompanied by 931 Section VIII.J.2.a describes how state plan by extension their state plans) to accept CO2 CO2 emissions from affected EGUs in another submittals must include as requirements, or emission allowances issued by new partner states linked state that are below that state’s mass CO2 describe as part of supporting documentation, as usable for compliance with their mass-based goal (or mass-based CO2 goal plus new source CO2 relevant aspects of such emission budget trading emission standards. emission complement). programs.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00233 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64894 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

emissions from affected EGUs under transfer is determined based on approaches and requirements for such plans must be at or below a state’s compliance account holdings at the end coordination among such programs 933 mass-based CO2 emission goal (or mass- of the plan performance period. For where states retain individual state rate- based CO2 goal plus new source CO2 example, assume two states, State A and based CO2 emission goals. emission complement) during an State B, with emission budgets of 1,000 1. Adjustments to CO2 Emission Rates in identified plan performance period, tons of CO2. Each state issues 1,000 CO2 with the following state accounting allowances. At the end of a plan Rate-Based State Plans adjustments for net ‘‘import’’ and net performance period, affected EGUs in Section VIII.K.1.a below describes the ‘‘export’’ of CO2 allowances: State A collectively hold 500 CO2 basic accounting method for adjusting a allowances in their compliance CO2 emission rate, as well as eligibility • Net ‘‘imports’’ of CO2 allowances: Reported CO2 emissions from affected EGUs accounts that were issued by State A. requirements for measures that may be in a state may exceed the state CO2 mass goal Affected EGUs in State B collectively used for adjusting a CO2 emission rate. (or mass-based CO2 goal plus new source CO2 hold in their compliance accounts 500 Section VIII.K.1.b addresses measures emission complement) during an identified CO2 allowances issued by State A and that may not be used to adjust the CO2 plan performance period in the amount of an 1,000 CO2 allowances issued by State B. emission rate of an affected EGU in a adjustment for the net ‘‘imported’’ CO2 In this simplified example, a net transfer state plan, and explains the basis for allowances during the plan performance of 500 CO2 allowances has occurred this exclusion. Section VIII.K.1.c period. The adjustment represents the CO2 emissions (in tons) equal to the number of between State A and State B. State A has addresses measures that reduce CO2 net ‘‘imported’’ CO2 allowances. Under this ‘‘exported’’ 500 CO2 allowances to State emissions outside the electric power adjustment, such allowances must be issued B, while State B has ‘‘imported’’ 500 sector. Such measures may not be by a state with an emission budget trading CO2 allowances from state A. counted under either a rate-based or program that only applies to affected EGUs mass-based state plan. K. Additional Considerations and (or affected EGUs plus applicable new fossil a. Measures taken to adjust the CO2 Requirements for Rate-Based State fuel-fired EGUs). Net ‘‘imports’’ of emission rate of an affected EGU. This allowances are determined through review of Plans section describes how measures that tracking system compliance accounts. This section discusses considerations • Net ‘‘exports’’ of CO2 allowances: substitute for generation from affected and requirements for rate-based state Reported CO2 emissions from affected EGUs EGUs or avoid the need for generation in a state during an identified plan plans. This section discusses eligibility, from affected EGUs may be used in a performance period must be equal to or less accounting, and quantification and state plan to adjust the CO2 emission than the CO2 mass goal (or mass-based CO2 verification requirements (EM&V) for rate of an affected EGU. This section goal plus new source CO2 emission the use of CO2 emission reduction discusses the required accounting complement) minus an adjustment for the measures that provide substitute method for adjusting a CO emission ‘‘exported’’ CO allowances during the plan 2 2 generation for affected EGUs or avoid rate, as well as general eligibility performance period. The adjustment the need for generation from affected represents CO emissions (in tons) equal to requirements that apply to different 2 EGUs in rate-based state plans. These the number of net ‘‘exported’’ CO2 categories of measures that may be used measures may be used to adjust the CO allowances. Net ‘‘exports’’ of allowances are 2 to adjust a CO2 emission rate. Where determined through review of tracking emission rate of an affected EGU under relevant, this section also discusses system compliance accounts. a rate-based state plan. This adjustment additional specific accounting methods may occur when an affected EGU is Where CO2 emissions from affected and other relevant requirements that EGUs exceed these levels (based on demonstrating compliance with a rate- apply to different categories of based emission standard, or when a reported CO2 emissions with applied measures. state is demonstrating achievement of plus or minus adjustments for net CO2 A CO2 emission rate adjustment may allowance ‘‘imports’’ or ‘‘exports’’) over the CO2 emission performance rates or be applied in different rate-based state the 8-year interim period or during any applicable rate-based state CO2 emission plan contexts. For example, in a rate- final plan reporting period, or by 10 goal in the emission guidelines. This based emission trading program, percent or more during the interim step section also discusses requirements for adjustments may be applied through the 1 or step 2 periods, a state would be state plans that include rate-based use of ERCs.934 Regardless of the type of considered to, in the case of the interim emission trading programs, including plan in which an adjustment is applied, and final periods, not have met its CO2 the same basic accounting and general as of a specified date is necessary because multiple mass goal during an identified plan individual allowance transfers may occur among eligibility requirements described in performance period, and in the case of accounts during a plan performance period, this section will apply. the interim step periods, to not be on representing normal trading activity. In addition, As discussed in this section, a wide course to meet the final goal. As a result, net transfers are based on compliance account range of actions may be taken to adjust holdings, because these represent the CO2 under a state measures state plan, allowances directly available at that point in time the reported CO2 emission rate of an implementation of the backstop for use by an affected EGU for complying with its affected EGU in order to meet a rate- federally enforceable emission emission limit. Emission budget trading programs based emission standard and/or standards for affected EGUs in the state typically allow non-affected entities to hold demonstrate achievement of a state CO allowances in general accounts. These parties are 2 plan would be triggered. free to hold and trade CO2 allowances, providing rate-based emissions goal. All of the A net transfer of CO2 allowances market liquidity. General account holdings are not measures described in this section will during a plan performance period assessed as part of a periodic state net transfer substitute for generation from affected accounting, as these allowances may subsequently represents the net number of CO2 be transferred to other accounts in multiple states EGUs or avoid the need for generation allowances (issued by a respective state) and do not represent allowances currently held by that are transferred from the compliance an affected EGU that can be used for complying 934 ERCs may be issued for the measures accounts of affected EGUs in that state with its emission limit. presented in this section, as well as to affected to the compliance accounts of affected 933 Compliance account holdings, as used here, EGUs that emit at a CO2 emission rate below their 932 refer to the number of CO2 allowances surrendered assigned emission rate limit. ERC issuance and EGUs in another state. This net for compliance during a plan performance period, trading is discussed in detail in section VIII.K.2. as well as any remaining CO2 allowances held in That section addresses the accounting method for 932 A net transfer metric is applied as of the end a compliance account as of the end of a plan ERC issuance to affected EGUs that perform below of the plan performance period. This net accounting performance period. their assigned CO2 emission rate.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00234 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64895

937 from affected EGUs, thereby reducing or low-emitting generation for standard rate. The CO2 emission CO2 emissions. This includes generation from affected EGUs, or by performance rates or rate-based CO2 goal incremental NGCC and RE measures avoiding the need for generation in the emission guidelines are met if the included in the EPA’s determination of altogether (in the case of resources that adjusted CO2 emission rate of affected the BSER, as well as other measures that lower electricity demand through EGUs in a state is at or below the were not included in the determination improved demand-side EE and DSM). In specified CO2 emission rate in a state of the BSER, such as other RE resources, both of these cases, generation from an plan that applies for an identified plan demand-side EE, CHP, WHP, electricity affected EGU is replaced, through performance period. transmission and distribution substitute generation or a reduction in Numerous commenters requested that improvements, nuclear energy, and electricity demand. To the extent that the EPA ensure consistency between international RE imports connected to qualifying zero-emitting and low- goal-setting calculations and the the grid in the contiguous U.S., as emitting resources result in reduced methodology used to demonstrate discussed elsewhere in this preamble. generation and CO2 emissions from an achievement of a CO2 emission rate The EPA believes that the broad individual affected EGU, those emission under a state plan. This approach for categories of measures listed in this impacts are reflected in lower reported adjusting a CO2 emission rate section address the wide range of CO2 emissions and a reduction in MWh corresponds with how RE, one of the actions that are available to reduce CO2 generation from the affected EGU. components of the BSER that involves emissions from affected EGUs under a However, while there will be a adjustment of a CO2 emission rate, is rate-based state plan. However, the reduction in CO2 emissions at the represented in the CO2 emission actions that a state could include in a affected EGU, the fact that both CO2 performance rates in the emission rate-based state plan are not necessarily emissions and MWh generation are guidelines. Specifically, in the limited to those described in this reduced means that such impacts do not calculation of final CO2 emission section. Other specific actions not listed alter the reported CO2 emission rate of performance rates, the MWhs of RE are here may be incorporated in a state the affected EGU. As a result, the MWh reflected in two adjustments of the rate: plan, provided they meet the general of replacement generation must be A reduction of CO2 emissions from eligibility requirements listed in this added to the denominator of the affected EGUs in the numerator and a section, as well as the other relevant reported CO2 emission rate in order to one-to-one replacement of affected EGU requirements in the emission represent those impacts in the form of generation in the denominator, where it 935 guidelines. Nor are states required to an adjusted CO2 emission rate. In this is assumed that replaced generation include in their plans all of the actions manner, adding MWh from these from an affected EGU is subtracted from that are described in this section. resources to the denominator of an the denominator and the same number This section discusses the basic 938 affected EGU’s CO2 emission rate allows of zero-emitting MWh are added. accounting method for adjusting the mass CO2 emission reductions from When demonstrating achievement of a reported CO2 emission rate of an these measures to be fully reflected in CO2 emission performance rate, the affected EGU, through the use of an adjusted CO2 emission rate. reported CO2 emissions already reflect measures that substitute for or avoid The following provides a simple the actual emission reductions from the generation from affected EGUs. That calculation example of how MWh of deployment of qualifying zero-emitting method is based on adding MWh from replacement generation added to the and low-emitting resources across the such measures to the denominator of an denominator of an affected EGU’s regional grid; a further adjustment of affected EGU’s reported CO2 emission reported CO2 emission rate results in a CO2 emissions would double count CO2 rate (lb CO2/MWh). Those additional lower adjusted CO2 emission rate. emissions impacts across the grid. MWh are based on quantified and Assume an affected EGU with CO2 Consistent with the EPA’s calculation of verified electricity generation or emissions of 200,000 lb and electric the CO2 emission performance rates and electricity savings from eligible generation of 100 MWh during a state rate-based CO2 goals in the measures, and in the case of an affected reporting period. The affected EGU’s emission guidelines, the zero-emitting EGU’s compliance with its emission reported CO2 emission rate is 2,000 lb/ MWhs (from substitute generation or a standard, are reflected in ERCs. This MWh (200,000 lb CO2/100 MWh = 2,000 reduction in electricity demand) must section also addresses eligibility lb/MWh). When complying with its still be added to the denominator of a requirements for resources that are used rate-based emission limit, the affected reported CO2 emission rate to calculate to adjust an affected EGU’s CO2 EGU submits 10 ERCs, representing 10 an adjusted CO2 emission rate that emission rate. MWh of replacement generation.936 appropriately reflects the replaced (1) General accounting approach for Adding 10 MWh of replacement generation. Thus, the resultant rate, adjusting a CO2 emission rate. generation to the reported MWh where the numerator reflects CO In this final rule, the reported CO 2 2 generation of the affected EGU results in emission reductions from qualifying emission rate of an affected EGU may be an adjusted CO2 emission rate of 1,818 measures, and the denominator reflects adjusted based on quantified and lb CO2/MWh (200,000 lb CO2/110 MWh replaced generation, is consistent with verified MWh from qualifying zero- = 1,818 lb CO2/MWh). the goal-setting calculation. emitting and low-emitting resources, as In the case of rate-based CO2 emission Several commenters suggested that described in sections VIII.K.1.a.(2)–(10) standards, an affected EGU the EPA consider the regional nature of below. These MWh are added to the demonstrates compliance with the the electricity grid and how RE and denominator of an affected EGU’s emission standards if the affected EGU’s demand-side EE impacts generation and reported CO2 emission rate, resulting in adjusted CO2 emission rate calculated in CO2 emissions across the grid when a lower adjusted CO2 emission rate. the aforementioned manner is less than The measures described in these accounting for the impacts of RE and or equal to the applicable CO2 emission sections reduce mass CO2 emissions 937 Any ERCs used to adjust a CO2 emission rate from affected EGUs by substituting zero- 936 Requirements for the issuance of ERCs and a must meet requirements in the emission guidelines. further discussion of how ERCs are used in 938 For a detailed discussion of this method, see 935 These requirements are discussed in section compliance with rate-based emission limits are Section VI.C.3. Form of the Performance Rates, in VIII.D. addressed in section VIII.K.2. the Equation section.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00235 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64896 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

demand-side EE measures in a rate- accounting method is indifferent to emission rate. This 2012 date applies to based plan approach. This MWh avoided CO2 emission rates and creates all eligible measures that are used to accounting structure corresponds with the same number of zero-emitting adjust a CO2 emission rate under a state the regional treatment of RE resources in credits or adjustment for each MWh of plan. For example, eligible measures, the BSER that provide substitute energy generation or savings, wherever such as CHP, nuclear power and DSM, generation in the EPA-calculated CO2 they occur. For a detailed discussion on also must be installed after 2012, but emission performance rates in the how the accounting method addresses only their generation or savings emission guidelines. Consistent with interstate effects, see section VIII.L. produced in 2022 and after can be used assumptions used in calculating the CO2 (2) General eligibility requirements for to adjust a CO2 emission rate. emission performance rates in the resources used to adjust a CO2 emission As discussed in section VIII.C.2.a, a emission guidelines, affected EGUs and rate. MWh of generation or savings that states can take full credit for the MWh The EPA is finalizing certain general occurs in 2022 or a subsequent year may resulting from eligible measures they are eligibility requirements for resources be carried forward (or ‘‘banked’’) and responsible for deploying, no matter used to adjust a CO2 emission rate. applied in a future year. For example, a where those measures are implemented. These requirements align eligibility MWh of RE generation that occurs in CO2 emission reductions from the with certain factors and assumptions 2022 may be applied to adjust a CO2 eligible measures may occur across the used in establishing the BSER, and by emission rate in 2023 or future years, region; however, an affected EGU or a extension, application of the BSER to without limitation.940 These MWh may state may only take credit for avoided the performance levels established for be banked from the interim to final CO2 emissions at that affected EGU or affected EGUs in the emission periods. set of EGUs in question, as reflected in guidelines, as well as state rate and This eligibility date criterion is the reported stack CO2 emissions of mass CO2 goals. As a result, the consistent with the date of installation affected EGUs. requirements ensure that measures that for ‘‘incremental’’ RE capacity that is Because of the separate accounting of may be used in a state plan are treated included in the BSER building block 3, MWhs and CO2 emissions, with consistently (to the extent possible) with which is the basis for RE MWh emission impacts inherent in reported the EPA’s assessment of the BSER.939 incorporated in the CO2 emission stack CO2 emissions and zero-emitting These general requirements also address performance rates for affected EGUs in MWh impacts requiring explicit potential interactions among rate and the emission guidelines. For more adjustments, the accounting method mass plans, as discussed more fully in information on RE in the BSER, see corresponds with the use of MWh- section VIII.L. section V.E. denominated ERCs in the rate-based As discussed in the sections that Many commenters asserted that emission trading framework specified in follow, the general eligibility criteria proposed state goals did not sufficiently this rule. The accounting method only address: account for actions states take that requires a quantification of the MWh • The date from which eligible measures reduce CO2 emissions prior to the first generated or avoided by an eligible may be installed (e.g., installation of RE plan performance period, and therefore measure, and thus credits or generating capacity and installation of EE requested that MWhs of electricity adjustments can be denominated in measures); generation or electricity savings that MWh and do not need to represent an • the date from which MWh from eligible occur prior to the first plan performance approximation of the CO2 emission measures may be counted, and applied period be eligible to apply toward reductions that result from those MWhs. toward adjusting a CO2 rate; and • adjusting the CO2 emission rates of This creates a crediting system or rate the need to demonstrate that eligible affected EGUs. The EPA recognizes the adjustment process that is simpler to measures replace or avoid generation from affected EGUs. importance of early state action as the implement than one that requires an basis for significant CO2 emission approximation of avoided CO2 (a) Eligibility date for installation of reductions and as a key part of enabling RE/EE and other measures and MWh emissions. state plans to achieve the CO2 emission generation and savings. The MWh accounting method also performance levels or state CO2 goals. creates a crediting system or rate Incremental emission reduction The ability to count eligible measures adjustment process that is indifferent to measures, such as RE and demand-side installed in 2013 and subsequent years the rate-based CO2 emission goals of EE, can be recognized as part of state for the MWhs they generate during a individual states, or the specific CO2 plans, but only for the emission plan performance period provides emission rate standards that states may reductions they provide during a plan significant recognition for early action, apply, and the relative stringency of performance period. Specifically, this corresponding with the BSER those goals or standards. Use of ERCs in means that measures installed in any framework that is based on cost- rate-based emission trading programs is year after 2012 are considered eligible effective actions that many sources are addressed in detail in section VIII.K.2. measures under this final rule, but only already doing, while still conforming to As a result, the MWh accounting the quantified and verified MWh of CO2 performance rates and state goals method addresses interstate effects, electricity generation or electricity that are forward-looking. In order to because it inherently accounts for how savings that they produce in 2022 and provide additional incentives for early generation replacement and CO2 future years may be applied toward investment in RE and demand-side EE, emission reduction impacts may cross adjusting a CO2 emission rate. For the EPA is also establishing the CEIP, as state borders. For example, if the example, MWh generation in 2022 from discussed in section VIII.B.2. ERCs accounting method was informed by a wind turbine installed in 2013 may be distributed by states and the EPA avoided CO2 emission rates, it could applied toward adjusting a CO2 through this program may also be used create perverse incentives for by affected EGUs to demonstrate 939 development of zero- or low-emitting For example, eligibility requirements include compliance with an emission standard, resources in states that result in the installation dates for eligible RE measures that may be used in a state plan. These dates generally align greatest calculated estimate of CO2 with the dates used for broadly defining 940 Similarly, as discussed in section emission reductions for each incremental RE resources that were considered in VIII.C.2.b.(2).(a), allowances may be banked in a replacement MWh. Instead, this establishing the BSER. mass-based trading program.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00236 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64897

and may be banked from the interim to All EE measures must result in another state plan. Discussion of how final periods. electricity savings at a building, facility, such a demonstration can be made in Commenters’ concerns about or other end-use location that is the context of a rate-based emission treatment of early actions are further connected to the electricity grid. EE trading program is in section VIII.D.2.b. addressed by changes from proposal to measures only avoid electric generation The EPA received many comments on the BSER assumptions and the from grid-connected EGUs if the the treatment of in-state and out-of-state methodology used by the EPA to electrical loads where the efficiency RE and demand-side EE. Most establish the CO2 emission performance improvements are made are commenters recommended crediting of levels and rate-based state CO2 goals in interconnected to the grid. both in-state and out-of-state RE and the emission guidelines. The specifics of Commenters sought clarity on this demand-side EE measures, similar to the these changes are addressed in section issue, so the EPA is providing this final rule approach for eligible emission V.A.3. Three examples of those changes requirement as part of the final rule. reductions measures. Commenters are provided below. Some commenters advocated for the argued that this approach makes sense First, affected EGUs that have inclusion of measures that were not grid based on the nature of the maximized their CO2 emission connected as eligible resources, arguing interconnected electricity grid and reduction opportunities available that some of these measures substituted allows states and utilities to fully through early action will be better for non-affected EGUs and resulted in account for their RE and demand-side positioned to meet the BSER CO2 reductions in CO2 emissions. However, EE efforts, whether that RE or EE, and emission performance rates or state goal eligible measures must be able to its related impacts, occurs inside or applied to affected EGUs in their state. substitute for generation from affected outside of their state. Some commenters For example, a steam generating unit EGUs as defined under this rule, and expressed concerns that, at proposal, that has already reduced its CO2 thus must be tied to the electrical grid. states with significant RE resources had emission rate through a heat rate (c) Geographic eligibility. large amounts of existing RE capacity improvement may have a CO2 emission All eligible emission reduction included in their state CO2 goals, but rate of 2,000 lb/MWh whereas its rate measures, including RE generation and that RE was functionally credited to was 2,100 lb/MWh prior to the demand-side EE, may occur in any state, other states for use in meeting their improvement. Therefore, it has less with certain limitations, as described goals because it was associated with distance to cover to meet its CO2 below. To the extent these measures are measures (such as an RPS) likely to be emission performance rate. tied to a state plan,941 these measures included in another state’s plan. This Second, generation from existing RE may be used to adjust a CO2 emission concern has been addressed through capacity installed prior to 2013 has been rate, regardless of whether the changes in the BSER RE assumptions in excluded from the EPA’s calculation of associated generation or electricity the final rule. This includes the CO2 emission performances rates in savings occur inside or outside the regionalization of the RE building block, the emission guidelines. That RE state.942 This approach is generally and removal of existing RE capacity generating capacity will still provide consistent with the approach used in constructed prior to 2012 from the zero-emitting generation to the grid building block 3 of the BSER, which building block. The result of these meeting demand that will not need to be reflects regionally available RE. It also changes is that the RE incorporated in addressed by existing affected EGUs and recognizes that emission reduction the BSER is more equally shared across will better position states and affected measures have impacts on electricity states. EGUs to meet the CO2 performances generation across the electricity system, (i) Measures that occur in states with rates or state rate- or mass-based CO2 both within and beyond a state’s mass-based plans. goals. borders. A more in-depth discussion of As discussed above, eligible measures Third, commenters expressed concern the basis for treatment of in-state and for adjusting the CO2 emission rate of an that demand-side EE targets as part of out-of-state measures is provided in affected EGU may occur in any state, proposed state goals reflected an section VIII.L. with certain conditions. This includes a assumption of installation of increased State plans must demonstrate that condition that applies to eligible EE measures starting in 2017, which emission standards and state measures measures that occur in a state with an seemed to be an implicit requirement to (if applicable) are non-duplicative. EPA-approved plan that is meeting a take action prior to the performance Given the geographic eligibility state mass-based CO2 goal. Eligible period. Because demand-side EE is not approach described here, this includes a measures that could be used to adjust a used in calculating the CO2 emission demonstration that a state plan does not CO2 emission rate under a rate-based performance rates in the final emission allow recognition of a MWh, for use in state plan which are located in a state guidelines, this is no longer a concern. adjusting the CO2 emission rate of an with a mass-based plan are restricted Furthermore, eligible demand-side EE affected EGU, if the MWh is being or has from being counted under another actions that occur after 2012 can be been used for such a purpose under state’s rate-based plan. An exception is applied toward adjusting the CO2 made for RE measures that occur in emission rates of affected EGUs, 941 As used here, a measure is ‘‘tied to a state such mass-based states, because of its plan’’ if it is issued an ERC under approved unique role in BSER. RE measures must providing a significant compliance procedures in a rate-based emission standards plan option that is not assumed in emission or represents quantified and verified MWh energy meet additional eligibility criteria in performance rates or state goals. generation or energy savings achieved by an order to be used to adjust the CO2 (b) Demonstration that measures approved state measure in a state measures plan. emission rate of an affected EGU in a substitute for grid generation. 942 For example, under a rate-based emission state with a rate-based plan. This standard with credit trading, ERCs may be issued Eligible measures must be grid- for qualifying actions that occur both inside and exception only applies to RE; other connected. This eligibility criterion outside the state, provided the measures meet emission reduction measures that were aligns incremental NGCC generation in requirements of EPA-approved state regulations and not included in the determination of the building block 2. It also aligns with RE the provider applies to the state for the issuance of BSER located in mass-based states, ERCs. Similarly, under a state measures plan, a state generation in building block 3 of the might include state requirements such as an RPS, including demand-side EE, are BSER, which substitutes for the need for where compliance with the RPS can be met through restricted from ERC issuance in rate- generation from affected EGUs. out-of-state RE generation. based states.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00237 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64898 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

These criteria are intended to address Under an emission standards plan, qualify for ERCs from zero or low- the fact that eligible measures should this demonstration must be made by the emitting resources, it must be lead to substitution of generation from provider of the RE measure seeking ERC demonstrated that the generation was affected EGUs, with related impacts on issuance under the rate-based emission delivered to the grid to meet electricity 947 CO2 emissions from affected EGUs. standards in a rate-based state, as part load in a state with a rate-based plan. Where states with mass-based plans of the eligibility application for the Some examples of documentation that 946 implement mass-based CO2 emission measure. The rate-based state must can serve as a demonstration include a standards, CO2 emissions reductions include in its state plan provisions that power delivery contract or power from affected EGUs must occur in order describe a sufficient demonstration of purchase agreement. The EPA is giving to comply with these emission geographic eligibility for the RE states flexibility regarding the nature of standards and, unlike the rate-based generation under rate-based emission this demonstration, but a state plan approach, zero- and low-emitting MWhs standards. must describe the nature of the required do not play a specified role in Further examples of eligible demonstration and have it be approved demonstrating that the mass-based demonstrations and how they should be by the EPA. standards have been met.943 Since they outlined in state plans are provided in In addition to generation from zero- or are not counted in the mass-based section VIII.L. low-emitting resources, demand-side EE (ii) Measures that occur in states, demonstration, eligible measures resources in areas of Indian country including areas of Indian country, that located in mass-based states could be located within the borders of states with do not have affected EGUs. rate-based emission standards for used in a state with a rate-based plan to States, including areas of Indian adjust the CO2 emission rate of affected affected EGUs may also be issued ERCs. country, that do not have any affected In these instances, the area of Indian EGUs. Such adjustments would obviate EGUs within their borders may be the need for comparable CO2 emission country is located within the rate-based providers of credits for generation from service area subject to a rate-based state reductions at affected EGUs in the rate- zero- or low-emitting resources to adjust based state or the use of other measures plan. The ERCs from demand-side EE CO2 emission rates. In its supplemental resources must meet the eligibility to make a rate adjustment. In this proposal for the proposed rulemaking, scenario, to the extent that eligible requirements to adjust a CO2 emission the EPA sought comment on whether or rate, including installation date and measures substitute solely for not jurisdictions without affected fossil generation from affected EGUs in a state EM&V requirements described below in fuel generation units subject to the section VIII.K.3. If the area of Indian with mass-based emission limits, and proposed emission guidelines should be country is located within the borders of are also used to adjust the reported CO2 authorized to participate in state plans. a state that is meeting a mass-based CO2 emission rate of affected EGUs in a rate- Commenters were supportive of based state, no incremental CO2 goal, then the demand-side EE resources allowing those jurisdictions without are not eligible to be issued ERCs. emissions reductions would occur in affected EGUs the opportunity to the rate-based state as a result of the Similarly, demand-side EE resources in participate in state plans. CO2 reduction eligible measures.944 The result would any state with a mass-based CO2 goal are measures in areas without affected not eligible to provide ERCs. be forgone CO2 emission reductions that EGUs have the potential to provide cost- would otherwise occur across the two Non-contiguous states and territories effective opportunities to reduce may not be providers of ERCs to the states. These dynamics are further emissions and should be available on a addressed in section VIII.L. contiguous U.S. states. As discussed voluntary basis to affected EGUs. previously in section VII.F, we have not For RE measures located in a mass- Commenters noted that some tribes, for set CO2 emission performance goals for based state to have some or all of its example, have many untapped RE Alaska, Hawaii, Guam, or Puerto Rico in generation counted under a rate-based resources that could be developed, and this final rule at this time. plan in another state, it must be they should be able to realize the (iii) Measures that occur outside the demonstrated that the generation was benefits of contributing to a state plan. U.S. delivered to the grid to meet electricity Commenters stated that because of the The EPA will work with states using 945 load in a state with a rate-based plan. integrated nature of the U.S. electricity the rate-based approach that are Some examples of documentation that grid, it is appropriate to allow all interested in allowing the use of RE can serve as a demonstration include a jurisdictions with the ability to from outside the U.S. to adjust CO2 power delivery contract or power contribute to and benefit from CO2 emission rates. In these cases, all purchase agreement. The EPA is giving emission reductions or CO2 emission conditions for creditable domestic RE states flexibility regarding the nature of rate adjustments. must be met, including that RE this demonstration, but a state plan For participating states, they must resources must be incremental and must describe the nature of the required adhere to EM&V standards, installation installed after 2012, and all EM&V demonstration and have it be approved dates, and any other criteria that apply standards must be met. In addition, the by the EPA. to all states. Section VIII.K.3 below country generating the ERCs must be identifies and discusses the EM&V connected to the U.S. grid, and there 943 Where such measures substitute for generation requirements used to quantify MWh must be a power purchase agreement or from affected EGUs subject to a mass CO2 emission savings from generation from zero- or limit, such measures reduce the cost of meeting other contract for delivery of the power low-emitting sources. with an entity in the U.S. RE generation those mass emission limits, but do not result in States, including areas of Indian incremental CO2 emission reductions. capacity outside the U.S. that existed 944 As used here, incremental emission reductions country, that do not have any affected prior to 2012 but was not exported to refers to emission reductions that are above and EGUs may provide ERCs to adjust CO2 the U.S. is not considered new or beyond what would be achieved solely through emissions provided they are connected incremental generation and, therefore, compliance with the emission standards in the to the contiguous U.S. grid and meet the mass-based state. 945 This does not need to necessarily be the state other requirements for eligibility. To 947 This does not need to necessarily be the state where the MWh of energy generation from the where the MWh of energy generation from the 946 measure is used to adjust the CO2 emission rate of Requirements for ERC issuance are addressed measure is used to adjust the CO2 emission rate of an affected EGU. in section VIII.K.2. an affected EGU.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00238 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64899

not eligible for adjusting CO2 emission increased to 1,000 MWh, then 200 MWh CO2 emissions in its plan, along with rates under this rule. For example, a ((25 MW/125 MW) * 1,000 MWh) is supporting analysis and quality control new transmission interconnection to eligible for use in adjusting a CO2 measures, and the EPA will review the existing RE in Canada would not be emission rate, regardless of the overall appropriateness and basis for such considered incremental, but a new level of generation for the period.949 determinations in the course of its interconnection to RE where the RE was Many commenters supported using review of a state plan. Where an RE built after 2012 would be considered RE deployment as measures to adjust generating unit uses qualified biomass, incremental. See below in section the CO2 emission rate of affected EGUs. as designated in an approved state plan, VIII.K.1.a.(3) for more specifics Some commenters specifically agreed MWh generation from the unit could be regarding the use of incremental with the EPA’s determination that only used to adjust the reported CO2 hydroelectric power in a rate-based new and incremental RE (including emission rate of an affected EGU. Total approach. hydropower) should be used to adjust MWh generation from an RE generating The EPA received comments CO2 emission rates. Those commenters unit that uses qualified biomass must be encouraging the use of international objected to counting existing RE that are prorated based on either the heat input zero-emitting electricity imports in state already embedded in the baseline supplied from qualified biomass as a plans, particularly hydroelectric power emissions and generation mix. A proportion of total heat input or on the from Canada. Canada currently provides significant number of commenters proportion of biogenic CO2 emissions states such as Minnesota and Wisconsin supported the integration of RE into a compared to total stack CO2 emissions with RE through existing grid rate-based credit trading system. from the RE generating unit. Either connections. New projects are in various Certain additional requirements apply approach must incorporate the stages of development to increase for hydropower and biomass (including approved valuation of biogenic CO2 generating capacity, which could be waste-to-energy) RE, as described below. emissions from qualified biomass in the called upon as a base load resource to (a) Hydroelectric power. plan (i.e., the proportion of biogenic supplement variable forms of RE Consistent with other types of RE, CO2 emissions from use of qualified generation. Commenters said that the new hydroelectric power generating biomass feedstock that would not be EPA should permit the use of all capacity installed after 2012 is eligible counted). incremental hydropower—both for use in adjusting a CO2 emission rate. Section VIII.K describes the domestic and international—towards Relicensed facilities are considered requirements and procedures for EM&V, EGU CO2 emission rate adjustments existing capacity and, therefore, are not and discusses how all eligible resources providing that double-counting can be eligible for use in adjusting a CO2 must demonstrate how they will prevented; and the EPA acknowledges emission rate, unless there is a capacity quantify and verify MWh savings using this may be allowable, as long as the uprate as part of the relicensed permit. best-practice EM&V approaches. One specified criteria have been met. In such a case, only the incremental way to make this demonstration for (3) RE. capacity is eligible for use in adjusting eligible resources could be to use the RE measures may be used to adjust a a CO2 emission rate. presumptively approvable EM&V CO2 emission rate, provided they meet The EPA noted that many approaches that are included in the final the general eligibility requirements commenters preferred that generation model trading rule. outlined above and the MWh electricity from hydropower displace generation (c) Waste-to-energy. generation is properly quantified and from fossil sources. One commenter Qualified biomass may include the verified.948 As used in this section, RE suggested that existing zero-emitting biogenic portion of MSW combusted in includes electric generating sources, including hydropower, do not a waste-to-energy facility.951 With technologies using RE resources, such as reduce emissions from existing fossil regard to assessing qualified biomass wind, solar, geothermal, hydropower, generation, but that new or uprated proposed in state plans, the EPA biomass and wave and tidal power. A zero-emitting sources would, because of generally acknowledges the CO2 capacity uprate at an existing RE facility their low variable rate, reduce fossil emissions and climate policy benefits of (i.e., an uprate to generating capacity emissions. Several commenters waste-derived biomass, which includes originally installed as of 2012 or earlier) recommended allowing incremental biogenic MSW inputs to waste-to-energy is eligible to adjust a CO2 emission rate. generation from new or uprated zero- facilities. The process and The capacity uprate must occur after emitting sources, including considerations for the use of biomass in 2012. Such uprates to capacity represent hydropower, be available for state plans are discussed in section incremental capacity added after 2012. compliance. VIII.I.2.c. Quantification and accounting criteria (b) Biomass. MSW can be directly combusted in for incremental RE (and nuclear RE generating capacity installed after waste-to-energy facilities to generate generation) are as follows. The 2012 that uses qualified biomass as a electricity as an alternative to landfill incremental generating capacity (in fuel source is eligible for use in disposal. In the U.S., almost all 950 nameplate MW) is divided by the total adjusting a CO2 emission rate. As incineration of MSW occurs at waste-to- uprated generating capacity (in discussed in section VIII.I.2.c., if a state energy facilities or industrial facilities nameplate MW) and then multiplied by intends to allow for the use of biomass where the waste is combusted and generation output (in MWh) from the as a compliance option for an affected energy is recovered.952 Total MSW uprated generator. For example, if a EGU to meet a CO2 emission standard, generation in 2012 was 251 million hydroelectric power plant expands a state must propose qualified biomass tons, but of that total volume generated, generating nameplate capacity from 100 feedstocks and treatment of biogenic almost 87 million tons were recycled MW to 125 MW and generation output 949 For example, the overall generation from the 951 As with other RE, only generating capacity 948 All state plans must demonstrate that uprated hydroelectric power plant may be higher or installed after 2012 would be eligible for use in measures included in the plan are quantifiable and lower than generation levels that occurred at the adjusting a CO2 emission rate. verifiable. See section VIII.K.2 for discussion of plant prior to the capacity uprate. 952 2014 Inventory of U.S. Greenhouse Gas requirements for the issuance of ERCs, and section 950 As with other RE, only generating capacity Emissions and Sinks: 1990–2012. http:// VIII.K.3 for discussion of EM&V requirements for installed after 2012 would be eligible for use in www.epa.gov/climatechange/ghgemissions/ use of RE relied on in a state plan. adjusting a CO2 emission rate. usinventoryreport.html.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00239 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64900 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

and composted.953 Increasing demand A state plan must include a method negative impacts from waste-to-energy for electricity generated from waste-to- for determining the proportion of total production on recycling, waste energy facilities could increase MWh generation from a waste-to-energy reduction, and composting programs competition for and generation of waste facility that is eligible for use in should be evaluated and efforts to stream materials—including discarded adjusting a CO2 emission rate. The EPA mitigate negative impacts must be organic waste materials—which could will evaluate the method as part of its discussed in the supporting work against programs promoting waste evaluation of the approvability of the documentation of state plans. reduction or cause diversion of these state plan. Measuring the proportion of (4) DSM. materials from existing or future efforts biogenic to fossil CO2 emissions can be promoting composting and recycling. performed through sampling and testing Avoided MWh that result from DSM The EPA and many states have of the biogenic fraction of the MSW may be used to adjust a CO2 emission recognized the importance of integrated used as fuel at a waste-to-energy facility rate. Eligible DSM actions are those that waste materials management strategies (e.g., via ASTM D–6866–12 testing or are zero-emitting and avoid, rather than that emphasize a hierarchy of waste shift, the use of electricity by an other methods—ASTM, 2012; Bohar, et 957 prevention, starting with waste al. 2010), or based on the proportion of electricity end-user. The MWh that may be used for such an adjustment are reduction programs as the highest biogenic CO2 emissions to total CO2 priority and then focusing on all other emissions from the facility. For an determined based on the MW of productive uses of waste materials to example of the former method, if the demand reduction multiplied by the reduce the volume of disposed waste biogenic fraction of MSW is 50 percent hours during which such a demand materials.954 For example, Oregon and reduction is achieved (MW of demand by input weight, only the proportion of × Vermont have strategies that emphasize MWh output attributable to the biogenic reduction hours = MWh avoided). waste prevention, followed by reuse, portion of MSW at the waste-to-energy DSM measures must be appropriately then recycling and composting materials facility may be used to adjust an quantified and verified, in accordance 955 with requirements in the emission prior to treatment and disposal. affected EGU CO2 emission rate. Information in the revised Framework Alternatively, as an example of the latter guidelines, as discussed in section for Assessing Biogenic CO2 Emissions VIII.K.3. method, if biogenic CO2 emissions from Stationary Sources and other represent 50 percent of total reported (5) Energy storage. technical studies and tools (e.g., EPA CO2 emissions, a facility would need to Energy storage may not be directly Waste Reduction Model, EPA Decision estimate the fraction of biogenic to fossil recognized as an eligible measure that Support Tool) should assist both states MSW utilized and the net energy output can be used to adjust a CO emission and the EPA in assessing the role of 2 of each component (based on relative rate, because storage does not directly biogenic feedstocks used in waste-to- higher heating values) to determine the substitute for electric generation from energy processes, where use of such percent of the MWh output from the the grid or avoid electricity use from the feedstocks is included in a state plan.956 waste-to-energy facility that may be 958 When developing their plans, states grid. The electric generation that is used to adjust an affected EGU’s CO planning to use waste-to-energy as an 2 input to an energy storage unit may be emission rate. Section VIII.K describes option for the adjustment of a CO used to adjust a CO2 emission rate, but 2 the requirements and procedures for emission rate should assess both their the output from the energy storage unit EM&V, and discusses how all eligible 959 capacity to strengthen existing or may not. However, energy storage can resources must demonstrate how they implement new waste reduction, reuse, be used as an enabling measure that will quantify and verify MWh savings recycling and composting programs, and facilitates greater use of RE, which can using best-practice EM&V approaches. measures to minimize any potential be used to adjust a CO2 emission rate. negative impacts of waste-to-energy One way to make this demonstration for For example, utility scale energy storage operations on such programs. States eligible resources could be to use the may be used to facilitate greater grid must include that information in their presumptively approvable EM&V penetration of RE generating capacity plan submissions. The EPA will reject approaches that are included in the final and can also be used to store RE as qualified biomass any proposed model trading rule. generation that may have otherwise waste-to-energy component of state The EPA received multiple comments been shed in times of excess generating plans if states do not include supporting the use of waste-to-energy as capacity. Likewise, on-site energy information on their efforts to part of state plans. Some commenters storage at an electricity end-user can strengthen existing or implement new expressed concern that non-biogenic waste reduction as well as reuse, materials, such as plastics and metal, 957 An example is a utility direct load control recycling and composting programs, and would be incinerated along with program, such as those where customer air conditioning units are cycled during periods of measures to minimize any potential biogenic materials. As discussed above, peak electricity demand. Actions that shift negative impacts of waste-to-energy only electric generation related to the electricity demand from one time of day to another, operations on such programs. Only biogenic fraction of MSW at a waste-to- without reducing net electricity use, are not electric generation at a waste-to-energy energy facility added after 2012 is eligible, as these measures do not avoid electricity use from the grid. Use of emitting generators as a facility that is related to the biogenic eligible for use in adjusting a CO2 DSM measure is also not eligible. fraction of MSW and that is added after emission rate. The EPA also received 958 Energy storage depends on a generation 2012 is eligible for use in adjusting a comments that expressed concern about source, either from a utility-scale EGU (e.g., a fossil EGU, a wind turbine, etc.) or a distributed CO2 emission rate. the potential negative impacts on recycling and waste reduction efforts, generation source at an electricity end-user (e.g., a PV system installed at a building). 953 http://www.epa.gov/osw/nonhaz/municipal/ while other commenters asserted that 959 _ _ This approach focuses on counting the pubs/2012 msw fs.pdf. waste-to-energy practices encourage qualifying electric generation, which may be an 954 http://www.epa.gov/wastes/nonhaz/ recycling programs. Some commenters input to an energy storage unit. Counting both the municipal/hierarchy.htm. also expressed concern about what generation input to energy storage and the output 955 http://www.anr.state.vt.us/dec/wastediv/ from the energy storage unit would be a form of WastePrevention/main.htm. treatment would be approvable for double counting. The electric generation that is 956 http://epa.gov/epawaste/conserve/tools/warm/ emissions from waste-to-energy stored may be counted; the subsequent output from Warm_Form.html, https://mswdst.rti.org/. practices. As discussed above, potential the storage unit may not.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00240 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64901

enable greater use of RE to meet on-site distribution upgrades, and including other private and non-profit entities.964 electricity demand.960 these technologies in the suite of EE measures, for the purposes of this The EPA received multiple comments potential measures that states could section, may also consist of state or local regarding the overall merits of energy consider for emission rate adjustments requirements that result in electricity storage. Consistent with the discussion in their state plans. Comments pointed savings, such as building energy codes above, the majority of commenters out that in addition to helping achieve and state appliance and equipment observed that storage technology emission standards, T&D efficiency standards. Other interventions that enables greater grid penetration of RE improvements make the grid more result in electricity savings may also be and supports more efficient and robust and flexible, as well as delivering considered an EE measure for the effective operations of both RE and environmental benefits. In many parts of purposes of this section, provided the fossil-fuel plants. Commenters further the country, grid operators, transmission intervention can be specified and noted that energy storage can provide planners, transmission owners and quantified and verified in accordance RE to the grid when it is most needed, regulators are already taking steps to with EM&V requirements in the while simultaneously taking pressure expand and modernize T&D networks. emission guidelines. off fossil-fuel plants to respond to Commenters suggested that the EPA Numerous commenters expressed sudden shifts in demand. Despite broad clarify the eligibility and criteria under support for including demand-side EE acknowledgment of the benefits of which such measures would be as an eligible measure states and storage, public comments underscore its permitted in a state plan. affected EGUs can use to meet the indirect and supporting role in To be eligible, T&D measures must be emission guidelines. Commenters providing zero-emission MWh to the installed after 2012. This general touted the value of demand-side EE as grid (consistent with the EPA’s decision eligibility requirement is discussed a resource that delivers energy savings, to exclude energy storage as an eligible above in section VIII.K.1.a. The MWh of lowers bills, creates jobs and reduces measure that can be used to adjust a CO2 avoided losses or reduction in end-use CO2 emissions. Commenters called for emission rate). that result from T&D measures must be the EPA to allow for the use of a broad (6) Transmission and distribution appropriately quantified and verified, as range of demand-side EE measures to (T&D) measures. discussed in section VIII.K.3. meet the emission guidelines, including, Electricity T&D measures that (7) Demand-side EE, including water but not limited to, utility and non-utility improve the efficiency of the T&D EE deployment programs; energy system and/or reduce electricity use system efficiency. Demand-side EE measures may be savings performance contracts; may be used to adjust a CO2 emission measures that reduce electricity use in used to adjust a CO emission rate, rate. This includes T&D measures that 2 residential and commercial buildings, provided they meet the general reduce losses of electricity during industrial facilities and other grid- eligibility requirements outlined above delivery from a generator to an end-user connected equipment; state and local and the MWh electricity savings are (sometimes referred to as ‘‘line requirements that result in electricity properly quantified and verified.963 As losses’’ 961) and T&D measures that savings, such as building energy codes used in this section, demand-side EE reduce electricity use at the end-user, and state appliance and equipment may include a range of eligible such as conservation voltage reduction standards; appliance replacement and measures, provided that the measures (CVR).962 The EPA received many recycling programs; and behavioral can be quantified and verified in comments in support of advanced programs. The EPA also received energy technologies, including energy accordance with the EM&V comments supporting the use of water storage and transmission and requirements in the emission sector EE programs and projects. guidelines, which are addressed in Commenters identified water and 960 For example, battery storage at a building with section VIII.K.3. Examples of demand- wastewater utilities as particularly well- solar PV can enable the PV system to meet the side EE measures include, but are not suited for participating in EE programs building’s entire electrical load, by storing energy limited to, EE measures that reduce and providing a source of electricity during times of peak PV system output for later use electricity use in residential and when the sun is not shining. savings. Investments such as replacing commercial buildings, industrial 961 T&D system losses (or ‘‘line losses’’) are pumps and other aging equipment and typically defined as the difference between facilities, and other grid-connected repairing leaks can result in greater EE. electricity generation to the grid and electricity equipment. Water efficiency programs The EPA agrees that these electricity sales. These losses are the fraction of electricity lost that improve EE at water and savings should be eligible for to resistance along the T&D lines, which varies wastewater treatment facilities also depending on the specific conductors, the current, adjustments to CO2 emission rates at and the length of the lines. The Energy Information provide demand-side EE savings affected EGUs. Administration (EIA) estimates that national opportunities. EE measures, for the (8) Nuclear power. electricity T&D losses average about 6 percent of the purposes of this section, may consist of As is discussed in section V.A.3, upon electricity that is transmitted and distributed in the U.S. each year. EE measures installed as the result of consideration of comments received, the 962 Volt/VAR optimization (VVO) refers to individual EE projects, such as those EPA has not included nuclear coordinated efforts by utilities to manage and implemented by energy service generation from either existing or under improve the delivery of power in order to increase companies, as well as multiple EE construction units in the determination the efficiency of electricity distribution. VVO is measures installed through an EE accomplished primarily through the of the BSER. In addition to comments implementation of smart grid technologies that deployment program (e.g. appliance received on the provisions for improve the real-time response to the demand for replacement and recycling programs, determining the BSER, the EPA also power. Technologies for VVO include load tap and behavioral programs) administered received comments requesting that the changers and voltage regulators, which can help by electric utilities, state entities, and EPA allow all generation from nuclear manage voltage levels, as well as capacitor banks that achieve reductions in transmission line loss. generating units to be recognized as an VVO efforts are often closely related to CVR, which 963 All state plans must demonstrate that are actions taken to reduce initial delivered voltage measures included in the plan are quantifiable and 964 EE programs may also be implemented by levels in feeder transmission lines while remaining verifiable. See section VIII.K.2 for discussion of other entities. Eligible EE measures that are within the 114 volt to 126 volt range (for normal requirements for the issuance of ERCs, and section deployed through EE programs are not limited to 120-volt service) required at the customer meter, VIII.K.3 for discussion of EM&V requirements for those EE measures deployed through EE programs per the ANSI C84.1 standards. use of demand-side EE relied on in a state plan. administered by the types of entities listed here.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00241 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64902 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

eligible measure that can be used to CO2 emission rate of an affected EGU, as This low CO2 emission rate for adjust a CO2 emission rate. Commenters CHP units are low-emitting electric electrical generation from a non-affected also recommended that the EPA generating resources that can replace CHP unit is a product of both the fact consider nuclear generating units and generation from affected EGUs. that CHP units are typically very RE generating units in a consistent Electrical generation from non-affected thermally efficient and the fact that a manner for CO2 emission rate CHP units that meet the eligibility portion of the CO2 emissions from a adjustments in state plans. We agree criteria under section VIII.K.1.a can be non-affected CHP unit would have with comments that nuclear generation used to adjust the reported CO2 occurred anyway from an industrial and RE should be treated consistently emission rate of an affected EGU. boiler used to meet the thermal load in when it comes to CO2 emission rate Where a state plan provides for the the absence of the CHP unit. In contrast, adjustments. use of electrical generation from eligible the CHP unit also provides the benefit The EPA has determined that non-affected CHP units to adjust the of electricity generation while resulting generation from new nuclear units and reported CO2 emission rate of an in very low incremental CO2 emissions capacity uprates at existing nuclear affected EGU, the state plan must beyond what would have been emitted units will be eligible for use in adjusting provide a required calculation method by an industrial boiler. As a result, the a CO2 emission rate, just like new and for determining the MWh that may be accounting method proposed in a state uprated capacity RE. However, used to adjust the CO2 emission rate. plan should not presume that CO2 consistent with the reasons discussed This proposed accounting method must emission reductions occur outside the for not including the preservation of adequately address the considerations electric power sector, but instead only existing nuclear capacity in the BSER— discussed below. The EPA will review would account for the CO2 emissions namely, that such preservation does not whether a state’s proposed accounting related to the electrical production from actually reduce existing levels of CO2 method for electric generation from a CHP unit that is used to substitute for emissions from affected EGUs— eligible non-affected CHP units is electrical generation from affected preserving generation from existing approvable per the requirements of the EGUs. final emission guidelines, as part of its nuclear capacity is not eligible for use Non-affected CHP units can use in adjusting a CO2 emission rate. overall plan review of the rate-based emission standards and implementing qualified biomass fuels. As described in In contrast, any incremental zero- section VIII.I.2.c, states must submit emitting generation from new nuclear and enforcing measures in the state plan. The EPA notes that the proposed state plan requirements regarding capacity would be expected to replace qualified biomass feedstocks and generation from affected EGUs and, model rule for a rate-based emission treatment of biogenic CO2 emissions in thereby, reduce CO2 emissions; and the trading program includes a proposed accounting method for non-affected state plans, along with supporting continued commitment of the owner/ analysis and quality control measures, operators to completion of the new units CHP units. The accounting method provided in a final model rule could be and the EPA would review the and improving the efficiency of existing appropriateness and basis for such units through uprates can play a key a presumptively approvable accounting approach. determinations in the course of its role in state plans. Therefore, consistent review of the approvability of a state with treatment of other low- and zero- The proposed accounting method in a state plan must address the following plan. Considerations for qualified emitting generation, new nuclear power biomass included in state plans are generating capacity installed after 2012 considerations. The accounting approach proposed in a state plan must discussed in section VIII.I.2.c, while and incremental generation resulting accounting requirements for RE using from nuclear uprates after 2012 are take into account the fact that a non- affected CHP unit is a fossil fuel-fired biomass are provided in section measures eligible for adjusting a CO2 VIII.K.1.a.(3)(b). emission rate. However, existing nuclear emission source, as well as the fact that units (i.e., those that originally the incremental CO2 emissions related Most comments received on CHP commenced operation in 2012 or earlier to electrical generation from a non- recommended that the EPA explicitly years) that receive operating license affected CHP unit are typically very low. describe how CHP can be accounted for extensions are not eligible for use in In accordance with these in a state plan. Commenters described considerations, a non-affected CHP the CO2 emission reductions achieved adjusting a CO2 emission rate, except where such units receive a capacity unit’s electrical MWh output that can be through CHP’s thermal efficiency and

uprate as a result of the relicensing used to adjust the reported CO2 the precedent set in other federal and process. Only the incremental capacity emission rate of an affected EGU should state rules that have included CHP as a from the uprate is eligible for use to be prorated based on the CO2 emission compliance option. Some commenters rate of the electrical output associated pointed out that without such a adjust a CO2 emission rate. Applicable generation (in MWh) from with the CHP unit (a CHP unit’s description, states would not be able to incremental nuclear power is ‘‘incremental CO2 emission rate’’) readily take advantage of the CO2 determined in the same manner as that compared to a reference CO2 emission emission reductions that result from the described for incremental RE above. rate. This ‘‘incremental CO2 emission use of CHP. (9) Combined heat and power (CHP) rate’’ related to the electric generation (10) WHP. from the CHP unit would be relative to units. WHP units that meet the eligibility the applicable CO emission rate for Electric generation from non-affected 2 criteria under section VIII.K.1 may be 965 affected EGUs in the state and would be CHP units may be used to adjust the used to adjust the CO limited to a value between 0 and 1. 2 emission rate of an affected EGU. There are several types 965 The accounting considerations described in this section are for a ‘‘topping cycle’’ CHP unit. A bottoming cycle CHP unit, fuel is first used to of WHP units. There are units, also topping cycle CHP unit refers to a configuration provide thermal energy for an industrial process referred to as bottoming cycle CHP where fuel is first used to generate electricity and and the waste heat from that process is then used units, where the fuel is first used to then heat is recovered from the electric generation to generate electricity. Some waste heat power provide thermal energy for an industrial process to provide additional useful thermal and/ (WHP) units are also bottoming cycle units and the or mechanical energy. A CHP unit can also be accounting treatment for bottoming cycle CHP units process and the waste heat from that configured as a ‘‘bottoming cycle’’ unit. In a is provided with the WHP description below. process is then used to generate

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00242 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64903

electricity.966 There are also WHP emission guidelines. Emissions leakage, comments, the EPA is not allowing facilities where the waste heat from the or increased CO2 emissions due to shifting generation to new NGCC units initial combustion process is used to increased utilization of unaffected to be used as a measure for adjusting generate additional power. Under both sources, is contradictory to objectives of CO2 emission rates for affected EGUs in configurations, unless the WHP unit this rule and should, therefore, be rate-based state plans. supplements waste heat with fossil fuel minimized. Allowing affected EGUs to In addition, other new and existing use, there is no additional fossil fuel adjust their emission rates as a result of non-affected fossil fuel-fired EGUs that used to generate this additional power. lower-emitting new NGCC units not are not subject to CAA section 111(b) or As a result, there are no incremental covered under this section 111(d) rule 111(d), such as simple cycle combustion CO2 emissions associated with that would not mitigate leakage concerns, turbines, may not be used to adjust the additional power generation. As a and could even exacerbate the situation. CO2 emission rate of an affected EGU. result, the incremental electric Consequently, new EGUs covered under While generation from such units could generation output from the WHP the CAA section 111(b) rule are not substitute for generation from affected facilities could be considered zero- allowable measures in state plans EGUs, the EPA has determined that emitting, for the purposes of meeting the because the EPA believes it would result additional incentives for such emission guidelines, and the MWh of in increased emission leakage. generation, in the form of an explicit electrical output could be used to adjust The EPA received comments both adjustment to the CO2 rate of an affected the CO2 emission rate of an affected supporting and opposing the use of new EGU, are not necessary or warranted. 967 EGU. The MWh of electrical output NGCC units in state plans. In addition Providing for such an adjustment could from a WHP unit that can be recognized to leakage concerns, commenters create perverse incentives for the may not exceed the MWh of industrial expressed concern with the potential construction of new simple cycle or other thermal load that is being met incentives created by including new combustion turbines that are not subject by the WHP unit, prior to the generation to the applicability criteria of the final 968 NGCC capacity in the BSER or as a of electricity. Most commenters that compliance mechanism in state plans. Standards of Performance for addressed WHP noted the benefits of Some commenters suggested that Greenhouse Gas Emissions from New WHP at the same time that they including new NGCC capacity in the Stationary Sources: Electric Utility discussed the benefits of CHP. The BSER or for compliance would distort Generating Units rule. These units could commenters reflected that WHP is market incentives to build new NGCC provide only limited adjustment credit, another potential compliance option units, particularly if new units were as operation beyond a certain capacity and requested it be discussed explicitly allowed to generate ERCs that could be factor threshold would trigger as a compliance option that can be used sold to affected EGUs. These applicability under CAA section 111(b). to meet the emission guidelines. The commenters suggested that the Further, providing for the ability to comments discussed WHP benefits but additional incentive for new NGCC generate adjustment credits would did not elaborate on a preferred units could make existing NGCC units provide incentives for construction of accounting method for MWh of less competitive. Other commenters less efficient fossil generating capacity electrical generation from WHP that than would likely otherwise be could be used to adjust the CO suggested that including new NGCC 2 capacity in state plans would promote constructed (e.g., addition of a simple emission rate of an affected EGU. cycle combustion turbine rather than a b. Measures that may not be used to generation from new CO2-emitting units at the expense of new zero-emitting NGCC unit). In addition, providing for adjust a CO2 emission rate. the ability to generate adjustment This section addresses measures that units, increasing overall emissions within a state. This effect would be credits could create perverse incentives may not be used to adjust a CO2 for the continued operation of less emission rate. New, modified, and exacerbated if state plans allowed new NGCC units to be treated as ‘‘zero- efficient existing fossil generating reconstructed EGUs covered under the capacity. Such outcomes run counter to CAA section 111(b) final Standards of emitting’’ for purposes of compliance— as suggested by other commenters. In the objectives of this final rule. Performance for Greenhouse Gas addition, commenters expressed c. Measures that reduce CO2 Emissions from New Stationary Sources: emissions outside the electric power Electric Utility Generating Units rule are concern that the EPA’s inclusion of new NGCC capacity in setting the BSER or in sector. not approvable sources of electric Measures that reduce CO emissions compliance could negatively impact 2 generation for adjusting the CO2 outside the electric power sector may ratepayers over the long-term by emission rate of an affected EGU under not be counted toward meeting a CO sending the wrong signal to industry 2 a rate-based state plan. As discussed emission performance level for affected and resulting in stranded assets if, in the earlier in section VII.D of this preamble, EGUs or a state CO goal, under either future, carbon emissions become more 2 a key concern under this rule is leakage a rate-based or mass-based approach, expensive or the EPA proposes to to new units that are not covered by the because all of the emission reduction incorporate sources built under the measures included in the EPA’s 966 forthcoming section 111(b) standard In such a configuration, the waste heat stream determination of the BSER reduce CO could also be generated from a mechanical process, into the section 111(d) program. 2 emissions from affected EGUs. such as at natural gas pipeline compressors. Commenters also expressed concern 967 This only applies where no additional fossil Examples of measures that may not be that including generation from new fuel is used to supplement the use of waste heat in counted toward meeting a CO emission NGCC units could create unreasonable 2 a WHP facility. Where fossil fuel is used to performance level for affected EGUs or supplement waste heat in a WHP application, MWh uncertainty, given limitations on the a state CO goal include GHG offset of electrical generation that can be used to adjust ability to accurately project new NGCC 2 the CO2 emission rate of an affected EGU must be projects representing emission builds, could create undue pressure on prorated based on the proportion of fossil fuel heat reductions that occur in the forestry and input to total heat input that is used by the WHP natural gas prices, and could create agriculture sectors,969 direct air capture, unit to generate electricity. unfair disparities in the compliance 968 This limitation prevents oversizing the opportunities afforded different states. thermal output of a WHP unit to exceed the useful 969 We note, however, that the final emission industrial or other thermal load it is meeting, prior In light of the emissions leakage guidelines allow state measures like emission to generation of electricity. concerns, and in consideration of these Continued

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00243 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64904 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

and crediting of CO2 emission and enforceable with respect to each trading program could be presumptively reductions that occur in the affected EGU. approvable as meeting the requirements transportation sector as a result of The EPA also specifically proposed of CAA section 111(d) and these vehicle electrification. that for state plans that rely on measures emission guidelines. The EPA would that avoid EGU CO2 emissions, such as evaluate the approvability of such plans 2. Requirements for Rate-Based RE and demand-side EE measures, the through independent notice and Emission Trading Approaches state will also need to include comment rulemaking. A state may issue ERCs to an affected As made clear in the proposal,970 all quantification, monitoring, and EGU that performs at a CO emission emission standards in a state plan must verification provisions in its plan for 2 rate below a specified CO emission be quantifiable, verifiable, enforceable, these measures. The EPA is finalizing 2 rate, as well as to providers of qualifying non-duplicative and permanent.971 This requirements specific to rate-based emission trading programs as measures that provide substitute requirement is applicable to emission generation for affected EGUs or avoid standards that include a rate-based requirements the EPA has determined are necessary to assure the integrity of the need for generation from affected emission trading program. The State EGUs. This latter category includes Plan Considerations TSD for the a rate-based approach that includes an emission trading program, and therefore providers of qualifying RE and demand- proposal also explained that in order to side EE measures, as well as other types ensure a plan is enforceable, a state plan assures a state plan using such an approach appropriately provides for the of measures, as discussed in section must: identify in its plan the entity or 975 implementation and enforcement of VIII.K.1.a. entities responsible for meeting rate-based emission standards in ERCs may be used by an affected EGU compliance and other enforceable accordance with CAA section 111(d).973 to adjust its reported CO2 emission rate obligations under the plan; include These specific requirements for a rate- when demonstrating compliance with a mechanisms for demonstrating based emission trading program include rate-based emission standard. This compliance with plan requirements or provisions for issuance of ERCs by the adjustment is made by adding MWh to demonstrating that other binding state and/or its designated agent; the denominator of an affected EGU’s obligations are met; and provide a provisions for tracking ERCs, from reported CO2 emission rate, in the mechanism(s) for legal action if affected issuance through submission for amount of submitted ERCs, resulting in EGUs are not in compliance with plan compliance; and the administrative a lower adjusted rate. To demonstrate requirements or if other entities fail to process for submission of ERCs by the compliance with a rate-based emission meet enforceable plan obligations. A owner or operator of an affected EGU to standard, an affected EGU would report state plan using a rate-based emission the state, in order to adjust its reported its CO2 lb/MWh emission rate to the trading approach must therefore include CO emission rate when demonstrating state regulatory body, and would also 2 surrender to the state any ERCs it rate-based emission standards for compliance with a rate-based emission wishes to use to adjust its reported affected EGUs along with related standard.974 These requirements must emission rate. The state regulator would implementation and compliance be submitted for inclusion in the 972 then cancel the submitted ERCs. The requirements and mechanisms. These federally enforceable plan, per the affected EGU would add the MWh the related requirements include those statutory requirement that states provide ERCs represent to the denominator of its applicable to rate-based emission for the implementation and enforcement reported CO lb/MWh emission rate to standards more broadly: CO2 emission of emission standards. A rate-based 2 demonstrate compliance with its monitoring, reporting, and trading program would provide for the emission standard. The state regulator recordkeeping requirements for affected implementation and enforcement of EGUs, including requirements for could facilitate its evaluation of the rate-based emission standards for a state affected EGU’s compliance (as well as monitoring and reporting of useful plan that allows its affected EGUs to energy output. By satisfactorily evaluation by the affected EGU, the adjust a rate by the use of an ERC. EPA, and others) by providing addressing these requirements, state The EPA will review a state plan plans including a rate-based emission functionality in its tracking system to submittal including a rate-based run such compliance calculations. If the trading program will be able to meet the emission trading program to assure that statutory requirements of CAA section affected EGU’s adjusted CO2 emission the plan contains the requirements rate is equal to or lower than its 111(d) regarding the need for state plans necessary to assure the integrity of a to provide for the implementation and applicable emission rate standard, the rate-based approach, and therefore affected EGU would be in compliance. enforcement of emission standards, as provide for the implementation and well as meet the requirement that each a. Issuance of ERCs to affected EGUs. enforcement of rate-based emission ERCs may be issued to affected EGUs emission standard be quantifiable, standards. These requirements are that emit below a specified CO verifiable, non-duplicative, permanent, 2 discussed in more detail in this section. emission rate, as discussed below. For The EPA also notes it is proposing issuance of ERCs to affected EGUs, the budget trading programs to include out-of-sector model rules for both mass-based and state plan must specify the accounting GHG offsets. For example, both the California and rate-based emission trading programs. RGGI programs allow for the use of allowances method and administrative process for awarded to GHG offset projects to be used to meet State plans that include the finalized ERC issuance. This includes the a specified portion of an affected emission source’s model rule for a rate-based emission compliance obligation. The RGGI program contains 975 As used in this section, the term ‘‘EE program’’ a cost containment allowance reserve that makes 973 By ‘‘integrity of a rate-based emission trading refers to an EE deployment program. An EE available additional allowances up to a certain program’’, the EPA is referring to elements in the program involves deployment of multiple EE amount, at specified allowance price triggers. design and administration of a program necessary measures or EE projects, such as utility- or state- 970 79 FR 34830, 34913. to assure that emission standards implemented administered EE incentive programs that accelerate 971 These requirements are described in detail in using a rate-based emission trading approach are the deployment of EE technologies and practices. section VIII.D.2. quantifiable, verifiable, enforceable, non- As used in this section, the term ‘‘EE/RE project’’ 972 As described below, these requirements would duplicative, and permanent. refers to a discrete EE project (e.g., an EE upgrade likely be provided in a state plan in the form of state 974 See section VIII.K.1 for a discussion of the to a commercial building or set of buildings) or a regulations, but could potentially be provided in accounting method used to adjust a CO2 emission RE generator (e.g., a single wind turbine or group another form. rate. of turbines).

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00244 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64905

calculation method for determining the ERCs 976 = reported MWh by affected ERCs = NGCC unit’s reported MWh— 977 number of ERCs to be issued to an EGU × ((CO2 emission rate limit for ((NGCC unit’s CO2 emission 978 982 affected EGU, based on reported CO2 affected EGUs —affected EGU standard —NGCC unit’s reported CO2 979 emissions and MWh energy output, in reported CO2 emission rate )/CO2 emission rate)/NGCC unit’s CO2 comparison to a reference CO2 emission emission rate limit for affected EGUs) emission standard) rate. The reference rate is a specified For the example above, the According to this equation, ERC issuance is assessed based on the CO2 lb/MWh emission rate that an calculation is as follows: difference between the CO2 emission affected EGU’s reported CO2 emission ERCs = MWh reported × (2,000¥1,000)/ 983 rate is compared to, when determining 2,000 = MWh reported × 0.5 rate standard for the NGCC unit and the amount of ERCs that may be issued the reported CO2 emission rate of the If the affected EGU in this example affected NGCC unit. In other words, to an affected EGU. generated 1,000,000 MWh, 500,000 affected NGCC stationary combustion Following determination of the ERCs would be issued. turbines earn ERCs for generation when number of ERCs an affected EGU is Where a state plan includes separate they perform at an emission rate better eligible to receive, based on an affected emission standards for subcategories of than the reference rate for stationary EGU’s reported CO2 emission rate affected EGUs, specifically affected combustion turbines, similarly to how compared to a specified reference rate, fossil fuel-fired electric utility steam affected steam units can earn ERCs. the state regulatory body would issue generating units and stationary In a subcategorized rate-based those ERCs into a tracking system combustion turbines, the reference rate emission trading program, a state must account held by the owner or operator differs for affected fossil fuel-fired use the incremental operation of an of the affected EGU. Tracking system electric utility steam generating units affected NGCC unit quantified for and stationary combustion turbines. requirements are addressed below at building block 2 to allow a NGCC unit Additionally, if the state plan applies section VIII.K.2.c. to generate ERCs based on its expected emission standards for its affected EGUs incremental generation. The accounting method that may be that are equal to the subcategorized CO2 A state plan that provides for the use applied in a state plan differs depending emission performance rates there is a of ERCs issued based on incremental on whether a state plan includes a unique opportunity for the adjustment affected NGCC generation must provide single rate-based emission standard that of an affected EGU’s emission rate using a required calculation method that applies to all affected EGUs (e.g., if a ERCs that are generated as a result of allows for issuance of ERCs based on the plan is designed to meet a state rate- building block 2 incremental NGCC unit ability of incremental generation from based CO2 goal) or separate rate-based operation. The EPA is requiring state affected stationary combustion turbines emission standards that apply to plans to account for incremental NGCC to substitute for generation from affected subcategories of affected EGUs, namely generation in ERC generation if a state steam generating units (as represented fossil fuel-fired electric utility steam plan applies the subcategorized CO2 in building block 2), while also generating units and stationary emission performance rates to its respecting the fact that affected combustion turbines. In both cases, affected EGUs as emission standards. stationary combustion turbines must ERCs are issued in MWh, based on the Additionally, the EPA is requiring that also meet an assigned CO2 emission rate difference between an affected EGU’s a NGCC unit is not able to use ERCs limit for the entirety of its MWh energy generated by it or any other NGCC unit’s reported CO2 emission rate (in CO2 lb/ output. This accounting method must MWh) and a specified CO lb/MWh building block 2 incremental generation. reflect the application of the BSER, as 2 For affected steam generating units, emission rate that the reported rate is described in section V, and the the reference CO emission rate is the compared to (referred to as a ‘‘reference 2 accounting method must not create assigned CO emission rate limit for rate’’). The reference rate may be an 2 incentives to rearrange dispatch steam generating units, and the between existing NGCC units to affected EGU’s assigned CO2 emission following accounting method for limit rate or another CO emission rate, generate additional ERCs without 2 generating ERCs applies: changing the overall level of NGCC as described below. Where an affected ERCs 980 = reported MWh × ((steam generation. EGU’s reported CO emission rate is 2 generating unit CO2 emission rate The EPA will review whether a state’s lower than the specified reference CO2 limit 981—steam generating unit accounting method is approvable per emission rate, ERCs may be issued. reported CO2 emission rate)/steam the requirements of the statute and this Where a state plan includes emission generating unit CO2 emission rate limit). final rule as part of its overall plan standards in the form of a single rate- For an affected NGCC stationary review of the rate-based emission based emission standard that applies to combustion turbine in a subcategorized standards and implementing and all affected EGUs, the reference rate is rate-based emission trading program, enforcing measures in the state plan. the CO2 emission rate limit for affected the following equation provides a The EPA notes that the proposed model EGUs. In this instance, ERCs may be required accounting method for rule for a rate-based emission trading issued based on an affected EGU’s generating ERCs based on operation program includes a proposed with respect to the NGCC unit’s reported CO2 emission rate as a accounting method and takes comments proportion of the emission limit rate. emission standard: on alternatives. The accounting method For example, if the emission rate limit provided in a final model rule could be 976 For all calculations in this section, where the a presumptively approvable approach is 2,000 lb CO2/MWh and the affected result is a negative value, no ERCs would be issued. for issuance of ERCs based on the ability EGU emits at a rate of 1,000 lb CO / 977 This term represents the reported MWh by the 2 of incremental generation from affected MWh, 0.5 MWh would be awarded for affected EGU on an annual basis. 978 stationary combustion turbines to every MWh generated by the affected This term represents the ‘‘reference rate.’’ 979 EGU. ERCs would be issued to affected This term represents the annual reported CO2 emission rate of the affected EGU. 982 The ‘‘reference rate.’’ 980 983 EGUs in whole MWh increments. The For all calculations in this section, where the This is the CO2 emission performance rate for calculation method is as follows: result is a negative value, no ERCs would be issued. affected stationary combustion turbines in the 981 The ‘‘reference rate.’’ emission guidelines.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00245 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64906 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

substitute for generation from affected must include a description of the State plans with rate-based emission steam generating units. A state’s program or project, a projection of the trading programs must include accounting requirements for generation MWh generation or energy savings requirements regarding the qualification of ERCs based on incremental affected anticipated over the life of the program status of an independent verifier. An NGCC generation must maintain or project, and an EM&V plan that meets independent verifier is a person consistency with the EPA’s application state plan requirements. The EM&V plan (including any company, any corporate of the BSER when calculating CO2 must describe how MWh of RE parent or subsidiary, any contractors or emission performance rates for affected generation or energy savings resulting subcontractors, and the actual person) stationary combustion turbine and from the program or project will be who has the appropriate technical and steam generating units. In particular, a quantified and verified.988 A state, in its other qualifications to provide state’s accounting method must emission standard regulations, must verification reports. The independent maintain consistency of accounting in a include requirements for EM&V plans verifier must not have, or have had, any state rate-based CO2 emission standard that are consistent with the direct or indirect financial or other with the EPA’s application of building requirements in the emission guidelines interest in the subject of its verification block 2 in calculating CO2 emission for EE/RE measures and other eligible report or ERCs that could impact its performance rates for affected fossil measures, as discussed in sections impartiality in performing verification fuel-fired electric utility steam VIII.K.1 and VIII.K.3. services. State plans must require that a generating units and stationary The EPA has determined that state person be approved by the state as an combustion turbines, which is based on requirements for an eligibility independent verifier, as defined by this use of incremental generation from application must include review of the final rule, as eligible to perform the affected stationary combustion turbine application by an independent verifier, verifications required under the to replace generation from affected approved by the state as eligible per the approved state plan. State plans must steam generating units. requirements of the final emission also include a mechanism to b. Issuance of ERCs for RE, demand- guidelines to provide such verification, temporarily or permanently revoke the side EE, and other measures. prior to submittal. This requirement qualification status of an independent ERCs may be issued for qualifying 984 builds on the approach used for verifier, such that it can no longer measures. For issuance of ERCs for assessing GHG offset projects, both in provide verification services related to qualifying measures, state plan international emission trading programs an eligibility application or M&V report requirements for ERC issuance must and the GHG emission budget trading for at least the duration of the period it include a two-step process. In the first programs implemented by California does not meet the qualification step of the process, a potential ERC and the RGGI participating states.989 An requirements for independent verifiers provider submits an eligibility assessment by an independent verifier in an approved state plan. The EPA’s application for a qualifying program or would be included as a component of an proposed model rate-based emission project 985 to the administering state 986 eligibility application. trading rule contains provisions regulator (or its agent ). The state The EPA has determined that addressing accreditation and conflicts of regulator reviews the application to independent verification requirements interest for independent verifiers. State determine whether, in this example, an are necessary to ensure the integrity of plans that adopt the finalized model EE/RE program or project meets state rate-based emission trading rule could be presumptively approvable eligibility requirements for the issuance 987 programs included in a state plan, given with respect to these requirements of ERCs. An eligibility application the wide range of eligible measures that regarding independent verifiers. may generate ERCs and the broad The state’s eligibility requirements 984 Qualifying measures that can be used to adjust geographic locations in which those and application procedures must ensure the CO2 emission rate of an affected EGU are discussed at section VIII.K.1, and include measures may occur. Inclusion of an that only eligible actions may generate incremental NGCC, RE, demand-side EE, and other independent verification component ERCs and that documentation is measures, such as DSM, CHP and incremental provides technical support for state submitted only once for each program or nuclear generation. 985 For example, for an EE/RE program or project, regulatory bodies to ensure that project, and to only one state 990 as described in this section for illustrative purposes. eligibility applications and M&V reports program. These provisions will The requirements described in this section for EE/ are thoroughly reviewed prior to ensure that actions that are eligible for RE programs and projects also apply for all other issuance of ERCs. Inclusion of an the issuance of ERCs are ‘‘non- eligible qualifying measures discussed in section 991 VIII.K.1. independent verification component is duplicative.’’ The tracking system 986 As used here, an agent is a party acting on also consistent with similar approaches used to administer a state’s rate-based behalf of the state, based on authority vested in it required by state PUCs for the review of emission trading system must provide by the state, pursuant to the legal authority of the demand-side EE program results and transparent, electronic, public access to state. A state could designate an agent to provide GHG offset provisions included in state information about program and project certain limited administrative services, or could choose to vest an agent with greater authority. GHG emission budget trading programs. eligibility applications, including EM&V Where an agent issues an ERC on behalf of the state, plans, and regulatory approval status. such issuance would have the same legal effect as 988 The verification process includes confirmation In the second step of the process, issuance of an ERC by the state. that quantified MWh are non-duplicative and following implementation of the RE/EE 987 The entity implementing the EE/RE program permanent (i.e., are not being used in any other or project (referred to in the preamble as a state plan to demonstrate compliance with an program or project (as described in this ‘‘provider’’) would submit the application. This is emission standard or achievement of an emission example) that was approved in step one, the identified entity to which ERCs would performance rate or state CO2 emission goal). the RE/EE provider periodically submits ultimately be issued, to a tracking system account 989 Information about the verification process for a M&V report to the state regulatory held by the entity. Such entities could include a GHG offsets under the RGGI program, including wide variety of parties that implement EE/RE verifier accreditation requirements and access to body documenting the results of the programs and projects, including owners or relevant documents, is available at http:// operators of affected EGUs, electric distribution www.rggi.org/market/offsets/verification. Similar 990 This includes ensuring that multiple parties companies, independent power producers, energy information about the verification process for GHG do not submit an eligibility application for the same service companies, administrators of state EE offsets under the California program is available at EE program or project, or for the same RE generator. programs, and administrators of industrial EE http://www.arb.ca.gov/cc/capandtrade/offsets/ 991 Emission standards must be ‘‘non-duplicative’’ programs, among others. verification/verification.htm. as described in section VIII.D.2.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00246 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64907

program or project in MWh of electric specified in the emission trading be applied to adjust a CO2 emission rate generation or energy savings.992 These program regulations. Each issued ERC in 2023 or future years without results are quantified according to the must have a unique identifier (e.g., limitation. ERCs may be banked from EM&V plan that was approved as part of serial number) and the tracking system the interim plan performance period to step one. These results are verified by must provide for traceability of issued the final plan performance period. an accredited independent verifier, and ERCs back to the program or project for Banking provides a number of its verification assessment must be which they were issued. advantages while ensuring that the same included as part of the M&V report The EPA received a number of output-weighted average CO2 emission submitted to the state regulatory body. comments from states and stakeholders rates of the interim and final state CO2 The administering state regulator (or its about the value of the EPA’s support in goals are achieved over the course of a agent) then reviews the M&V report, and developing and/or administering state plan. Banking provisions have determines the number of ERCs (if any) tracking systems to support state been used extensively in rate-based that should be issued, based on the administration of rate-based emission environmental programs and mass- report. Finally, the state regulatory body trading systems. This could include based emission budget trading (or its agent) issues ERCs to the provider regional systems and/or a national programs.997 This is because banking of the approved program or project. system. The EPA is exploring options reduces the cost of attaining the These ERCs are issued to the tracking for providing such support and is requirements of the regulation. The EPA system account held by the program or conducting an initial scoping has determined that the same rationale project provider. assessment of tracking system support and outcomes apply under a CO2 State plan requirements must ensure needs and functionality. emission rate approach, in that allowing that only one ERC is issued for each d. Effect of improperly issued ERCs. banking will reduce compliance costs. verified MWh. This is addressed Because the goal of this rulemaking is Banking encourages additional emission through registration in the tracking the actual reduction of CO2 emissions, reductions in the near-term if economic system of programs and projects that it is fundamental that ERCs represent to meet a long-term emission rate have been qualified for the issuance of the MWh of energy generation or constraint, which is beneficial due to ERCs, to ensure that documentation is savings they purport to represent. To social preferences for environmental submitted only once for each RE/EE this end, only valid ERCs that actually improvements sooner rather than 993 action, and to only one state program. meet the standards articulated in this later.998 State plans must specify The tracking system must provide rule may be used to satisfy any aspect whether the state is allowing or transparent electronic public access to of compliance by an affected EGU with restricting the banking of ERCs between submitted M&V reports and regulatory emission standards. Despite safeguards compliance periods for affected EGUs. 994 approvals related to such reports. included in the structure of ERC State plans must also prohibit Such reports are the basis for issuance issuance and tracking systems, such as borrowing of any ERCs from future of ERCs. the review of eligibility applications and compliance periods by affected EGUs or c. Tracking system requirements. M&V reports, and state issuance of State requirements must include eligible resources. ERCs, ERCs may be issued that do not, provisions to ensure that ERCs issued to f. Considerations for ERC issuance. in fact, represent eligible zero-emission any eligible entity are properly tracked The EPA notes that state-administered MWh as required in the emission from issuance to submission by affected and state-overseen EE programs, such as guidelines. A variety of situations may EGUs for compliance (where ERCs are those administered by state-regulated result in such improper ERC issuance, ‘‘surrendered’’ by the owner or operator electric distribution utilities, could play ranging from simple paperwork errors to of an affected EGU and ‘‘retired’’ or a key role in supplying energy savings outright fraud. ‘‘cancelled’’), to ensure they are only to a rate-based emission trading system An approvable state plan that allows used once to meet a regulatory in the form of ERCs. These programs affected EGUs to comply with their obligation. This is addressed through have been the primary means for emission standards in part through specified requirements for tracking delivering EE programs and energy system account holders, ERC issuance, reliance on ERCs must include savings at scale, and also allow for a ERC transfers among accounts, provisions making clear that an affected state to conduct a portfolio planning compliance true-up for affected EGU may only demonstrate compliance process to guide EE program design and EGUs,995 and an accompanying tracking with an ERC that represents the one focus in a manner that best provides system that meets requirements MWh of actual energy generation or multiple benefits to electricity savings that it purports to represent and ratepayers in a state. Such portfolio 992 State rate-based emission trading program otherwise meets the emission planning processes typically treat EE as regulations must specify the frequency for guidelines. an energy resource comparable to submission of M&V reports for approved qualified e. Banking of ERCs. electricity generation. measures that have been deemed eligible to ERCs issued in 2022 or a subsequent generate ERCs. These reporting periods should be annual, but a state could consider shorter or longer year may be carried forward (or 997 Banking under mass-based emission budget periods, depending on the type of ERC resource. ‘‘banked’’) and used for demonstrating trading programs, and the rationale for banking 993 EE/RE programs and projects, and other compliance in a future year.996 For provisions, is addressed below in section VIII.J.2.c. eligible measures, with an approved eligibility example, an ERC issued for a MWh of 998 The absence of banking creates an incentive to application would be designated in a tracking defer both relatively low-cost and higher-cost CO2 system as qualified programs or projects. Qualified RE generation that occurs in 2022 may emission reduction actions until a later period programs and projects may be issued ERCs, based when emission rate limits become more stringent, on approved M&V reports. 996 States also have the option to participate in rather than incentives to undertake the low-cost 994 This must include electronic Internet access to the CEIP, under which they can issue ERCs for activities sooner in order to further delay the high such information in the tracking system. MWh generation or savings that occur in 2020–2021 cost actions. Under a rate-based emission trading 995 ‘‘Compliance true-up’’ refers to ERC for measures implemented following submission of program, banking will encourage ERC providers to submission by an owner or operator of an affected a final state plan, and receive matching ERCs from generate larger numbers of ERCs in early years of EGU to adjust a reported CO2 emission rate, and a federal pool. See section VIII.B.2 for a detailed a plan performance period, in anticipation of rising determination of whether the adjusted rate is equal discussion. The ERCs issued under this program ERC prices over time, when demand for ERCs is to or lower than the applicable rate-based emission can also be banked during and between the interim expected to increase as rate-based CO2 emission standard. and final compliance period. standards become more stringent.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00247 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64908 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

The EPA also notes that non–ERC agreements. Such interactions among trading program and pursue appropriate certificates may be issued by states and existing instruments and ERCs could remedies where significant deficiencies other bodies for MWh of energy also impact how marketing claims are are identified. generation and energy savings that are made in the voluntary RE market. How 3. EM&V Requirements for RE, Demand- used to meet other state regulatory a state might choose to address these Side EE, and Other Measures Used To requirements, such as state RPS and potential interactions will depend on a Adjust a CO Rate EERS, or by individuals to make number of factors, including the utility 2 environmental or other claims in regulatory structure in the state, existing This section discusses EM&V for RE, voluntary markets. statutory and regulatory requirements demand-side EE, and other measures The EPA defines an ERC in the for state RPS, and existing RE power that are used to generate ERCs or emission guidelines as a tradable purchase agreements and REC contracts. otherwise adjust an emission rate.999 compliance instrument that represents a g. Program review. EM&V is applied for purposes of zero-emission MWh (for the purposes of The EPA is requiring that states quantifying and verifying MWh in rate- meeting the emission guidelines) from a periodically review the administration based state plans, as described below. qualifying measure that may be used to of their rate-based emission trading Rate-based state plans must require that adjust the reported CO2 emission rate of programs. The results of these program eligible resources document in EM&V an affected EGU subject to a rate-based reviews must be submitted by states to plans and M&V reports how all MWh emission standard in an approved state the EPA as part of their required reports saved and generated from eligible plan under CAA section 111(d). The on the implementation of their state measures will be quantified and sole purpose of an ERC is for use by an plans, as described in sections verified. Additionally, with respect to affected EGU in demonstrating VIII.D.a.(5) and VIII.D.2.b.(4), and must EM&V, the EPA’s proposed model rule compliance with a rate-based emission be made publicly available. Such a identifies certain industry best practices standard in such an approved state plan. review submitted as part of a required that, upon finalization, could be An ERC is issued separately from any state report provides for the adopted as presumptively approvable other instruments that may be issued for implementation of rate-based emission components of a state plan.1000 a MWh of energy generation or energy standards per the requirements of CAA As discussed in section VIII.K.1, savings from a qualifying measure. Such section 111(d)(2). For a rate-based quantified and verified MWh of RE other instruments may be issued for use emission trading program, the review generation, EE savings,1001 and other in meeting other regulatory must cover the reporting period eligible measures may be used to adjust requirements (e.g., such as state RPS addressed in the state’s periodic reports a CO2 emission rate when and EERS requirements) or for use in to the EPA on plan implementation. demonstrating compliance with the voluntary markets. An ERC may be The program review must address all emission guidelines. In states issued based on the same data and aspects of the administration of a state’s implementing emission standard type verification requirements used by rate-based emission trading program, plans with rate-based trading, affected existing REC and EEC tracking systems including the state’s evaluations and EGUs adjust their reported emission rate for issuance of RECs and EECs. regulatory decisions regarding eligibility using ERCs, which represent MWh that The EPA notes that the definitions of applications for ERC resources and M&V are quantified and verified according to other instruments, such as RECs, differ reports (and associated EM&V the EM&V requirements described in (as established under state statute, activities), and the state’s issuance of this section. The EPA will evaluate the regulations, and PUC orders) and that ERCs. The program review must assess overall approvability of the state plan requirements under state regulatory whether the program is being taking into consideration whether the programs that use such instruments, administered properly in accordance state’s submitted EM&V requirements such as state RPS, also differ. As a with the state’s approved plan; whether satisfy these final emission guidelines. result, states may want to assess, when ERC eligibility applications and M&V a. Discussion of proposed EM&V developing their state plan, how such reports are being properly evaluated and approach and public comment. existing instruments may interact with acted upon (i.e., approved or The EPA proposed that a state plan ERCs. For example, a state may want to disapproved); whether reported annual that incorporates RE and demand-side assess how issuance of ERCs pursuant to MWh of generation and savings from a state plan may interact with qualified ERC resources are being 999 EM&V is defined to mean the set of procedures, methods, and analytic approaches used compliance with a state RPS by entities properly quantified, verified, and to quantify the MWh from demand-side EE and RE affected under relevant state RPS reported in accordance with approved and other measures, and thereby ensure that the regulations or PUC orders. The EM&V plans, and whether appropriate resulting savings and generation are quantifiable interaction of other instruments and records are being maintained. The and verifiable. ERCs may also impact existing or future program review must also address 1000 The EPA recognizes that EM&V best practices are routinely evolving to reflect changes in markets, arrangements in the private determination of the eligibility of technologies and data availability. Therefore the marketplace. Actions taken by states, verifiers by the state and the conduct of agency is providing draft EM&V guidance with the separate from the design of their state verifiers, including the quality of proposed model rule, which can be updated over plan, could address a number of these verifier reviews. Where significant time to address any such changes to best practices. The guidance can also identify and describe potential interactions. For example, deficiencies are identified by the state’s alternative quantification approaches that may be state RPS regulations that specify a REC program review, those deficiencies must approved for use, provided that such approaches for a MWh of RE generation, and the be rectified by the state in a timely meet the requirements of the finalized EM&V attributes related to that MWh, may or manner. requirements. 1001 In the context of demand-side EE, ‘‘measure’’ may not explicitly or implicitly States must collect, compile, and refers to an installed piece of equipment or system recognize that the holder of the REC is maintain sufficient data in an at an end-use energy consumer facility, a strategy also entitled to the issuance of an ERC appropriate format to support the intended to affect consumer energy use behaviors, for a MWh of electricity generation from periodic program review. The EPA will or a modification of equipment, systems or operations that reduces the amount of electricity the eligible RE resource. This could review the results of each program that would have delivered an equivalent or impact existing and future RE power review. The EPA may also audit a state’s improved level of end-use service in the absence of purchase agreements or REC purchase administration of its rate-based emission EE.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00248 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64909

EE measures must include an EM&V Another point made by commenters is generating unit must be uniquely plan that explains how the effect of that, despite the observed improvements identified and recorded in a specified these measures will be determined in in EM&V over time, quantification registry to avoid the double counting of the course of plan implementation. The knowledge is more robust for some EE credits at the time of issuance and proposal sought comment on the program and policy types than for retirement. In addition, the existing suitability of current state and utility others. Additionally, there is relatively reports and documentation from EM&V approaches for RE and demand- limited experience applying EM&V tracking systems may, together with side EE programs in the context of an protocols and procedures to emission eligible independent third party approvable state plan, and on whether trading programs, where each MWh of verification reports, serve as the harmonization of state approaches, or replaced generation can be bought and substantive basis for eligibility supplemental actions and procedures, sold by a regulated source. As a result, applications, EM&V plans and M&V should be required in an approvable the EPA’s final emission guidelines and reports for the issuance of ERCs to state plan, provided that supporting proposed model rule include a number energy generating resources for affected EM&V documentation meets applicable of safeguards and quality-control EGUs to meet their obligations under minimum requirements. In the proposal, features that are intended to ensure the the final rule. With respect to actual the EPA also indicated that it would accuracy and reliability of quantified EE monitoring requirements, many existing issue guidance to help states, sources, savings. REC registries include provisions for the and project providers quantify and b. Requirements for EM&V and M&V monitoring of MWh of generation that verify MWh savings and generation submittals. would be appropriate to meet state plan resulting from zero-emitting RE and As discussed in section VIII.K.2, these requirements pursuant to the final rule, demand-side EE efforts. final guidelines require that state plans such as requirements to use a revenue The proposal and associated ‘‘State include a requirement that EM&V plans quality meter. Plans Considerations’’ TSD 1002 and M&V reports be submitted to the For demand-side EE, states must suggested that the EPA’s EM&V state for rate-based emission trading require that EM&V plans that are requirements could leverage existing programs. States must require that at the developed for purposes of adjusting an industry practices, protocols, and initiation of an eligible measure, project emission rate under this final rule tracking mechanisms currently utilized providers must develop and submit to include several specific components. by the majority of states implementing the state an EM&V plan that documents The EPA notes these components reflect RE and demand-side EE. The EPA how requirements for quantification and existing provisions in a wide range of further noted that many state regulatory verification will be carried out over the publicly or rate-payer funded EE bodies and other entities already have period that MWh generation or savings programs and energy service company are produced. States must also require significant EM&V infrastructure in place projects. One of these components state that after a project or program is and have been applying, refining, and plans must require is a demonstration of implemented, the provider must submit enhancing their evaluation and quality how savings will be quantified and periodic M&V reports to confirm and assurance approaches for over 30 years, verified by applying industry best- describe how each of the requirements particularly with regard to the practice protocols and guidelines, as was applied. These reports must also quantification and verification of energy well as an explanation of the key specify the actual MWh savings or savings resulting from utility- assumptions and data sources used. generation results, as quantified by State plans must require EM&V plans to administered EE programs. The applying EM&V methods on a include and address the following: proposal also observed that the majority retrospective (ex-post) basis. States may of RE generation is typically quantified • A baseline that represents what would not allow MWh values that are have happened in the absence of the EE and verified using readily available, quantified using ex-ante (pre- reliable, and transparent methods such intervention, such as the equipment that implementation) estimates of savings. would most likely have been installed—or as direct metering of MWh. As previously described, the EPA took that a typical consumer or building owner As a result, the agency took comment comment on the suitability of current would have continued using—in a given on whether this infrastructure is state and utility EM&V approaches for circumstance at the time of EE appropriate in the context of approvable RE and demand-side EE programs in the implementation state plans for use in rate-based state • The effects of changes in independent context of an approvable state plan. factors affecting energy consumption and plans that include RE, demand-side EE, These final requirements regarding and other measures. The majority of savings; that is, factors not directly related to EM&V plans and M&V reports are the EE action, such as weather, occupancy, commenters addressing this question intended to leverage and closely or production levels responded affirmatively, indicating that resemble those already in routine use. • The length of time the EE action is existing EM&V infrastructure is For energy generating resources, anticipated to continue to remain in place appropriate to assure quality, including RE resources, states may and operable, effectively providing savings credibility, and integrity. However, leverage the programs and infrastructure (in years) commenters also noted that EM&V they have in place for achievement of Examples and discussion of industry methods are routinely improving and their RPS and take advantage of best-practices for executing each of the changing over time, and that the EPA’s registries in place for the issuance and above-listed components is provided in requirements and guidance should be tracking of RECs. Many existing REC the EPA’s draft EM&V guidance for responsive to such changes, should tracking systems already include well- demand-side EE, which is being avoid locking in outdated methods, and established safeguards, documentation released in conjunction with the should be updated to maintain requirements, and procedures for proposed model rule. The model trading relevance. registry operations that could be rule defines certain EM&V provisions adapted to serve similar functions in for demand-side EE, as well as specific 1002 See discussion beginning on p. 34 of the State relation to the final emission guidelines. provisions for non-affected CHP and RE Plan Considerations TSD for the Clean Power Plan Proposed Rule: http://www2.epa.gov/carbon- For example, a key element of RPS resources, including incremental pollution-standards/clean-power-plan-proposed- compliance in many states that parallels hydroelectric power, biomass RE rule-state-plan-considerations. the final rule’s requirements is that each facilities, and waste-to-energy facilities,

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00249 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64910 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

that may be presumptively approvable Apprenticeship; or with a state across states could create distortionary upon finalization. apprenticeship program approved by effects that lead to shifts in generation The EPA notes that state plans the DOL, or by another skill certification among states based on the different CO2 incorporating the finalized model rule validated by a third party accrediting emission rate standards applied by for rate-based emission trading body. This can help to substantiate the states to similar types of affected EGUs. programs could be presumptively authenticity of emission reductions due Providing for the interstate trading of approvable as meeting the requirements to demand-side EE and RE and other ERCs in this instance would exacerbate of CAA section 111(d) and the EM&V CO2 emission reduction measures. these distortionary effects by providing provisions in these emission guidelines. arbitrage opportunities. 4. Multi-State Coordination: Rate-Based When demonstrating that a state’s CO The EPA will evaluate the approvability Emission Trading Programs 2 of such state plans through independent emission goal is achieved as a result of notice and comment rulemaking. Individual rate-based state plans may plan implementation, a state with c. Skill certification standards. provide for the interstate transfer of linkages to other states would be Using a skilled workforce to ERCs, which would enable an ERC required to demonstrate that any ERCs implement demand-side EE and RE issued by one state to be used for issued by another state that are used by projects and other measures intended to compliance by an affected EGU with a affected EGUs in the state for rate-based emission standard in another reduce CO2 emissions, and to evaluate, compliance with its rate-based CO2 measure, quantify and verify the savings state. Such plans would include emission standards were issued by associated with EE projects or the regulatory provisions in each state’s states with an EPA-approved state additional generation from performance emission standard requirements that plan.1005 improvements at existing RE projects indicate that ERCs issued in other States could implement these linkages are both important in existing best partner states may be used by affected among state plans with rate-based industry practices. Several commenters EGUs for compliance. Such plans must emission trading systems through three pointed out that skill certification indicate how ERCs will be tracked from different implementation approaches: standards can help to assure quality and issuance through use for compliance, (1) Plans that are ‘‘ready-for-interstate- credibility of demand-side EE, RE, and through either a joint tracking system, trading;’’ (2) plans that include specified interoperable tracking systems, or an bilateral or multilateral linkages; and (3) other CO2 emission reduction projects. 1003 The EPA also recognizes that a skilled EPA-administered tracking system. plans that provide for joint ERC The approaches described in this workforce performing the EM&V is issuance among states with materially section are only allowed for states that important to substantiate the consistent regulations. These impose rate-based emission limits for authenticity of emissions reductions. approaches are summarized below: affected EGUs that are equal to the CO The EPA is therefore recommending 2 • Ready-for-interstate-trading plans: A emission performance levels in the state plan recognizes ERCs issued by any in conjunction with the EM&V emission guidelines. This approach is requirements discussed in this section, state with an EPA-approved plan that also necessary to ensure that each state that uses a specified EPA-approved 1006 or EPA- that states are encouraged to include in is allowing for the interstate transfer of administered tracking system. Plans are their plans a description of how states ERCs is implementing rate-based approved individually. A state plan need not will ensure that the skills of workers emission standards for affected EGUs at designate the individual states by name from installing demand-side EE and RE the same lb CO /MWh level.1004 This which it would accept issued ERCs. States 2 can join such a coordinated approach over projects or other measures intended to assures that all the participating states reduce CO emissions as well as the time, without the need for plan revisions.1007 2 are issuing ERCs to affected fossil steam • skills of workers who perform the Specified bilateral linkage: States and NGCC units that emit below their recognize ERCs issued by named partner EM&V of demand-side EE and RE assigned emission standards on the states. Partner states must demonstrate that performance will be certified by a third same basis. they use a shared tracking system, party entity that: This approach avoids providing interoperable tracking systems, or an EPA- (1) Develops a competency based program different incentives, in the form of administered tracking system. Plans are aligned with a job task analysis and issued ERCs, to affected steam approved individually, including review of certification scheme; generating units and NGCC units in the shared tracking system or interoperable tracking systems. (2) Engages with subject matter experts in different states that have comparable • the development of the job task analysis and Joint ERC issuance: States implement CO2 emission rates. Providing different materially consistent rate-based emission certification schemes that represent incentives to similar affected EGUs appropriate qualifications, categories of the jobs, and levels of experience; 1005 This could be done by reference to data in the 1003 (3) Has clearly documented the process The emission standards in each individual tracking system used to implement a state’s rate- state plan must include regulatory provisions that based emission trading program that identifies the used to develop the job task analysis and address the issuance of ERCs and tracking of ERCs origin of each ERC (e.g., by serial identifier). certification schemes, covering such from issuance through use for compliance, as 1006 The EPA would designate tracking systems elements as the job description, knowledge, described in section VIII.K.2. The description here that it has determined adequately address the skills, and abilities; addresses how those regulatory provisions will be integrity elements necessary for the issuance and (4) Has pursued third-party accreditation implemented through the use of a joint tracking tracking of ERCs, as described in section VIII.K.2. aligned with consensus-based standards, for system, interoperable tracking systems, or an EPA- Under this approach, a state could include in its example ISO/IEC 17024. administered tracking system. plan such a designated tracking system, which has 1004 States also have the option of implementing already been reviewed by the EPA. Examples of such entities include: a multi-state plan with a single rate-based emission 1007 The EPA notes that it is proposing a model Parties aligned with the Department of standard that applies to all affected EGUs in the rule for a rate-based emission trading program that Energy’s (DOE) Better Building participating states. This approach would also could be used by states interested in implementing allow for interstate transfers of ERCs. Under this a ready-for-interstate-trading plan approach. A state Workforce Guidelines and validated by approach, a rate-based multi-state plan would plan that included the finalized rate-based model a third party accrediting body include emission standards for affected EGUs based rule could be presumptively approvable as meeting recognized by DOE; or by an on a weighted average rate-based emission goal, the requirements of CAA section 111(d) and the derived by calculating a weighted average CO2 emission guidelines. If a state plan also met the apprenticeship program that is emission rate based on the individual rate-based requirements described in this section for ready-for- registered with the federal Department goals for each of the participating states and 2012 interstate-trading plans, it could be approved as of Labor (DOL), Office of generation from affected EGUs. ready-for-interstate trading.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00250 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64911

trading program regulations and share a plan options that limit distortionary demonstrating achievement of state tracking system. States coordinate their effects, the structure of mass-based plan goals. 1008 review of submissions for ERC issuance and rate-based plan accounting for The EPA acknowledges that some and their issuance of ERCs to the shared amount of shifts in generation between tracking system. Issued ERCs are recognized emission reductions measures, and as usable for compliance in all states using specified restrictions on the counting in sources within and across state borders the shared tracking system. Plans are a rate-based plan of emission reduction will inevitably be present and approved individually, including review of measures located in a mass-based state. unavoidable in the context of this rule the shared tracking system. Finally, the section discusses how the and may affect how affected EGUs These implementation approaches are rate-based accounting framework achieve the applicable CO2 performance designed to streamline the process for minimizes incentives to develop rates or state goals under a state plan. In linking emission trading programs, emission reduction measures in fact, the definition of the BSER is avoid or limit the need for plan particular states due to differences in premised upon shifts in generation revisions as new states join a rates. across sources, particularly shifts from collaborative emission trading In the June 2014 proposal, the EPA higher- to lower-emitting units that approach, and facilitate the acknowledged that emission reduction result in overall emission reductions. development of regional or broader measures implemented under a state However, in the context of these shifts, multi-state markets for ERCs.1009 plan will likely have impacts across the extent to which the movement of many affected sources both within and generation may be driven not by the L. Treatment of Interstate Effects across state boundaries due to the potential to capture lower-cost emission This section discusses how differing dynamic and interstate nature of the reduction but by arbitrage across characteristics across states and sources electric grid. These interactions may be different emission rates, causing could create risks of increased driven in part due to differences in inefficiencies in the power markets and emissions under this rule through power sector dynamics across states, possibly eroding overall emission double counting of emission reduction including the types of affected EGUs in reductions, should be minimized. In particular, the EPA has determined measures or through foregone emission a state, the availability of eligible zero- final emission performance rates that reductions due to movement of emitting resources, and the costs of serve to reduce relative differences generation from source to source. The different compliance options and between state goals, and thus also focus section also discusses how the final rule existing policies in states. These state- the potential for generation shifting addresses these concerns: First, through level characteristics play out across between affected EGUs on achieving the the characteristics of goal-setting and dynamic regional grids that provide emission reductions quantified in the the framework of state plans, and electricity across states. EGUs are BSER. In the proposal, goals differed second, through specific requirements dispatched both within and across state intended to minimize the risk of double more substantially between states based borders and are constantly adjusting upon an assessment of what emission counting and increased emissions.1010 behavior in response to available The section is structured as follows. reduction potential units could access generation and electricity demand on located within their state. Commenters First, this section discusses the the regional grid. Whenever CO2 dynamics that cause these risks to observed that due to the interconnected emission reduction measures, such as nature of the power sector, units are not potentially arise. Second, it provides a RE or demand-side EE, are discussion of how the risks of double limited to such emission reduction implemented, the measure can affect measures within their state, and indeed counting and foregone reductions are EGU generation and CO2 emissions minimized through the following any operational decisions that units take across the regional grid. These impacts necessarily influence operational provisions: The nature of the final can change across multiple affected emission performance rates, multi-state decisions at other units throughout the EGUs on a minute-to-minute, hour-to- interconnected grid. As a result, in the hour, and day-to-day basis as electricity final rule, we are finalizing CO2 1008 This refers to eligibility applications and demand changes and different M&V reports, which are required submittals for emission performance rates, informed non-affected EGU entities seeking the issuance of generating resources are dispatched. by regional emission reduction ERCs. Where affected EGUs are issued ERCs for These impacts will also change in the potential, for fossil fuel-fired electric emission performance below a specified CO2 long-term, as the generating fleet and utility steam generating units and emission rate, these ERCs are issued by the load behavior change over a period of individual state in which they are subject to a rate- stationary combustion turbines that are based emission standard. Requirements for ERC years. Interactions among EGUs across applied consistently across all affected issuance are discussed in section VIII.K.2. states may be further driven by the plan EGUs. As the same source category- 1009 The EPA also notes that individual state types (i.e., rate-based or mass-based) and specific performance rates are applied to plans may utilize RE and demand-side EE (and the individual characteristics of the other eligible measures), that occur in other states, all units in the contiguous U.S. as described in section VIII.L addressing interstate plans that states choose to adopt. regardless of the state in which they are effects. Under an individual state plan, ERCs could In the context of this complex located, any differences between state be issued for RE and demand-side EE measures that environment of federal and state goals in this final rule stem only from occur in other states, provided the EE/RE provider policies and interstate grids, the relative prevalence in each state of submits the measures to the state and the measures meet requirements in the state plan’s rate-based commenters expressed concern about fossil fuel-fired electric utility steam emission trading program requirements. The multi- the risk of double-counting of measure generating units and stationary state approaches described above provide impacts, particularly across state plans. combustion turbines. Consequently, additional flexibility for states to informally and Commenters stated that there is there is substantially less incentive in formally coordinate their implementation of rate- based plans across states while retaining individual potential for distortionary incentives this final rule for units to shift rate-based state goals. that could undermine overall CO2 generation across state lines based 1010 This section does not discuss emission emission reductions (often termed solely on differences in state goals, since leakage and how it is addressed by this final rule. emissions ‘‘leakage’’). Commenters there is substantially less difference See section VII.D for a discussion of emission leakage and its impact on state goal equivalence. requested that the EPA ensure that between the final rule’s state goals, and See section VIII.J for a discussion of requirements states avoid double-counting and since those state goals are themselves for mass-based plans to address leakage. minimize leakage effects when premised on nationally consistent

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00251 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64912 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

source category-specific performance states involved. These requirements interstate effects through the structure of rates. along with a method for calculating a the rule’s accounting approach for The EPA has also incorporated weighted average goal rate are specified adjusting the CO2 emission rate of an elements into the rule that seek to in section VIII.C.5. affected EGU, detailed in section minimize double-counting and the Under all types of state plans, states VIII.K.1 above, used to show that the distortionary effects that could must ensure that the emission reduction state has met its obligation under its potentially increase emissions. First, measures counted as part of meeting state plan. states have the option to adopt multi- their plan requirements are not The general accounting approach for state plans that reflect regional duplicative of any measures that are adjusting the CO2 emission rate of an interactions while eliminating chances counted by another state, in order to affected EGU inherently accounts for the for double counting and providing a avoid double counting of the MWhs of regional nature of how substitute level playing field for trading of rate- generation or energy savings that these generation and energy savings will based ERCs or mass-based allowances. measure produce. Depending on the impact affected EGU generation and CO2 Second, in the method for rate-based accounting method used to reflect these emissions. The following discussions plan compliance, the rule provides a measures in state goals, interstate effects refer to the substituting generation and general accounting approach for could still allow for the double counting energy savings in question as RE and adjusting an affected EGU’s or state’s of the emission reductions resulting demand-side EE, but this method can CO2 rate that inherently acts to from these measures, particularly if apply to other measures that were not minimize state differences. These points mathematical adjustments were made to included in the determination of the are further discussed below. stack emissions to reflect these BSER that substitute for affected EGU For both rate-based and mass-based reductions. Depending on how these generation. The adjusted CO2 emission approaches, the rule provides states measures are accounted for, the rate gives credit to the affected EGU or with the option of creating either reductions could be counted by both the state for the MWhs of RE and demand- ‘‘ready-for-interstate-trading’’ plans or state that deployed the measure, and the side EE it is responsible for deploying, multi-state plans. These options for state that reports a reduction in fossil by allowing those MWhs to be added to states working together provide generation or reported emissions. In this the denominator of the CO2 rate, but opportunities to enable protections final rule, the accounting approaches for makes no adjustment to the numerator. against double counting and minimize both mass-based and rate-based plans Instead, the numerator reflects reported the presence of distortionary effects. have been specifically designed to stack emissions, which will reflect the ‘‘Ready-for-interstate-trading’’ and eliminate the risk of double counting of extent to which RE and demand-side EE multi-state plans engage multiple states reductions, because emission reduction reduced the affected EGU’s generation in the same system for the purpose of measures are accounted for only and emissions, without needing to trading mass-based allowances or through their inherent impact on stack account for the state in which the RE or issuing and trading rate-based ERCs. emissions for affected EGUs. demand-side EE originated, or This allows for efficient implementation Mass-based plans rely exclusively on approximating exactly how it impacted of protections against double counting reported stack emissions for the regional grid. Double-counting of provided in state plan requirements, as determining whether a mass-based CO2 CO2 emission reductions is prevented multiple states are participating in the emission goal is achieved. This means because the reported emissions from same tracking systems. This is that under a mass-based plan any each unit are represented in the particularly useful in the context of rate- emission reduction measures that are numerator of each of those units’ based ERC issuance and tracking, where implemented are automatically emission rates, and those real emissions it must be ensured that the ERCs being accounted for in reduced stack capture whatever emission reduction generated are unique across rate-based emissions of CO2 from affected EGUs, impact occurred with regard to any plans. which avoids concerns about counting particular MWh of RE or demand-side This final rule also reduces the same mass reductions in two EE. Because the general accounting distortionary effects within the context different mass-based states. approach disallows any adjustment to of multi-state plans. It does so by In a rate-based plan, there needs to be any EGU’s reported emissions, it is not restricting states to interstate trading an explicit adjustment of reported CO2 possible for the real emission reductions with equivalently denominated mass- emission rates from affected EGUs, to prompted by any particular measure to based allowances or rate-based ERCs. In reflect the measures that substitute low- be double-counted. a mass-based context, all affected EGUs or zero-emitting generation or energy Double-counting of MWhs in the will trade uniform mass-based savings for affected EGU generation. denominator can be avoided because it allowances, whether in a ‘‘ready-for- States with rate-based plans must is relatively straightforward to quantify interstate-trading’’ plan or multi-state demonstrate that measures used to the MWhs that the affected EGU is plan. In a rate-based plan context, adjust their CO2 emission rate, such as responsible for deploying and add them ‘‘ready-for-interstate-trading’’ states RE and demand-side EE, are non- to the denominator, and this method must all adopt as their goal the CO2 duplicative. The proposal attempted to aligns well with the MWh-denominated emission performance rates as their joint address this issue in part by limiting trading system described in this final goal. This assures that all the demand-side EE that states could claim rule. As long as it is assured that the participating states are issuing ERCs to in-state measures. In fact, those in- MWhs of RE and demand-side EE are using the same subcategorized state measures still have an impact only being claimed by one affected EGU performance rates, and that the sources outside of the state and under the or state, as is outlined in section VIII.K, in each state have equivalent incentives proposal’s approach, states would have then there is no double-counting of for trading ERCs. Similarly, under been restricted from taking credit for all MWh. Therefore, the accounting method multi-state plans, the relevant states the measures they have put in place that avoids double counting of both CO2 must choose to adopt identical rates, reduce CO2 emissions. Therefore, the emission reductions and MWhs, the two either the CO2 emission performance EPA is finalizing a treatment that allows characteristics of RE and demand-side rates or a weighted average goal rate states to count all in-state and out-of- EE measures that affect CO2 emission based on the rate-based goals of all the state measures, while addressing rates. For further discussion of the

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00252 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64913

MWh-based accounting method, compliance costs, but they play no purchase agreement in which an entity including a calculation example, see direct role in mass-based compliance. in the rate-based state contracts for the section VIII.K.1. As a result, no double-counting of supply of the MWhs in question. The There may also be interactions emission reductions can take place. EPA is providing flexibility to states between mass-based and rate-based Though there is no risk of double- regarding the nature of the required plans regarding counting measures, counting emissions, some commenters demonstration, though the state must specifically where measures that expressed the concern that overall CO2 specify eligible demonstrations for provide substitute or avoided emissions reductions would be foregone approval in state plans. Under an generation, such as RE and demand-side in situations where a source in a rate- emission standards plan, this EE, are located in a mass-based state and based state counts the MWh from demonstration would be made by the can also be used by a rate-based state in measures in a mass-based state, but the provider of the measure seeking ERC meeting the CO2 performance rates or generation from that measure acts solely issuance to the rate-based state. state goals. The EPA received comments to serve load in the mass-based state. In The following are examples of how on this particular issue, and many that scenario, expected CO2 emission requirements for a demonstration could expressed concerns that this use of reduction actions in the rate-based state be established in state plans and used to mass-based resources in a rate-based are foregone as a result of counting allow RE in a mass-based state to be state would result in double-counting of MWh that resulted in CO2 emission counted in a rate-based state. For an emission reductions. reductions in a mass-based state. emission standards state plan, a state Commenters provided analyses Therefore the EPA is restricting the could specify in the regulations for the specifying how two states can benefit ability of rate-based states to claim rate-based emission standards included from the same RE and demand-side EE emission reduction measures, such as in its state plan that it will require an measures as a result of rate- and mass- RE and demand-side EE, located in RE provider that seeks the issuance of based plan interactions. Some mass-based states. ERCs to show that load-serving entities commenters considered this double- While the EPA understands this in the rate-based state have contracted counting of emission reductions, and concern regarding foregone reductions, for the delivery of the RE generation that requested specific mathematical we do not believe it is appropriate to occurs in a mass-based state to meet adjustments of reported generation or restrict RE crediting unilaterally load in a rate-based state. Under this CO2 emissions from affected EGUs between rate-based and mass-based approach, an RE provider in a mass- under either rate-based or mass-based states. Such a restriction could cut some based state could submit as part of an state plans in order to eliminate double- states off from regional RE supplies that eligibility application a delivery counting. are assumed in the BSER building block contract or power purchase agreement The EPA has determined that, in the 3 and incorporated in the CO2 emission showing that the generation was context of interactions among rate-based performance rates and state CO2 goals. procured by the utility, and was treated and mass-based plans, there is not Allowing crediting between rate- and as a generation resource used to serve explicit double-counting of the CO2 mass-based states, as long as the risk of regional load that included the rate- emission reductions associated with foregone CO2 emission reduction based state. This documentation would counting measures located in mass- actions in rate-based states are be sufficient demonstration to allow the based states, considering the accounting minimized, will assure a supply of RE generating resource to meet this methods outlined in this final rule. eligible RE MWhs that will further additional geographic eligibility First, as discussed above, the accounting enable affected EGUs and states to meet requirement for the amount of method for adjusting the CO emission 2 obligations under the final rule. generation in question. All quantified rate only counts the MWhs generated by Therefore, the EPA has determined that and verified RE MWhs submitted for a measure to adjust the MWh in the it is appropriate for rate-based states to ERC issuance would need to be denominator of the reported CO 2 count MWhs from RE located in mass- associated with that power purchase emission rate. The CO emissions 2 based states, subject to the condition contract or agreement, and this fact impacts of the measures will be that the generation in question was would need to be demonstrated in the reflected in the rate-based state only to intended to meet electricity load in a M&V reports submitted for issuance of the extent that the MWhs resulted in state with a rate-based plan.1011 This ERCs. lower reported CO2 emissions from an The ability for a rate-based state to may apply to some or all of the affected EGU in the rate-based state. To count MWhs located in a mass-based generation from an individual RE the extent that measures that provide state under the above conditions is installation. To assure that the RE substitute or avoided generation reduce limited to RE. Rate-based states are not generation in question meets this generation from affected EGUs in a allowed to claim demand-side EE or any condition, the EPA is requiring that RE mass-based state, the effect of those other emission reduction measures that generation from RE installations located measures is reflected in lower reported were not included in the determination in a mass-based state can only be CO2 emissions of the mass-based EGUs. of the BSER located in mass-based states counted in a rate-based state if the The CO2 emission reductions reflected for ERC issuance. While this limits rate- in the rate and the mass state will electricity generated is delivered with based sources’ access to additional necessarily be mutually exclusive, the intention to meet load in a state with resources, providing that access would because both are based on reported a rate-based plan, and was treated as a result in a risk of foregone reductions. stack emissions. Additionally, the generation resource used to serve Further, unlike RE, there is no mechanism in the mass-based state that regional load that included the rate- obligation related to demand-side EE based state. This can be demonstrated is assuring CO2 emission reductions is and other measures that were not the mass budget, which is met by through, for example, the provision of a included in the determination of the power delivery contract or power affected EGUs adjusting their BSER incorporated in the CO2 emission generation. Low- or zero-emitting MWhs performance rates or state rate-based 1011 This does not need to necessarily be the state from resources like RE and demand-side where the MWh of energy generation from the RE goals which would necessitate EE can serve load in the mass-based measure is used to adjust the CO2 emission rate of facilitating access to those resources. state and play a role in lowering an affected EGU. This treatment also does not apply to

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00253 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64914 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

fossil-fuel fired EGUs, such as NGCC trading framework, we are adjusting are experienced in individual units. If a mass-based emission standard rates using calculated MWhs, not based communities. has been applied to an affected EGU, upon an emission reduction Vulnerable communities also often there is no valid way to calculate approximation as commenters outlined receive more than their fair share of whether it has MWh that are eligible for above. Not only does the method allow conventional air pollution, with the crediting, as is possible under a rate- emission reductions to be accounted for attendant adverse health impacts. The based plan. as they occur across the grid, but it changes in electricity generation that Finally, as stated earlier, commenters means the ERCs being traded across will result from this rule will further also expressed concern about the states represent one MWh of zero- benefit communities by reducing potential for relative increases in emitting generation in whatever state it existing air pollution that directly emissions to occur given relative originated, and its value is unaffected by contributes to adverse localized health differences between sources and states. any emission rate associated with its effects. These air quality improvements These differences could include states’ state of origin. Thus, the finalized will be achieved through this rule goals under either the rate- or mass- accounting and trading methods because the electric generating units that emit the most GHGs also have the based approaches, or states’ accounting minimize the relative incentives for of new sources. These differences could highest emissions of conventional generating zero-emitting ERCs in a induce increased generation in one state pollutants, such as SO , NO , fine particular state based upon the rates that 2 X over another because the costs of particles, and HAP. These pollutants are apply to that state. compliance and relative costs of known to contribute to adverse health generation would vary between states. IX. Community and Environmental outcomes, including the development of There was particular concern regarding Justice Considerations heart or lung diseases, such as asthma how these differences would provide and bronchitis, increased susceptibility incentives for increasing generation at In this section we provide an to respiratory and cardiac symptoms, new fossil sources and expanding overview of the actions that the agency greater numbers of emergency room utilization of existing affected EGU is taking to help ensure that vulnerable visits and hospital admissions, and generation in states that have less communities are not disproportionately premature deaths.1013 The EPA expects stringent goals, and that this movement impacted by this rulemaking.1012As that the reductions in utilization of of generation would result in increased described in the Executive Summary, higher-emitting units likely to occur emissions overall. This could climate change is an environmental during the implementation of state potentially result in the achievement of justice issue. Low-income communities plans will produce significant performance rates but with fewer overall and communities of color already reductions in emissions of conventional CO2 emissions reductions than overburdened with pollution are likely pollutants, particularly in those projected nationally under the proposal. to be disproportionately affected by, and communities already overburdened by Commenters suggested that the less resilient to, the impacts of climate pollution, which are often low-income issuance and trading of emission credits change. This rulemaking will provide communities, communities of color, and across states under a rate-based broad benefit to communities across the indigenous communities. These approach would result in incentives to nation, as its purpose is to reduce GHGs, reductions will have beneficial effects create credits, through the development the most significant driver of climate on air quality and public health both of RE for example, in certain states with change. While addressing climate locally and regionally. Further, this higher state goals, and this could also be change will provide broad benefits, it is rulemaking complements other actions a source of increased overall emissions. particularly beneficial to low-income already taken by the EPA to reduce They noted that RE siting would thus populations and some communities of conventional pollutant emissions and not occur in the most optimal locations. color (in particular, populations defined improve health outcomes for The commenters assumed that zero- jointly by ethnic/racial characteristics overburdened communities. emitting credits are denominated in and geographic location) where people By reducing millions of tons of CO2 mass units by multiplying the number are most vulnerable to the impacts of emissions that are contributing to global of MWh by some emission rate: Either climate change (a more robust GHG levels and providing strong the state goal rate, the current state discussion of the impacts of climate leadership to encourage meaningful emission rate, a regional emission rate, change on vulnerable communities is reductions by countries across the globe, or a calculated marginal rate. If those provided in the Executive Order 12898 this rule is a significant step to address rates were higher in any states, zero- section XII.J of this preamble). While health and economic impacts of climate emitting MWhs would create more climate change is a global phenomenon, change that will fall disproportionately mass-denominated credits in those the adverse effects of climate change can on vulnerable communities. By states, and thus RE and demand-side EE reducing millions of tons of would be more valuable. be very localized, as impacts such as storms, flooding, droughts, and the like conventional air pollutants, the rule will The incentive to target the location of lead to better air quality and improved zero-emitting generation or energy 1012 In this preamble, the EPA discusses health in those communities. We heard savings between states based on from many commenters who recognize variation in its emission reduction value environmental justice in two sections. Section XI.J specifically addresses how the agency has met the and welcome those benefits. has been minimized by the fact that directives under Executive Order 12898. The EPA There are other ways in which the states participating in rate-based defines environmental justice as the fair treatment actions that result from this rulemaking interstate trading must adopt the same and meaningful involvement of all people regardless of race, color, national origin or income may affect communities in positive or emission performance rates or rate- with respect to the development, implementation, potentially adverse ways and we also based state goals. It is further and enforcement of environmental laws, heard about these from commenters. minimized, even outside of an interstate regulations, and policies. This section of the While the agency expects overall trading framework, by the nature of the preamble addresses actions that the agency is taking related to environmental justice and other issues emission decreases as a result of this accounting method finalized in this (e.g., increased electricity costs) that may affect rule. As explained above regarding the communities covered by Executive Order 12898 as 1013 Six Common Air Pollutants. http:// general accounting approach and the well as other communities. www.epa.gov/oaqps001/urbanair/.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00254 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64915

rulemaking, we recognize that some organizations, public health assess the final plans’ impacts. The EGUs may operate more frequently, as a organizations, and others.1014 This input analysis and its results are presented in result of this rulemaking. To the extent has informed this final rulemaking and the EJ Screening Report for the Clean that we project increases in utilization prompted the EPA to consider other Power Plan, which is located in the as a result of this rulemaking, we expect steps that the agency can take in the docket for this rulemaking at EPA–HQ– these increases to occur generally in short and long term to assist states and OAR–2013–0602. lower-emitting NGCC units, which have stakeholders to consider environmental The proximity analysis provides minimal or no emissions of SO2 and justice and impacts to communities in detailed demographic information on HAP, lower emissions of particulate plan development and implementation. the communities located within a 3-mile matter, and much lower emissions of It has also prompted us to work with radius of each affected power plant in NOX compared to higher-emitting steam our federal partners to make sure that the U.S. Included in the analysis is the units. We acknowledge the concerns states and communities have breakdown by percentage of community that have been raised on this point but information on federal resources characteristics such as income and also the difficulty in anticipating prior available to assist communities. We minority status. The analysis shows a to plan implementation where those describe these resources below, as well higher percentage of communities of impacts might occur. In addition to as resources that the EPA will be color and low-income communities providing for a robust state planning providing to assist communities in living near power plants than national process with opportunity for meaningful accessing EE/RE and financial averages. It is important to note that the input, the EPA is encouraging states to assistance programs. In our discussion impacts of power plant emissions are evaluate the actual impacts of their below we also provide models of not limited to a 3-mile radius and the plans once implemented and, as programs that other states are currently impacts of both potential increases and described below, the EPA intends to using to assist communities in accessing decreases in power plant emissions can conduct an assessment of whether and available resources that states could use be felt many miles away. Still, being where emission increases may that may when developing their plans. aware of the characteristics of result from plan implementation and to Finally, and importantly, we communities closest to power plants is work with states to mitigate adverse recognize that communities must be a starting point in understanding how impacts, if any, in overburdened able to participate meaningfully in state changes in the plant’s air emissions may communities. plan development. In this section, we affect the air quality experienced by In addition to the many positive discuss the requirements in the final some of those already experiencing anticipated health benefits of this rule for states, as they develop their environmental burdens. rulemaking, it also will increase the use plans, to provide opportunities for Although overall there is a higher of clean energy and will encourage EE. public involvement, and resources fraction of communities of color and These changes in the electricity available to states and communities to low-income populations living near generation system, which are already enhance the success of the public power plants than national averages, occurring but may be accelerated by this process. there are differences between rural and urban power plants. There are many program, are expected to have other A. Proximity Analysis positive benefits for communities. The rural power plants that are located near electricity sector is, and will continue to The EPA is committed to assisting small communities with high be, investing more in RE and EE. The states and communities to develop percentages of low-income populations construction of renewable generation plans that ensure there are no and lower percentages of communities and the implementation of EE programs disproportionate, adverse impacts on of color. In urban areas, nearby such as residential weatherization will overburdened communities. To provide communities tend to be both low- bring investment and employment information fundamental to beginning income communities and communities opportunities to the communities where that process, the EPA has conducted a of color. In light of this difference they take place. We recognize that proximity analysis for this final between rural and urban communities certain communities whose economies rulemaking that summarizes proximate to power plants and in order may be affected by changes in the utility demographic data on the communities to adequately capture both the low- and related sectors may be particularly located near power plants.1015 The EPA income and minority aspects central to impacted by the final rule. The EPA understands that, in order to prevent environmental justice considerations, encourages states to make an effort to disproportionately, high and adverse we use the terms ‘‘vulnerable’’ or engage with these communities, human health or environmental effects ‘‘overburdened’’ when referring to these including workers and their on these communities, both states and communities. Our intent is for these representatives in these sectors, communities must have information on terms to be understood in an expansive including EE. It is important to ensure the communities living near facilities, sense, in order to capture the full scope that all communities share in the including demographic data, and that of communities, including indigenous benefits of this program. And while we accessing and using census data files communities most often located in rural estimate that its benefits will greatly requires expertise that some community areas, that are central to our exceed its costs (as noted in the RIA for groups may lack. Therefore, the EPA environmental justice and community this rulemaking), it is also important to used census data from the American considerations. ensure that to the extent there are Community Survey (ACS) 2008–2012 to As stated in the Executive Order increases in electricity costs, that those conduct a proximity analysis that can be 12898 discussion located in section XII.J do not fall disproportionately on those used by states and communities as they of this preamble, the EPA believes that least able to afford them. develop state plans and as they later all communities will benefit from this The EPA has engaged with final rulemaking because this action community groups throughout this 1014 Detailed information on the outreach directly addresses the impacts of rulemaking, and we received many conducted as part of this rulemaking is provided in climate change by limiting GHG section I of this preamble. comments on the issues outlined above 1015 The proximity analysis was conducted using emissions through the establishment of from community groups, environmental the EPA’s environmental justice mapping and CO2 emission guidelines for existing justice organizations, faith-based screening tool, EJSCREEN. affected fossil fuel-fired power plants.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00255 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64916 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

The EPA also believes that the communities. Additionally, the EPA with vulnerable communities.1016 information provided in the proximity encourages states to submit a copy of Additionally, states in their initial analysis will promote engagement their analysis if they choose to conduct submittal and 2017 update must show between vulnerable communities and one, with their initial and final plan how they identified the communities their states and will be useful for states submittals. with whom they are engaging as they as they begin developing their plans. In develop their plans. Some suggested addition to providing the proximity B. Community Engagement in State Plan actions that states could take to engage analysis in the docket of this Development actively with the public, including rulemaking, the EPA will disseminate In sections VIII.D–E of this preamble, conducting meaningful engagement the proximity analysis to states and will the EPA explains that states need to with vulnerable communities, are make it publicly available on its Clean engage meaningfully with communities outlined in section VIII.E of this Power Plan (CPP) Community Portal. and other stakeholders during the initial preamble. Additionally, as outlined in Furthermore, the EPA has also created and final plan submittal processes. section VIII.D, the final plan submitted an interactive mapping tool that Meaningful engagement includes by states must include an overview of illustrates where power plants are outreach to vulnerable communities, the public hearing(s) conducted and located and provides information on a sharing information and soliciting input information on how the state ensured state level. This tool is available at: on state plan development and on any that the hearing(s) were accessible to http://cleanpowerplanmaps.epa.gov/ accompanying assessments such as stakeholders including vulnerable CleanPowerPlan/. those described above, and selecting communities. Additionally, the EPA encourages methods for engagement to support The EPA is committed to supporting states to conduct their own analyses of communities’ involvement at critical states in effectively engaging with community considerations when junctures in plan formulation and communities as they develop and developing their plans. Each state is implementation. This engagement also implement their plans. The EPA will uniquely knowledgeable about its own includes providing the public the provide training and other resources communities and well-positioned to opportunity to comment on the state’s throughout the implementation process consider the possible impacts of plans initial submittal and responding to that will assist states and communities on vulnerable communities within its significant comments received, in understanding plan requirements and state. Conducting state-specific analyses including comments from vulnerable options for plan development. These would not only help states assess communities, as well as conducting a trainings will be a continuation of those possible impacts of plan options, but it public hearing and responding to that the EPA has already conducted would also enhance a state’s comments before a final state plan is with communities and states both pre- understanding of the means to engage submitted. Additionally, the EPA and post-proposal. The EPA will reach these communities that would most expects that states will conduct out to a wide variety of community effectively reach them and lead to outreach meetings, which could include stakeholders, including groups valuable exchanges of information and public hearings or listening sessions, representing environmental justice concerns. A state analysis, together with before the initial submittal is made. The communities, faith-based organizations, the proximity analysis conducted by the EPA also encourages states to provide academic organizations working with EPA, would provide a solid foundation background information about their vulnerable and overburdened for engagement between a state and its proposed final state plan or their initial communities, affordable housing communities. state plan in the appropriate languages advocates, public health professionals, Such state-specific analyses need not in advance of their public hearing and public health organizations, and other be exhaustive. An examination of the at their public hearing. The EPA community stakeholders. options a state is considering for its recommends that states provide plan, and any projections of likely C. Providing Communities With Access translators and other resources at their resulting increases in power plant to Additional Resources public hearings, to ensure that members emissions affecting low-income In addition to providing resources to of the public can provide oral feedback. populations, communities of color states, the EPA encourages states to be populations, or indigenous In the initial submittal, the final rule aware of existing efforts undertaken by communities, would be informative for requires that states provide information other states aimed at providing low- communities. The analyses could to the agency about the community income communities access to financial include available air quality monitoring engagement they have undertaken and and technical assistance programs for data and information from air quality the means by which they intend to EE and RE, and to consider similar models, and, if available, take into involve vulnerable communities and approaches that may make sense for account information about local health other stakeholders as they develop their their own states. The EPA encourages vulnerabilities such as asthma rates or final plan. Furthermore, as noted in states to consider targeting economic access to healthcare. Alternatively, a section VIII.E of this preamble, in development resources to communities simple analysis may consider expected determining if states are eligible for a 2- that are likely to be negatively affected EGU utilization in geographic proximity year extension for submission of final by ongoing changes in the utility and to overburdened communities. The EPA plans, the rule requires that states related sectors in support of efforts to will provide states with information on demonstrate how they are meaningfully diversify their economies, attract new its publicly available environmental engaging vulnerable communities and sources of investment, and create new justice screening and mapping tool, EJ other interested stakeholders as part of jobs. SCREEN, which they may use in their public participation process. The One example of a program targeted at conducting a state-specific analysis. The EPA consulted its May 2015, Guidance low-income communities is the EPA will also provide states with on Considering Environmental Justice resources containing examples of During the Development of Regulatory 1016 Guidance on Considering Environmental Actions, when crafting this rulemaking Justice During the Development of Regulatory analyses that other states have Actions. http://epa.gov/environmentaljustice/ conducted to examine the impacts of and recommends that states consult it to resources/policy/considering-ej-in-rulemaking- their programs on overburdened assist them in engaging meaningfully guide-final.pdf. May 2015.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00256 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64917

Maryland EmPOWER Low Income on the beneficial impact of EE energy and cut energy bills for all Energy Efficiency Program (LIEEP).1017 investment in reducing atmospheric Americans, in particular low- and The LIEEP program administered by the deposition on impaired water bodies moderate-income communities, and to Maryland Department of Housing and consistent with Section 319 of the Clean create a more inclusive solar workforce. Community Development (DHCD) helps Water Act. As part of this new initiative, the U.S. low-income households through free As discussed below, there are also Department of Energy (DOE), the U.S. installation of energy conservation many federal programs that can help Department of Housing and Urban materials (i.e., installation, hot water low-income populations access the Development (HUD), U.S. Department of system improvements, lighting retrofits, benefits of RE, EE, and the economic Agriculture (USDA), and the EPA furnace cleaning, tuning and safety benefits of a cleaner energy economy. launched a National Community Solar repairs, refrigerator retrofits, etc.).1018 In the coming months, the EPA will Partnership to unlock access to solar Funding for this program is provided by continue to provide information and energy for the nearly 50 percent of EmPOWER Maryland partners: resources for communities and states on households and businesses that are Baltimore Gas and Electric, Southern existing federal, state, local, and other renters or do not have adequate roof Maryland Electric Cooperative, financial assistance programs to space to install solar systems, with a Delmarva Power, Allegheny Energy and encourage EE/RE opportunities that are focus on low- and moderate-income Pepco.1019 This program is available to already available to communities. For communities. The Administration also both homeowners and renters.1020 example the EPA will provide a catalog set a goal to install 300 megawatts (MW) Additionally, the Maryland Department of current or recent state and local of RE in federally subsidized housing by of Housing provides low-income programs that have successfully helped 2020 and plants to provide technical families with home heating bill communities adopt EE/RE measures. assistance to make it easier to install assistance and furnace repairs and The goal of these resources is to help solar energy on affordable housing, replacements through the Maryland vulnerable communities gain the including clarifying how to use federal Energy Assistance Program (MEAP).1021 benefits of this rulemaking by funding for EE and RE. To continue Maryland’s Electric Universal Service encouraging that states use these types enhancing employment opportunities in Program (EUSP) helps low-income of tools in their state plans. The use of the solar industry for all Americans, electric customers with their electric these RE/EE tools can also help low- AmeriCorps is providing funding to bills.1022 income households reduce their deploy solar energy and create jobs in Another example of a program is electricity consumption and bills. underserved communities, and DOE is EmPower New York, which provides The EPA recognizes the potential working to expand solar energy no-cost energy solutions to low-income impacts that this rulemaking could have education and opportunities for job populations.1023 Currently there are on jobs in communities. Therefore, in training. about 100,000 people who are receiving section VIII.G of this preamble, the EPA These recent announcements build on assistance. Both homeowners and has outlined that states, in designing the many existing federal programs and renters are eligible to receive assistance their state plans, should consider the resources available to improve EE and under this program. The types of effects of their plans on employment accelerate the deployment of RE in assistance available include EE and overall economic development to vulnerable communities. Some upgrades (plugging leaks, adding realize the opportunities for economic examples of these resources include: the insulation, replacing inefficient growth and jobs that the plans offer. To Department of Energy’s Weatherization refrigerators and freezers and new the extent possible, states should try to Assistance Program, Health and Human energy-efficient lighting). Other states, assure that communities that may be Service’s Low Income Home Energy like the State of Colorado’s Energy expected to experience job losses can Assistance Program, the Department of Outreach Colorado program, offer also take advantage of the opportunities Agriculture’s Energy Efficiency and similar resources for low-income for job growth or otherwise transition to Conservation Loan Program, High Cost populations.1024 healthy, sustainable economic growth Energy Grant Program, and the Rural In 2013, the New York State Energy (e.g., with regard to delivering EE Housing Service’s Multi-Family and Research Development Authority measures and installing rooftop solar Housing Program. (NYSERDA) was able to secure a triple- panels). Additionally, as part of the HUD supports EE improvements and A rated financial guarantee from the resources that we will be providing to the deployment of RE on affordable state’s Clean Water State Revolving states and low-income communities, the housing through its Energy Efficient Fund (SRF) for a $24 million bond EPA will provide information on the Mortgage Program, Multifamily Property issue. Proceeds funded residential EE Administration’s Partnerships for Assessed Clean Energy Pilot with the loans that were available to all utility Opportunity and Workforce and State of California, PowerSaver Program, customers, including low-income Economic Revitalization (POWER) and the use of Section 108 Community households. SRF eligibility was based Initiative and other programs that Development Block Grants. The specifically target economic Department of Treasury provides several 1017 EmPOWER Maryland Low Income Energy development assistance to communities tax credits to support RE development Efficiency Programs (LIEEP). http:// affected by changes in the coal industry and EE in low-income communities, www.mdhousing.org/Website/Programs/lieep/ 1025 including the New Markets Tax Credit Default.aspx. and the utility power sector. Program and the Low-Income Housing 1018 Ibid. D. Federal Programs and Resources 1019 Tax Credit. The EPA’s RE-Powering Ibid. Available to Communities 1020 Ibid. America’s Land Initiative promotes the 1021 Energy Assistance. http:// Federal agencies have a history of reuse of potentially contaminated lands, www.dhr.state.md.us/blog/?page_id=4326. bringing EE and RE to low-income landfills and mine sites—many of which 1022 Ibid. communities. Earlier this summer, the are in low-income communities—for RE 1023 EmPower New York. http:// Administration announced a new through a combination of tailored www.nyserda.ny.gov/All-Programs/Programs/ EmPower-New-York. initiative to scale up access to solar redevelopment tools for communities 1024 Energy Outreach Colorado. http:// and developers, as well as site-specific www.energyoutreach.org/about. 1025 http://www.eda.gov/power. technical support. The EPA’s Green

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00257 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64918 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

Power Partnership is increasing greater environmental results with occurring because peak hourly or daily community use of renewable electricity lower long-term costs. Such strategies emissions generally would not change; across the country and in low-income may also provide opportunities for however, increased utilization may communities. The EPA partners with EE states, communities, and affected make periods of relatively high programs throughout the country that facilities to consider the most effective concentrations more frequent. It should leverage ENERGY STAR to deliver means of meeting these obligations be noted that the gas-fired sources likely broad consumer energy-saving benefits, while limiting or eliminating localized to be dispatched more frequently have of particular value to low-income emission increases that would otherwise very low emissions of primary PM, SO2, households who can least afford high affect overburdened communities. and HAP per unit of electrical output energy bills. ENERGY STAR also works Furthermore, this type of multi- and that they must continue to comply with houses of worship to reduce energy pollutant approach has been suggested with other CAA requirements that costs—savings that can then be by states and regulated sources in past directly address the conventional repurposed to their community mission, rulemakings as a tool to determine the pollutants, including federal emission including programs and assistance to best system of emission reductions. The standards, rules included in SIPs, and residents in low-income communities. EPA recommends that states consider conditions in Title V operating permits, The EPA will be working with these such strategies in consultation with in addition to the guidelines in this final federal partners and others to ensure their communities, affected facilities, rulemaking. Therefore, local (or that states and vulnerable communities and other stakeholders. regional) air quality for these pollutants have access to information on these Air quality in a given area is affected is not likely to be significantly affected. programs and their resources. by emissions from nearby sources and For natural gas-fired EGUs, the EPA The federal government also has a may be influenced by emissions that found that regulation of HAP emissions number of programs to expand travel hundreds of miles and mix with ‘‘is not appropriate or necessary because employment opportunities in the energy emissions from other sources.1026 In the the impacts due to HAP emissions from sector, including for underserved Cross-State Air Pollution Rule the EPA such units are negligible based on the populations. Examples of these include used its authority to reduce emissions results of the study documented in the HUD, DOE, and the Department of that significantly contribute to utility RTC.’’ 1028 Because gas-fired Education’s ‘‘STEM, Energy, and downwind exposures. The RIA for the EGUs emit essentially no mercury, Economic Development’’ program; final Cross-State Air Pollution Rule increased utilization will not increase DOE’s Diversity in Science and anticipates substantial health benefits methyl mercury concentrations in water Technology Advances National Clean for the population across a wide region. bodies near these affected EGUs. In Energy in Solar (DISTANCE-Solar) Similarly, the EPA believes that, like the studies done by DOE/NETL comparing Program; Grid Engineering for Cross-State Air Pollution Rule, this cost and performance of coal- and Accelerated Renewable Energy rulemaking will result in significant NGCC-fired generation, they assumed Deployment (GEARED); the Department health benefits because it will reduce SO2, NOX, PM (and Hg) emissions to be of Labor’s Trade Adjustment Assistance co-pollutant emissions of SO2 and NOX ‘‘negligible.’’ Their studies predict NOX Community College and Career Training on a regional and national basis.1027 emissions from a NGCC unit to be (TAACCCT), Apprenticeship USA Thus, localized increases in NOX approximately 10 times lower than a Advancing Apprenticeships in the emissions may well be more than offset subcritical or supercritical coal-fired 1029 Energy Field, Job Corps Green Training by NOX decreases elsewhere in the boiler. Many, although not all, and Greening of Centers, and region that produce a net improvement NGCC units are also very well YouthBuild; and the EPA’s in ozone and particulate concentrations controlled for emissions of NOX through Environmental Workforce Development across the area. the application of after combustion and Job Training (EWDJT) program. Another effect of the final CO2 controls such as selective catalytic emission guidelines for affected existing reduction. E. Multi-Pollutant Planning and Co- fossil fuel-fired EGUs may be increased Pollutants utilization of other, unmodified EGUs— F. Assessing Impacts of State Plan As outlined in the final Clean Power in particular, high efficiency gas-fired Implementation Plan, states and sources have continued EGUs—with relatively low GHG It is important to the EPA that the obligations to meet all other CAA emissions per unit of electrical output. implementation of state plans be requirements addressing conventional These plants may operate more hours assessed in order to identify whether pollutants. Because the CAA envisions during the year and could emit they cause any adverse impacts on control of these other pollutants as a pollutants, including pollutants whose communities already overburdened by continuous process (through provisions environmental effects would be disproportionate environmental harms such as periodic review of the NAAQS localized and regional rather than global and risks. The EPA will conduct its own and residual risk requirements under as is the case with GHG emissions. assessment during the implementation the MACT program), the EPA believes Changes in utilization already occur in phase of this rulemaking to determine that the Clean Power Plan provides an response to energy demands and whether the implementation of state opportunity for states to consider evolving energy sources, but the final plans developed pursuant to this strategies for meeting future CAA CO2 emission guidelines for affected rulemaking and other air quality rules planning obligations as they develop existing fossil fuel-fired EGUs can be are, in fact, reducing emissions and their plans under this rulemaking. expected to cause more such changes. improving air quality in all areas or Multi-pollutant strategies that Increased utilization of solid fossil fuel- whether there are localized air quality incorporate criteria pollutant reductions fired units generally would not increase impacts that need to be addressed under over the planning horizons specific to peak concentrations of PM2.5, NOX, or other CAA authorities. Furthermore, the particular states, jointly with strategies ozone around such EGUs to levels 1028 65 FR 79831. for reducing CO2 emissions from higher than those that are already affected EGUs needed to meet Clean 1029 ‘‘Cost and Performance Baseline for Fossil Energy Plants Volume 1: Bituminous Coal and Power Plan requirements over the time 1026 76 FR 48348. Natural Gas to Electricity’’ Rev 2a, September 2013 horizon of this rule, may accomplish 1027 76 FR 48347. Revision 2, November 2010 DOE/NETL–2010/1397.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00258 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64919

EPA recommends that states conduct implementation phase of this analysis a useful tool to help identify evaluations of their own to determine rulemaking, the agency will continue to overburdened communities that may be the impacts of their plans on provide trainings and resources to assist impacted by this rulemaking, states can overburdened communities. An communities and states as they engage use this tool as they engage with example of one such approach to with one another. Additionally, we will communities in the development of assessing a state plan for reducing GHGs provide states with recommendations their plans, consider a multi-pollutant is the California Air Resources Board’s on best practices for engaging with approach, help low-income (CARB), First Update on the Climate vulnerable communities. The EPA, communities access EE/RE and financial Change Scoping Plan: Building on the through its outreach efforts during assistance programs and assess the Framework Pursuant to AB32: The implementation, will continue to solicit impacts of their state plans. California Global Warming Solutions feedback from communities and states Additionally, in order to continue to Act of 2006, which outlines ongoing on topics for which they would like ensure that vulnerable communities are evaluations that it will conduct to additional trainings and resources. not disproportionately impacted by this determine the impacts of its programs The EPA will also provide states with rulemaking, the EPA will also be (throughout the implementation stages) resources containing examples of conducting its own assessment during on overburdened communities.1030 analyses that other states have the implementation phase. Furthermore, CARB’s Adaptive Management Plan for conducted to examine the impacts of the EPA will continue to engage with the Cap-and-Trade Program is one their programs on vulnerable communities and states throughout the particular evaluation, which is intended communities, as well as information on implementation phase of this to assess any localized emissions its publicly available environmental rulemaking to help ensure that increases resulting from the program so justice screening and mapping tool, EJ vulnerable communities are not that the state can appropriately SCREEN. States are encouraged to use disproportionately impacted. respond.1031 The EPA recommends that this preliminary information as well as states consider CARB’s approaches and other available information to conduct X. Interactions With Other EPA other programs as models for their own analyses. As described above, Programs and Rules conducting ongoing assessments of the the EPA will assess the impacts of this A. Implications for the New Source impacts of their state plans on rulemaking during its implementation. Review Program overburdened communities. The EPA The EPA will house this assessment, The new source review (NSR) will provide training for states and along with the proximity analysis and program is a preconstruction permitting communities on resources that they can other information generated throughout program that requires major stationary use to assess options for plan the implementation process, on its sources of air pollution to obtain development and implementation that Clean Power Plan (CPP) Community permits prior to beginning construction. appropriately consider localized Portal that will be linked to this The requirements of the NSR program impacts, especially effects of co- rulemaking’s Web site (www.epa.gov/ apply both to new construction and to pollutants, as well as training on how to cleanpowerplan). In addition, the EPA modifications of existing major sources. develop and carry out these evaluations. has expanded its set of resources that This training will include guidance in are being developed to help states and Generally, a source triggers these accessing the publicly available communities understand the breadth of permitting requirements as a result of a information that sources and states policy options and programs that have modification when it undertakes a currently report that can help with successfully brought EE/RE to physical or operational change that ongoing assessments of state plan overburdened communities. The EPA is results in a significant emission increase impacts. For example, unit-specific committed to continuing its engagement and a net emissions increase. NSR emissions data and air quality with states and communities from the regulations define what constitutes a monitoring data are readily available. beginning of plan development through significant net emissions increase, and This information, together with the plan implementation. the concept is pollutant-specific. As a assessment that the EPA will conduct in A more detailed discussion result of the decision in Utility Air the implementation phase of this concerning the application of Executive Regulatory Group (UARG) v. rulemaking and other analyses that Order 12898 in this rulemaking can be Environmental Protection Agency (EPA), states may develop, will enable states found in section XI.J of this preamble. 134 S. Ct. 2427 (2014), a modification and communities to monitor any A summary of the EPA’s interactions that increases only GHG emissions disproportionate emissions that may with communities is in the EJ Screening above the applicable level will not result in adverse impacts and to address Report for the Clean Power Plan, trigger the requirement to obtain a PSD them. available in the docket of this permit. Under existing EPA regulations, rulemaking. Furthermore, the EPA’s a modifying major stationary source G. EPA Continued Engagement responses to public comments, would trigger PSD permitting The EPA is committed to helping including comments received from requirements for GHGs if it undergoes a ensure that this action will not have communities, are provided in the change or change in the method of disproportionate adverse human health response to comments documents operation (modification) that results in or environmental effects on vulnerable located in the docket for this a significant increase in the emissions of communities. Throughout the rulemaking. a pollutant other than GHGs and results In summary, the EPA in this final in a GHG emissions increase of 75,000 1030 First Update on the Climate Change Scoping rulemaking has designed an integrative tons per year CO2e as well as a GHG Plan: Building on the Framework Pursuant to AB32: approach that helps to ensure that emissions increase on a mass basis. The California Global Warming Solutions Act of 2006. http://www.arb.ca.gov/cc/scopingplan/2013_ vulnerable communities are not Once it has been determined that a update/first_update_climate_change_scoping_ disproportionately impacted by this change triggers the requirements of the plan.pdf. May 2014. rulemaking. The proximity analysis that NSR program, the source must obtain a 1031 Adaptive Management Plan for the Cap-and- the agency has conducted for this permit prior to making the change. The Trade Regulation. http://www.arb.ca.gov/cc/ capandtrade/adaptive_management/plan.pdf. rulemaking is a central component of pollutant(s) at issue and the air quality October 2011. this approach. Not only is the proximity designation of the area where the

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00259 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64920 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

facility is located or proposed to be built In addition, in this final rule, we have based on accounting for the number of determine the specific permitting also adjusted the date of the period for permit actions that require a GHG requirements. mandatory reductions to 2022, instead assessment in a given period, rather As part of its CAA section 111(d) of 2020, and provided states with than accounting for emissions levels of plan, a state may impose requirements flexibility with respect to the glide path. GHGs. Finally, the EPA is also finalizing that require an affected EGU to This obviates concerns that there is the addition of text within 40 CFR part undertake a physical or operational insufficient time for sources that may 60, subpart TTTT, to clarify that the fee change to improve the unit’s efficiency need permits to obtain them and allows pollutant for operating permit purposes that results in an increase in the unit’s additional planning time for these is GHG (as defined in 40 CFR 70.2 and dispatch and an increase in the unit’s changes to be undertaken in a manner 71.2) to add clarity to our regulations annual emissions. If the emissions that does not trigger PSD. As a result of and to avoid the potential need for increase associated with the unit’s such flexibility and anticipated state possible future rulemakings to adjust changes exceeds the thresholds in the involvement, we expect that a limited the title V fee regulations if any NSR regulations for one or more number of affected sources would constituent of GHG, other than CO2, regulated NSR pollutants, including the trigger NSR when states implement their becomes subject to regulation under netting analysis, the changes would plans. CAA section 111 for the first time. trigger NSR. This title V fee issue is a one-time While there may be instances in B. Implications for the Title V Program occurrence resulting from the which an NSR permit would be In the preamble to the June 18, 2014 promulgation of the first CAA section required, we expect those situations to proposal, the EPA discussed the issue of 111 standard to regulate GHGs (the be few. As previously discussed in this excessive title V fees resulting standards of performance for new, preamble, states have considerable inadvertently as a consequence of the modified, and reconstructed EGUs, also flexibility in selecting varied measures promulgation of the first section 111 promulgated in this issue of the Federal as they develop their plans to meet the standard to regulate GHGs. Specifically, Register). The title V fee issue is not an goals of the emission guidelines. One of the EPA explained that when the first issue for any other subsequent CAA these flexibilities is the ability of the section 111 standard is promulgated for section 111 regulations, such as this state to establish emission standards in GHGs, if we do not revise 40 CFR parts section 111(d) standard; thus, there is their CAA section 111(d) plans in such 70 and 71 (the operating permit rule), no need to address any title V fee issues a way so that their affected sources, in then certain permitting authorities in this final rule as part of this action. complying with those standards, in fact would be required to charge emissions- In the proposal, the EPA discussed would not have emissions increases that based fees for GHGs, resulting in fees that the section 111 rules would have no trigger NSR. To achieve this, the state that would be far in excess of what is effect on the applicability thresholds for would need to conduct an analysis required to cover the reasonable costs of GHG under the operating permit rules. consistent with the NSR regulatory the permitting programs. To avoid this After the proposal for this rulemaking requirements that supports its situation, the EPA proposed as part of was published, the U.S. Supreme Court determination that as long as affected the re-proposed carbon pollution issued its opinion in UARG v. EPA, 134 sources comply with the emission standards for newly constructed fossil S.Ct. 2427 (June 23, 2014), and in standards in their CAA section 111(d) fuel-fired power plants (70 FR 1429– accordance with that decision, the D.C. plan, the source’s emissions would not 1519; January 8, 2014) to exempt GHGs Circuit subsequently issued an amended increase in a way that trigger NSR from the list of air pollutants that are judgment in Coalition for Responsible requirements. subject to fee calculation requirements Regulation, Inc. v. Environmental For example, a state could decide to under the operating permit rules. Also, Protection Agency, Nos. 09–1322, 10– use demand-side measures or increase we proposed several options to impose 073, 10–1092 and 10–1167 (D.C. Cir., reliance on RE as a way of reducing the a smaller fee adjustment for GHGs that April 10, 2015). Those decisions future emissions of an affected source would be reasonable and designed to support the same overall conclusion, as initially predicted (without such recover the costs of addressing GHGs in the EPA discussed in the proposal, with alterations) to increase its emissions as permitting without being excessive. respect to the effect of this final section a result of a CAA section 111(d) plan In a separate action in this issue of the 111 rule on the applicability thresholds requirement. In other words, a state Federal Register, the EPA is finalizing for GHGs under the operating permits plan’s incorporation of expanded use of changes to the operating permits rules to rules, though for different reasons. cleaner generation or demand-side address the title V fee issue. In With respect to title V, the Supreme measures could yield the result that particular, we are taking final action to Court said that EPA may not treat GHGs units that would otherwise be projected exempt GHGs from emissions-based fee as an air pollutant for purposes of to trigger NSR through a physical calculation requirements under the determining whether a source is a major change that might result in increased operating permit rules. In addition, we source required to obtain a title V dispatch would not, in fact, increase are also finalizing a modest GHG fee operating permit. In accordance with their emissions, due to reduced demand adjustment to recover the costs of that decision, the D.C. Circuit’s for their operation. The state could also, addressing GHGs in permitting. The amended judgment vacated the title V as part of its CAA section 111(d) plan, GHG adjustments we are finalizing are regulations under review in that case to develop conditions for a source the extent that they require a stationary expected to trigger NSR that would limit equal to or greater than specified thresholds are source to obtain a title V permit solely subject to major source requirements. See, e.g., CAA because the source emits or has the the unit’s ability to move up in the sections 165(a)(1), 169(1), 501(2), 502(a). A dispatch enough to result in a synthetic minor limitation is a legally and potential to emit GHGs above the significant net emissions increase that practicably enforceable restriction that has the applicable major source thresholds. The would trigger NSR (effectively effect of limiting emissions below the relevant level D.C. Circuit also directed the EPA to 1032 and that a source voluntarily obtains to avoid major consider whether any further revisions establishing a synthetic minor limit). stationary source requirements, such as the PSD or Title V permitting programs. See, e.g., 40 CFR to its regulations are appropriate in light 1032 Certain stationary sources that emit or have 52.21(b)(4), 51.166(b)(4), 70.2 (definition of of UARG v. EPA, and, if so, to undertake the potential to emit a pollutant at a level that is ‘‘potential to emit’’). to make such revisions. These court

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00260 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64921

decisions make clear that promulgation subject to the MATS rule are required to manufacturing facilities.1034 The 316(b) of CAA section 111 requirements for comply by April 16, 2012 or upon rule subjects existing power plants and GHGs will not result in EPA imposing startup, whichever is later. manufacturing facilities that withdraw a requirement that stationary sources Existing sources subject to the MATS in excess of 2 million gallons per day) obtain a title V permit solely because rule were required to begin meeting the of cooling water, and use at least 25 such sources emit or have the potential rule’s requirements on April 16, 2015. percent of that water for cooling to emit GHGs above the applicable Controls that will achieve the MATS purposes, to a national standard major source thresholds. performance standards are being designed to reduce the number of fish installed on many units. Certain units, destroyed through impingement and a C. Interactions With Other EPA Rules especially those that operate national standard for establishing Fossil fuel-fired EGUs are, or infrequently, may be considered not entrainment reduction requirements. All potentially will be, impacted by several worth investing in given today’s facilities subject to the rule must submit other recently finalized or proposed electricity market, and are closing. The information on their operations for use EPA rules.1033 The EPA recognizes the final MATS rule provided a foundation by the permit authority in determining importance of assuring that each of the on which states and other permitting 316(b) permit conditions. Certain plants rules described below can achieve its authorities could rely in granting an that withdraw very large volumes of intended environmental objectives in a additional, fourth year for compliance water will also be required to conduct commonsense, cost-effective manner, provided for by the CAA. States report additional studies for use by the permit consistent with underlying statutory that these fourth year extensions are authority in determining the site- requirements, and while assuring a being granted. In addition, the EPA specific entrainment reduction reliable power system. Executive Order issued an enforcement policy that measures for such facilities. The rule 13563, ‘‘Improving Regulation and provides a clear pathway for reliability- provides significant flexibility for Regulatory Review,’’ issued on January critical units to receive an compliance with the impingement 18, 2011, states that ‘‘[i]n developing administrative order that includes a standards and, as a result, is not regulatory actions and identifying compliance schedule of up to an projected to impose a substantial cost appropriate approaches, each agency additional year, if it is needed to ensure burden on affected facilities. With shall attempt to promote . . . electricity reliability. respect to entrainment, the rule calls coordination, simplification, and upon the permitting authority to harmonization. Each agency shall also 2. Cross-State Air Pollution Rule (CSAPR) establish appropriate entrainment seek to identify, as appropriate, means reduction measures, taking into account, to achieve regulatory goals that are The CSAPR requires states to take among other factors, remaining useful designed to promote innovation.’’ action to improve air quality by plant life and quantified and qualitative Within the EPA, we are paying careful reducing SO2 and NOX emissions that social benefits and cost. The permit attention to the interrelatedness and cross state lines. These pollutants react writer may also consider impacts on the potential impacts on the industry, in the atmosphere to form fine particles reliability of energy delivery within the reliability and cost that these various and ground-level ozone and are facility’s immediate area. Existing rulemakings can have. transported long distances, making it sources subject to the 316(b) rule are difficult for other states to attain and required to comply with the 1. Mercury and Air Toxics Standards maintain the NAAQS. The first phase of (MATS) impingement requirements as soon as CSAPR became effective on January 1, practicable after the entrainment On February 16, 2012, the EPA issued 2015, for SO2 and annual NOX, and May requirements are determined. They the MATS rule (77 FR 9304) to reduce 1, 2015, for ozone season NOX. The must comply with applicable site- emissions of toxic air pollutants from second phase will become effective on specific entrainment reduction controls new and existing coal- and oil-fired January 1, 2017, for SO2 and annual based on the schedule of requirements EGUs. The MATS rule will reduce NOX, and May 1, 2017, for ozone season established by the permitting authority. emissions of heavy metals, including NOX. Many of the power plants mercury, arsenic, chromium, and nickel; participating in CSAPR have taken 4. Disposal of Coal Combustion and acid gases, including hydrochloric actions to reduce hazardous air Residuals From Electric Utilities (CCR acid and hydrofluoric acid. These toxic pollutants for MATS compliance that Rule) air pollutants, also known as hazardous will also reduce SO2 and/or NOX. In this On December 19, 2014, the EPA air pollutants or air toxics, are known to way these two rules are complementary. issued the final rule for the disposal of cause, or suspected of causing, damage Compliance with one helps facilities coal combustion residuals from electric nervous system damage, cancer, and comply with the other. utilities. The rule provides a other serious health effects. The MATS 3. Requirements for Cooling Water comprehensive set of requirements for rule will also reduce SO and fine 2 Intake Structures at Power Plants the safe disposal of coal combustion particle pollution, which will reduce (316(b) Rule) residuals (CCRs), commonly known as particle concentrations in the air and coal ash, from coal-fired power plants. prevent thousands of premature deaths On May 19, 2014, the EPA issued a The CCR rule is the culmination of and tens of thousands of heart attacks, final rule under section 316(b) of the extensive study on the effects of coal bronchitis cases and asthma episodes. Clean Water Act (CWA) (33 U.S.C. ash on the environment and public New or reconstructed EGUs (i.e., 1326(b)) (referred to hereinafter as the health. The CCR rule establishes sources that commence construction or 316(b) rule.) The rule was published on technical requirements for existing and reconstruction after May 3, 2011) August 15, 2014 (79 FR 48300; August 15, 2014), and became effective October 1034 CWA section 316(b) provides that standards 1033 We discuss other rulemakings solely for 14, 2014. The 316(b) rule establishes applicable to point sources under sections 301 and background purposes. The effort to coordinate new standards to reduce injury and 306 of the Act must require that the location, rulemakings is not a defense to a violation of the design, construction and capacity of cooling water CAA. Sources cannot defer compliance with death of fish and other aquatic life intake structures reflect the best technology existing requirements because of other upcoming caused by cooling water intake available for minimizing adverse environmental regulations. structures at existing power plants and impacts.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00261 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64922 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

new CCR landfills and surface The EPA is endeavoring to enable On November 25, 2014, the EPA impoundments under the Resource EGUs to comply with applicable Administrator signed the proposed Conservation and Recovery Act, Subtitle obligations under other power sector rulemaking for the 2015 revisions to the D (42 U.S.C. 6941–6949a), the nation’s rules as efficiently as possible (e.g., by ozone NAAQS. The proposal was primary law for regulating solid waste. facilitating their ability to coordinate published in the Federal Register on These regulations address the risks planning and investment decisions with December 17, 2014 (79 FR 75234). The from coal ash disposal—leaking of respect to those rules) and, where Administrator proposed to revise the contaminants into ground water, possible, implement integrated primary ozone standard to a level in the blowing of contaminants into the air as compliance strategies. For example, in range of 0.065 to 0.070 ppm and took dust, and the catastrophic failure of coal the proposed SE ELG rule, the EPA comment on lower levels including ash surface impoundments by describes its thinking on how it might 0.060 ppm and on retaining the current establishing requirements for where effectively harmonize the potential standard of 0.075 ppm. Among other CCR landfills and surface requirements of that rule with the things, the ozone NAAQS proposal also impoundments may be located, how requirements of the final CCR rule. proposed to retain the current indicator, they must be designed, operated and Because these two rules affect similar averaging time, and form of the standard monitored, when they must be units and may be met with similar and included a proposed secondary inspected, and how they must be closed compliance strategies, common-sense ozone NAAQS in the 0.065 to 0.070 and cared for after closure. implementation timeframes were ppm range. Additionally, the CCR rule sets out established in the CCR final rule so that The proposal also outlined the key recordkeeping and reporting utilities would not be required to make implementation milestones requiring requirements, as well as the requirement major decisions about CCR units revised SIPs, with due dates starting in for each facility to establish and post without first understanding the October 2018 for infrastructure and specific information to a publicly- implications that such decisions would interstate transport SIPs, attainment accessible Web site. The final rule also have for meeting the surface water plans due 2020–21, and attainment supports the responsible recycling of protection requirements of the final ELG dates of 2020–37. The EPA is under a CCRs by distinguishing safe, beneficial rule. The EPA is taking into account court order to finalize its review of the use from disposal. these new CCR requirements for coal ozone NAAQS by October 1, 2015. ash as it develops the final SE ELG rule. Some commenters expressed concern 5. Steam Electric Effluent Limitation with the potential impact proposed Guidelines and Standards (SE ELG Rule) The EPA’s goal in harmonizing the SE ELG and CCR rules is to minimize the revisions to the ozone NAAQS could The EPA is reviewing public overall complexity of the two regulatory have on state planning efforts and comments and working to finalize the structures and avoid creating affected entities’ ability to comply with proposed SE ELG rule which will any potentially new requirements unnecessary burden. impact existing fossil fuel-fired EGUs. In associated with a revised ozone NAAQS 2013, the EPA proposed the SE ELG rule 6. Other EPA Rules and those related to the 111(d) emission (78 FR 34432; June 7, 2013) to guidelines. In particular, commenters In addition to the power sector rules strengthen the controls on discharges raised issues with a potentially more from certain steam electric power plants discussed above, the development of stringent ozone standard and the by revising technology-based effluent SIPs for criteria pollutants (ozone, permitting and state planning limitations guidelines and standards for PM2.5, and SO2) and regional haze may implications this may create. While the steam electric power generating also have implications for existing there was no discussion of the proposed point source category. The current fossil-fired EGUs. revisions to the ozone NAAQS in the regulations, which were last updated in Regarding ozone, the proposal 111(d) emission guidelines proposal, 1982, do not adequately address the included a discussion of the June 6, commenters expressed a desire for the toxic pollutants discharged from the 2013, proposed implementation rule for EPA to coordinate promulgation of the electric power industry, nor have they the 2008 ozone National Ambient Air final 111(d) emission guidelines (and kept pace with process changes that Quality Standards (NAAQS), addressing any other climate regulations) with the have occurred over the last three the statutory requirements for areas EPA potential revision to the ozone standard decades. Existing steam electric power has designated as nonattainment for the to provide certainty and flexibility for plants currently contribute 50–60 2008 ozone NAAQS. The final states and affected sources. percent of all toxic pollutants implementation rule for the 2008 ozone While it is premature to speculate discharged to surface waters by all NAAQS was signed on February 13, about the outcome of the ozone NAAQS industrial categories regulated in the 2015, and published on March 6, 2015, review and how a more stringent ozone U.S. under the CWA. Furthermore, with an effective date of April 6, 2015. NAAQS may impact sources of ozone power plant discharges to surface waters In general, the 2008 ozone NAAQS precursor emissions, including EGUs, are expected to increase as pollutants implementation rule interprets we believe the planning and compliance are increasingly captured by air applicable statutory requirements and timeframes that would follow from a pollution controls and transferred to provides flexibility to states to minimize revised ozone NAAQS and the wastewater discharges. The proposed administrative burdens associated with timeframes we are finalizing today for regulation, which includes new developing and implementing plans to submittal of the CAA section 111(d) requirements for both existing and new meet and maintain the NAAQS. The state plans will allow considerable time generating units, would reduce impacts rule establishes due dates for attainment for coordination by states in the to human health and the environment plans and clarifies attainment dates for development of their respective plans, by reducing the amount of toxic metals each ozone nonattainment area as needed. As stated in the proposal, the and other pollutants currently according to its classification based on EPA is prepared to work with states to discharged to surface waters from power air quality thresholds, with attainment assist them in coordinating their efforts plants. The EPA intends to take final dates starting in July 2015 through July across these planning processes. action on the proposed rule by 2032 depending on an area’s Regarding PM2.5 NAAQS September 30, 2015. classification. implementation, the proposal stated that

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00262 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64923

the EPA was developing a proposed completed by no later than July 2, 2016, requirements across multiple regulatory implementation rule to provide December 31, 2017, and December 31, programs, as warranted. guidance to states on the development 2020 with attainment plans due The EPA believes that CAA section of SIPs for the 2012 PM2.5 NAAQS. The between 2018 and 2022. 111(d) efforts and actions will tend to contribute to overall air quality proposed PM2.5 SIP requirements rule Regarding requirements under the improvements and thus should be was signed on March 10, 2015, and regional haze program, several affected complementary to criteria pollutant and published on March 23, 2015 (80 FR EGUs have deadlines in the 2016–2021 regional haze SIP efforts. 15340). The proposal addresses a timeframe to install controls to comply number of requirements including with the Best Available Retrofit 7. Final Rule Flexibilities attainment plan due dates, attainment Technology (BART) and reasonable As discussed in Section VIII of this dates and attainment date extension progress requirements of the Regional criteria for Moderate and Serious preamble, the EPA is providing states Haze Rule. Soon after these deadlines, flexibility in developing approvable nonattainment areas; determination some of the same affected EGUs may be criteria for Reasonably Available plans under CAA section 111(d), required to reduce their utilization, including the ability to impose source- Control Measures (RACM) for Moderate convert into natural gas-fired facilities, areas and Best Available Control by-source limitations reflecting the or shut down entirely as a result of state BSER performance rates to each affected Measures (BACM) for Serious areas; 111(d) plans. Some commenters have plans for demonstrating reasonable EGU or to adopt rate-based or mass- expressed concern that for these affected based emission performance goals, and further progress and for meeting EGUs, specifically those that choose to periodic quantitative milestones; and to rely on a wide range of CO2 emission retire, the capital equipment installed to reduction measures, including measures criteria for reclassifying a Moderate comply with the Regional Haze Rule nonattainment area to Serious. The EPA that are not part of the BSER. The EPA would likely become stranded assets. is also providing states considerable is planning to finalize the PM 2.5 flexibility with respect to the implementation rule in early 2016. While the EPA is providing There are currently only 9 areas considerable flexibility for states and timeframes for plan development and designated nonattainment for the 2012 sources under the final 111(d) emission implementation, with up to 3 years permitted for final plans to be submitted PM NAAQS, with an effective date of guidelines, the EPA acknowledges the 2.5 after the GHG emission guidelines are April 15, 2015. Since the attainment possibility that some sources could finalized, and up to 15 years for all plans for these areas must be completed ultimately be faced with the potential emission reduction measures to be fully and submitted to the EPA in September for stranded assets as a result of state implemented. The EPA is establishing 2016, we expect that the four states with 111(d) plans. For these sources, an 8-year interim period over which to such areas should have already decided however, states have the option of achieve the full required reductions to on their approach to implementing the developing BART alternatives that meet the CO performance rates, and 2012 PM NAAQS when they begin to replace control requirements that would 2 2.5 this begins in 2022, more than seven develop their plans for implementing otherwise result in stranded assets at a years from the June 18, 2014 date of the 111(d) guidelines, and will be able particular EGU with the aggregate emission reductions that will result proposal of the rulemaking. The 8-year to coordinate the two. interim period from 2022 through 2029, Related to the SO NAAQS, and as from retirements, fuel switching, 2 is separated into three steps, 2022–2024, stated in the proposal, the SO NAAQS reduced utilization, or lesser controls at 2 2025–2027, and 2028–2029, each was revised in June 2010 to protect multiple EGUs. associated with its own interim CO public health from the short-term effects 2 In fact, the EPA already has emission performance rates. of SO2 exposure. In July 2013, the EPA experience working with states to In light of these broad flexibilities, we designated 29 areas in 16 states as account for these very types of changed believe that states will have ample 1036 nonattainment for the SO2 NAAQS. The circumstances. The EPA will opportunity, when developing and EPA based these nonattainment continue to work with states to explore implementing their CAA section 111(d) designations on the most recent set of options for integrating compliance plans, to coordinate their response to certified air quality monitoring data as this requirement with source and state well as an assessment of nearby people are most likely to be exposed to violations responses to any obligations that may be emission sources and weather patterns of the standard. The strategy is available at http:// www.epa.gov/airquality/sulfurdioxide/ applicable to affected EGUs as a result that contribute to the monitored levels. of the MATS, CSAPR, 316(b), SE ELG The date for attainment plans for these implement.html, and the associated area designations schedule is at http://www.epa.gov/ and CCR rules, all of which are or soon areas to be completed and submitted to airquality/sulfurdioxide/designations/pdfs/ will be final rules. In addition, we the EPA was April 2015. As such, we 201503Schedule.pdf. believe that states will be able to design 1036 For example, Oregon replaced its BART expect states with such areas to have CAA section 111(d) plans that use already decided on their approach to determination for the Boardman Coal Plant with a new requirement that accounted for a planned innovative, cost-effective regulatory implementing the SO2 NAAQS as they shutdown before the EPA took action on the state’s strategies, that spark investment and start planning for implementation of the SIP submission (76 FR 12661). Washington innovation across a wide variety of similarly replaced its BART determination for the 111(d) guidelines, which should allow clean energy technologies, and that will for coordination and consideration of TransAlta Centralia Power Plant before the EPA took action on the state’s SIP submission (77 FR help reduce cost and ensure reliability, SO2 related air quality measures into 72742). Oklahoma submitted a SIP revision with a while also ensuring that all applicable their 111(d) planning. The EPA intends new BART determination for the AEP/PSO environmental requirements are Northeastern Power Station, which included to address the designations for all other met.1037 We also believe that the broad areas in three separate actions in the enforceable requirements for reduced utilization 1035 and early unit retirements, to replace a FIP that had future. These designations must be been promulgated by the EPA (79 FR 12944). 1037 It should be noted that regulatory obligations Finally, the EPA finalized a BART determination imposed upon states and sources operate 1035 The EPA has developed a comprehensive for Unit 3 at the Dave Johnston Power Plant in independently under different statutes and sections implementation strategy for these future actions Wyoming that included two compliance options, of statutes; the EPA expects that states and sources that focuses resources on identifying and one of which included a federally enforceable will take advantage of available flexibilities as addressing unhealthy levels of SO2 in areas where retirement date and less costly controls. Continued

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00263 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64924 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

flexibilities in this action will enable and mass-based CO2 goals in order to percent in 2025, and 32 percent in 2030. states and affected EGUs to build on maximize the range of choices that Under the mass-based approach, when their longstanding, successful records of states will have in developing their compared to 2005, CO2 emissions are complying with multiple CAA, CWA, plans. Because of the range of choices projected to be reduced by and other environmental requirements, available to states and the lack of a approximately 23 percent in 2020, 29 while assuring an adequate, affordable, priori knowledge about the specific percent in 2025, and 32 percent in 2030. and reliable supply of electricity. choices states will make in response to The final guidelines are projected to the final goals, the Regulatory Impact result in substantial co-benefits through XI. Impacts of This Action 1038 Analysis (RIA) for this final action reductions of SO2, NOX and PM2.5 that A. What are the air impacts? presents two scenarios designed to will have direct public health benefits achieve these goals, which we term the by lowering ambient levels of these The EPA anticipates significant ‘‘rate-based’’ illustrative plan approach pollutants and ozone. Tables 15 and 16 emission reductions under the final and the ‘‘mass-based’’ illustrative plan show expected CO2 and other air guidelines for the utility power sector. approach.1039 pollutant emissions in the base case and In the final emission guidelines, the Under the rate-based approach, when reductions under the final guidelines for EPA has translated the source category- compared to 2005, CO2 emissions are 2020, 2025, and 2030 for the rate-based specific CO2 emission performance rates projected to be reduced by and mass-based approaches, into equivalent state-level rate-based approximately 22 percent in 2020, 28 respectively.

TABLE 15—SUMMARY OF CO2 AND OTHER AIR POLLUTANT EMISSION REDUCTIONS FROM THE BASE CASE UNDER RATE- BASED ILLUSTRATIVE PLAN APPROACH

CO2 SO2 NOX (millions short tons) (thousand short tons) (thousand short tons)

2020 Final Guidelines: Base Case ...... 2,155 1,311 1,333 Final Guidelines ...... 2,085 1,297 1,282 Emissions Reductions ...... 69 14 50 2025 Final Guidelines: Base Case ...... 2,165 1,275 1,302 Final Guidelines ...... 1,933 1,097 1,138 Emissions Reductions ...... 232 178 165 2030 Final Guidelines: Base Case ...... 2,227 1,314 1,293 Final Guidelines ...... 1,812 996 1,011 Emissions Reductions ...... 415 318 282 Source: Integrated Planning Model, 2015. Note: Emissions may not sum due to rounding.

TABLE 16—SUMMARY OF CO2 AND OTHER AIR POLLUTANT EMISSION REDUCTIONS FROM THE BASE CASE UNDER MASS- BASED ILLUSTRATIVE PLAN APPROACH

CO2 SO2 NOX (million short tons) (thousand short tons) (thousand short tons)

2020 Final Guidelines: Base Case ...... 2,155 1,311 1,333 Final Guidelines ...... 2,073 1,257 1,272 Emissions Reductions ...... 81 54 60 2025 Final Guidelines: Base Case ...... 2,165 1,275 1,302 Final Guidelines ...... 1,901 1,090 1,100 Emissions Reductions ...... 265 185 203 2030 Final Guidelines: Base Case ...... 2,227 1,314 1,293 Final Guidelines ...... 1,814 1,034 1,015 Emissions Reductions ...... 413 280 278 Source: Integrated Planning Model, 2015. Note: Emissions may not sum due to rounding.

appropriate, but will comply with all relevant legal impacts. For example, states may use the mass-based illustrative plan approaches presented requirements. flexibilities described in these guidelines to find in the RIA may not be indicative of likely 1038 The impacts presented in this section of the approaches that are more cost-effective for their differences between the approaches if implemented preamble represent an illustrative implementation particular state or choose approaches that shift the by states and affected EGUs in response to the final of the guidelines. As states implement the final balance of co-benefits and impacts to match broader guidelines. If one approach performs differently guidelines, they have sufficient flexibility to adopt state priorities. than the other on a given metric during a given time different state-level or regional approaches that may 1039 It is important to note that the differences period, this does not imply this will apply in all yield different costs, benefits, and environmental between the analytical results for the rate-based and instances.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00264 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64925

The reductions in Tables 15 and 16 do proposed action and are later in time, test of the section 7 regulations and thus not account for reductions in hazardous but still are reasonably certain to are not subject to ESA consultation. air pollutants (HAPs) that may occur as occur.’’ Id. To trigger the consultation As described in the proposal, the EPA a result of this rule. For instance, the requirement, there must thus be a causal has also previously considered issues fine particulate reductions presented connection between the federal action, relating to GHG emissions in connection above do not reflect all of the reductions the effect in question, and the listed with the requirements of ESA section in many heavy metal particulates. species, and if the effect is indirect, it 7(a)(2) and has supplemented DOI’s must be reasonably certain to occur. B. Endangered Species Act The EPA notes that the projected analysis with additional consideration As explained in the preamble to the environmental effects of this rule are of GHG modeling tools and data proposed rule (79 FR at 34933–934), the positive: Reductions in overall GHG regarding listed species. Although the EPA has carefully considered the emissions, and reductions in PM and GHG emission reductions projected for requirements of section 7(a)(2) of the ozone-precursor emissions (SO2 and this final rule are large (estimated Endangered Species Act (ESA) and NOX). The EPA recognizes that reductions of about 415 million short applicable ESA regulations, and beneficial effects to listed species can, tons of CO2 in 2030 relative to the base reviewed relevant ESA case law and as a general matter, result in a ‘‘may case under the rate-based illustrative guidance, to determine whether affect’’ determination under the ESA. plan approach—see Table 14 above), the consultation with the U.S. Fish and However, the EPA’s assessment that the EPA evaluated larger reductions in Wildlife Service (FWS) and/or National rule will have an overall net positive assessing this same issue in the context Marine Fisheries Service (together, the environmental effect by virtue of of the light-duty vehicle GHG emission Services) is required by the ESA. The reducing emissions of certain air standards for model years 2012–2016 EPA proposed to conclude that the pollutants does not address whether the and 2017–2025. There the agency requirements of ESA section 7(a)(2) rule may affect any listed species or projected emission reductions over the would not be triggered by promulgation designated critical habitat for ESA lifetimes of the model years in of the rule, and we now finalize that section 7(a)(2) purposes and does not question 1042 which are roughly five to determination. constitute any finding of effects for that six times those projected above and, Section 7(a)(2) of the ESA requires purpose. The fact that the rule will have based on air quality modeling of federal agencies, in consultation with overall positive effects on the national potential environmental effects, one or both of the Services (depending and global environment does not mean concluded that ‘‘EPA knows of no on the species at issue), to ensure that that the rule may affect any listed actions they authorize, fund, or carry modeling tool which can link these species in its habitat or the designated small, time-attenuated changes in global out are not likely to jeopardize the critical habitat of such species within continued existence of federally listed metrics to particular effects on listed the meaning of ESA section 7(a)(2) or species in particular areas. Extrapolating endangered or threatened species or the implementing regulations or require result in the destruction or adverse from global metric to local effect with ESA consultation. The EPA has such small numbers, and accounting for modification of designated critical considered various types of potential habitat of such species. 16 U.S.C. further links in a causative chain, effects in reaching the conclusion that remain beyond current modeling 1536(a)(2). Under relevant ESA consultation is not required for this capabilities.’’ 1043 The EPA reached this implementing regulations, section rule. 7(a)(2) applies only to actions where With respect to the projected GHG conclusion after evaluating issues there is discretionary federal emission reductions, the EPA relating to potential improvements involvement or control. 50 CFR 402.03. considered in detail in the proposal why relevant to both temperature and Further, under the regulations such reductions do not trigger ESA oceanographic pH outputs. The EPA’s consultation is required only for actions consultation requirements under section ultimate finding was that ‘‘any potential that ‘‘may affect’’ listed species or 7(a)(2). As explained in the proposal, in for a specific impact on listed species in designated critical habitat. 50 CFR reaching this conclusion the EPA was their habitats associated with these very 402.14. Consultation is not required mindful of significant legal and small changes in average global where the action has no effect on such technical analysis undertaken by FWS temperature and ocean pH is too remote species or habitat. Under this standard, and the U.S. Department of the Interior to trigger the threshold for ESA section it is the federal agency taking the action (DOI) in the context of listing the polar 7(a)(2).’’ Id. The EPA believes that the that evaluates the action and determines bear as a threatened species under the same conclusion applies to the present whether consultation is required. See 51 ESA. In that context, in 2008, FWS and rule. See, e.g., Ground Zero Center for FR 19926, 19949 (June 3, 1986). Effects DOI expressed the view that the best Non-Violent Action v. U.S. Dept. of of an action include both the direct and scientific data available were Navy, 383 F. 3d 1082, 1091–92 (9th Cir. indirect effects that will be added to the insufficient to draw a causal connection 2004) (where the likelihood of jeopardy environmental baseline. 50 CFR 402.02. between GHG emissions and effects on to a species from a federal action is Direct effects are the direct or the species in its habitat.1041 The DOI extremely remote, ESA does not require immediate effects of an action on a Solicitor concluded that where the consultation). The EPA’s conclusion is listed species or its habitat.1040 Indirect effect at issue is climate change, entirely consistent with DOI’s analysis effects are those that are ‘‘caused by the proposed actions involving GHG regarding ESA requirements in the emissions cannot pass the ‘‘may affect’’ 1040 See Endangered Species Consultation Handbook, U.S. Fish & Wildlife Service and 1042 See 75 FR at 25438 Table I.C 2–4 (May 7, National Marine Fisheries Service at 4–25 (March 1041 See, e.g., 73 FR 28212, 28300 (May 15, 2008); 2010); 77 FR at 62894 Table III–68 (Oct. 15, 2012). 1998) (providing examples of direct effects: e.g., Memorandum from David Longly Bernhardt, 1043 EPA, Light-Duty Vehicle Greenhouse Gas driving an off road vehicle through the nesting Solicitor, U.S. Department of the Interior re: Emission Standards and Corporate Average Fuel habitat of a listed species of bird and destroying a ‘‘Guidance on the Applicability of the Endangered Economy Standards, Response to Comment ground nest; building a housing unit and destroying Species Act’s Consultation Requirements to Document for Joint Rulemaking at 4–102 (Docket ID the habitat of a listed species). Available at https:// Proposed Actions Involving the Emission of EPA–OAR–HQ–2010–0799). Available at http:// www.fws.gov/ENDANGERED/esa-library/pdf/esa_ Greenhouse Gases’’ (Oct. 3, 2008). Available at www.epa.gov/otaq/climate/regulations/ section7_handbook.pdf. http://www.doi.gov/solicitor/opinions/M-37017.pdf. 420r10012a.pdf.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00265 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64926 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

context of federal actions involving rev’d on different grounds sub nom., June 15, 2015, congressional letters to GHG emissions.1044 Whitman v. American Trucking Assn’s, EPA cited above. With regard to non-GHG air 531 U.S. 457 (2000) (National Ambient The EPA has carefully considered the emissions, the EPA also projects Air Quality Standards have no comments and the correspondence from substantial reductions of SO2 and NOX economic impact, for purposes of Congress as well as the case law and as a collateral consequence of this final Regulatory Flexibility Act, because other materials cited in those action. However, CAA section 111(d)(1) impacts result from the actions of states documents. The EPA does not believe standards cannot directly control through their development, that the effects of potential future emissions of criteria pollutants. See implementation and enforcement of changes in the energy sector—including CAA section 111(d)(1)(i). Consequently, SIPs).1045 The EPA recognized, for increased reliance on wind or solar CAA section 111(d) provides no instance, that questions may exist power as a result of future potential discretion to adjust the standard based whether decisions such as increased actions by states or other implementing on potential impacts to endangered utilization of solar or wind power could entities—or any potential alterations in species of reduced criteria pollutant the operations of any particular facility have effects on listed species. The EPA emissions. Section 7(a)(2) consultation are caused by the current rule or received comments on the proposal thus is not required with respect to the sufficiently certain to occur so as to asserting that because potential projected reductions of criteria pollutant require ESA consultation on the rule. emissions. See 50 CFR 402.03; see also, increased reliance on wind or solar The EPA appreciates that the ESA WildEarth Guardians v. U.S. Envt’l power may be an element of building regulations call for consultation where Protection Agency, 759 F.3d 1196, block 3, and because wind and solar actions authorized, funded, or carried 1207–10 (10th Cir. 2014) (EPA has no facilities may in some cases have effects out by federal agencies may have duty to consult under section 7(a)(2) of on listed species, the EPA must consult indirect effects on listed species or the ESA regarding hazardous air under the ESA on this aspect of the rule. designated critical habitat. However, as pollutant controls that it did not The EPA is also aware of certain noted above, indirect effects must be require—and likely lacked authority to questions regarding potential effects of caused by the action at issue and must require—in a federal implementation the rule on the Big Bend Power Station be reasonably certain to occur. At this plan for regional haze controls under located in Florida, which discharges point, there is no reasonable certainty section 169A of the CAA). effluent that provides a warm water regarding implementation of any Finally, the EPA has also considered refuge for manatees. The Big Bend planning measures in any location, let other potential effects of the rule Power Station and another coal-fired alone in any location occupied by a (beyond reductions in air pollutants) facility located in Florida—the Crystal listed species or its designated critical and whether any such effects are River Plant—are, for example, habitat. The EPA cannot predict with ‘‘caused by’’ the rule and ‘‘reasonably referenced in the June 11, 2015, and reasonable certainty where such certain to occur’’ within the meaning of measures may take effect or which the ESA regulatory definition of the 1045 One commenter questioned the EPA’s measures may be adopted. It is not clear, effects of an action. 50 CFR 402.02. As citation to American Trucking Assn’s. As stated by for instance, whether a particular the EPA noted in the proposal, there are the commenter, the statute at issue in that case— the Regulatory Flexibility Act (RFA)—is implementation plan will call, if at all, substantial questions as to whether any distinguishable from the ESA in that it addresses for increased reliance on wind power, as potential for relevant effects results from only direct effects and does not consider indirect opposed to solar power, or on some any element of the rule or would result effects. The commenter misreads the EPA’s citation other form of low or zero carbon instead from separate decisions and to this case. The EPA cites this case simply to reference a decision considering the impacts of an emitting generation. It is also entirely actions made in connection with the EPA action—the revision of a NAAQS under the uncertain how a future implementation development, implementation, and CAA—that in certain respects provides a useful plan for a particular state might affect, enforcement of a plan to implement the analogy to the present rule. A NAAQS is if at all, operations at a specific standards established in the rule. Cf. implemented through a series of subsequent 1046 planning decisions generally taken by states by facility. The precise steps included American Trucking Assn’s v. EPA, 175 means of adoption of SIPs. States can choose to in an implementation plan cannot be F. 3d 1027, 1043–45 (D.C. Cir. 1999), impose or avoid the types of impacts at issue in the determined or ordered by this federal D.C. Circuit case through their planning decisions; action, and they are not sufficiently 1044 The EPA has received correspondence from thus such impacts were not viewed as having been certain to be attributable to this final a U.S. Senator and a Member of the U.S. House of caused—for purposes of the RFA—by the EPA’s Representatives noting that the Services have promulgation of the revised NAAQS in the first rule for ESA purposes. These steps will identified several listed species affected by global instance. The standard setting and implementation flow from a series of later in time climate change. See Letter from Rob Bishop, mechanisms under section 111(d) are very similar. decisions generally made by other Chairman, House Committee on Natural Resources, Under section 111(d), the EPA is required to entities—usually states—in their to Gina McCarthy, Administrator, U.S. establish ‘‘a procedure similar to that provided by Environmental Protection Agency, dated June 11, section 7410’’—the provision establishing the SIP 2015; Letter from Rob Bishop, Chairman, House mechanism for implementing NAAQS. Thus, the 1046 A congressional letter of June 11, 2015, Committee on Natural Resources, and James M. D.C. Circuit’s discussion provides a useful analogy referenced above asserts that EPA’s modeling Inhofe, Chairman, Senate Committee on to the present rule and the various types of suggests that the Big Bend Power Station and Environment and Public Works, to Gina McCarthy, potential effects that may be attributable to future Crystal River Energy Complex in Florida will be Administrator, U.S. Environmental Protection implementation planning decisions by states and prematurely retired as a result of the rule. EPA Agency, dated June 15, 2015. EPA’s assessment of other entities as they exercise their discretion in notes that any such facility-level projections ESA requirements in connection with the present determining how to implement the federal associated with the rule cannot be stated with rule does not address whether global climate guidelines, but not to promulgation of the rule sufficient certainty to qualify as potential indirect change may, as a general matter, be a relevant itself. The EPA’s citation to this case was not effects under the ESA. These projections are based consideration in the status of certain listed species. intended to address any comparison of the scope of on numerous assumptions regarding a variety of Rather, the requirements of ESA section 7(a)(2) effects covered by the RFA and the effects planning and business decisions yet to be made by must be considered and applied to the specific cognizable under section 7(a)(2) of the ESA. The the implementing governments (usually states) and action at issue. As explained above, EPA’s EPA is aware that the ESA addresses both direct facility owners. Given the wide degrees of conclusion that ESA section 7(a)(2) consultation is and indirect effects as defined by the applicable discretion and flexibility and the numerous options not required here is premised on the specific facts ESA regulations. The discussion supporting the available for such decision making, the potential for and circumstances of the present rule and is fully EPA’s ESA conclusion expressly acknowledges the such outcomes to be realized as currently projected consistent with prior relevant analyses conducted relevance of indirect effects to the ESA analysis and is at this point too uncertain to qualify as an effect by DOI, FWS, and EPA. explains why such effects are not present here. under the ESA.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00266 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64927

distinct planning processes. These later location, if at all. The Services have listed species that trigger the section decisions cannot now be required by the explained that section 7(a)(2) was not 7(a)(2) consultation requirement.1049 rule, are not caused by the rule, and are intended to preclude federal actions C. What are the energy impacts? not reasonably certain to occur. The based on potential future speculative EPA also notes that the plans adopted effects.1047 These are precisely the types The final guidelines have important for particular states may themselves of speculative future activities and energy market implications. Table 17 provide wide degrees of implementation effects at issue here.1048 For this presents a variety of important energy flexibility, thus further increasing the additional reason, the EPA concludes market impacts for 2020, 2025, and 2030 uncertainty that any species-impacting that the rule does not have effects on under both the rate-based and mass- activity will occur in any particular based illustrative plan approaches.

TABLE 17—SUMMARY TABLE OF IMPORTANT ENERGY MARKET IMPACTS FOR RATE-BASED AND MASS-BASED ILLUSTRATIVE PLAN APPROACHES [Percent change from base case]

Rate-based Mass-based 2020 2025 2030 2020 2025 2030

Retail electricity prices ...... 3 1 1 3 2 0 Price of coal at minemouth ...... ¥1 ¥5 ¥4 ¥1 ¥5 ¥3 Coal production for power sector use ...... ¥5 ¥14 ¥25 ¥7 ¥17 ¥24 Price of natural gas delivered to power sector ...... 5 ¥8 2 4 ¥3 ¥2 Natural gas use for electricity generation ...... 3 ¥1 ¥1 5 0 ¥4

These figures reflect the EPA’s Energy market impacts from the flexibilities states may ultimately illustrative modeling that presumes guidelines are discussed more pursue. The illustrative analysis is policies that lead to generation shifts extensively in the RIA found in the designed to reflect, to the extent and growing use of demand-side EE and docket for this rulemaking. possible, the scope and the nature of the renewable electricity generation out to D. What are the compliance costs? final guidelines. However, there is 2029. If states make different policy considerable uncertainty with regards to The compliance costs of this final choices, impacts could be different. For the precise measures that states will action are represented in this analysis as instance, if states implement renewable adopt to meet the final requirements, the change in electric power generation and/or demand-side EE policies on a because there are considerable costs between the base case and the flexibilities afforded to the states in more aggressive time-frame, impacts on final rule in which states pursue a developing their state plans. natural gas and electricity prices would distinct set of strategies beyond the likely be less. Implementation of other strategies taken in the base case to meet The incremental cost is the projected measures not included in the BSER the terms of the final guidelines. The additional cost of complying with the calculation or compliance modeling, compliance costs estimates include cost guidelines in the year analyzed and such as nuclear uprates, transmission estimates for demand-side EE. The includes the amortized cost of capital system improvements, use of energy compliance assumptions—and, investment, needed new capacity, shifts storage technologies or retrofit CCS, therefore, the projected compliance between or amongst various fuels, could also mitigate gas price and/or costs—set forth in this analysis are deployment of demand-side EE electricity price impacts. illustrative in nature and do not programs, and other actions associated represent the full suite of compliance with compliance. These important

1047 See 51 FR at 19933 (describing effects that are appropriate point when particular activities have promulgation of the present rule will result in no ‘‘reasonably certain to occur’’ in the context of become reasonably certain. Several commenters on change to any ESA requirements applicable to any consideration of cumulative effects and the proposal specifically noted that such future future activities directed by plans (either state or distinguishing broader consideration that may be activities—e.g., development of additional RE federal) implementing the rule. The action at issue appropriate in applying a procedural statute such facilities such as wind farms—may call for ESA in Washington Toxics Coalition involved the EPA’s as the National Environmental Policy Act, as consultation. Further, EPA notes that section 9 of registration of certain pesticide active ingredients opposed to a substantive provision such as ESA the ESA, which prohibits the take of individuals of section 7(a)(2) that may prohibit certain federal most listed species, provides an additional under the Federal Insecticide, Fungicide, and actions); Endangered Species Consultation protection for listed species as future implementing Rodenticide Act. Such actions provide Handbook, U.S. Fish & Wildlife Service and activities become reasonably certain. authorization for the sale and distribution of those National Marine Fisheries Service at 4–30 (March 1049 The commenters cite certain cases that they products, consistent with applicable labelling 1998) (in the same context, describing indicators assert support consulting under ESA section 7(a)(2). requirements. The EPA also notes that under the that an activity is reasonably certain to occur as The EPA has considered these cases, each of which EPA’s regulations, registered pesticide labels must, including governmental approvals of the action or is distinguishable from the present rule. By way of among other things, specify the product ingredients indications that such approval is imminent, project example, a commenter cites two cases involving and the methods and sites of product application. sponsors’ assurance that the action will proceed, EPA actions: Defenders of Wildlife v. EPA, 420 F.3d 40 CFR 156.10. By contrast, the present rule only obligation of venture capital, or initiation of 946 (9th Cir. 2005), rev’d, National Association of sets goals and describes potential pathways to contracts; and noting that the more governmental Homebuilders v. Defenders of Wildlife, 551 U.S. 644 meeting those goals, all of which are subject to administrative discretion remains to be exercised, (2007); and Washington Toxics Coalition v. EPA, future considerations and decisions involved in the the less there is reasonable certainty the action will 413 F.3d 1024 (9th Cir. 2005). In Defenders of implementation of plans (generally by states). The proceed). Available at https://www.fws.gov/ Wildlife (a decision that was reversed by the U.S. ENDANGERED/esa-library/pdf/esa_section7_ Supreme Court), a principal relevant impact of the rule neither authorizes, nor directs, any of the handbook.pdf. federal action at issue—the EPA’s approval of a future measures to meet the rule’s goals. Those 1048 EPA also notes that some of the future state’s permitting program under the Clean Water activities remain subject to the full range of future implementing activities may involve federal actions Act—was that following the action, the relevant decision making addressing which types of that are subject to ESA consultation, thus providing permitted activities would no longer be subject to measures to implement, what emitting entities will consideration of any impacts on listed species at the consultation under the ESA. By contrast, be affected, how much, and when.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00267 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64928 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

dynamics are discussed in more detail implementing the guidelines may By its nature, demand-side EE reduces in the RIA in the rulemaking docket. choose to mitigate impacts to some overall demand for electric power. The The EPA estimates the annual markets outside the utility power sector. EPA recognizes as more efficiency is incremental compliance cost for the Similarly, demand for new generation or built into the U.S. power system over rate-based approach for final emission demand-side EE as a result of states time, lower fuel requirements may lead guidelines to be $2.5 billion in 2020, implementing the guidelines can result to fewer jobs in the coal and natural gas $1.0 billion in 2025 and $8.4 billion in in shifts in production and profitability extraction sectors, as well as in fossil- 2030, including the costs associated for firms that supply those goods and fuel fired EGU construction and with monitoring, reporting, and services. operation than would otherwise have recordkeeping (MR&R).1050 The EPA Executive Order 13563 directs federal been expected. The EPA also recognizes estimates the annual incremental agencies to consider the effect of the fact that, in many cases, compliance cost for the mass-based regulations on job creation and employment gains and losses that might approach for final emission guidelines employment. According to the be attributable to this rule would be to be $1.4 billion in 2020, $3.0 billion Executive Order, ‘‘our regulatory system expected to affect different sets of in 2025 and $5.1 billion in 2030, must protect public health, welfare, people. Moreover, workers who lose including the costs associated with safety, and our environment while jobs in these sectors may find MR&R. promoting economic growth, employment elsewhere just as workers More detailed cost estimates are innovation, competitiveness, and job employed in new jobs in these sectors available in the RIA included in the creation. It must be based on the best may have been previously employed rulemaking docket. available science.’’ (Executive Order elsewhere. Therefore, the employment 13563, 2011) Although standard benefit- estimates reported in these sectors may E. What are the economic and cost analyses have not typically include workers previously employed employment impacts? included a separate analysis of elsewhere. This analysis also does not The final standards are projected to regulation-induced employment capture potential economy-wide result in certain changes to power impacts, we typically conduct impacts due to changes in prices (of system operation as a compliance with employment analyses. While the fuel, electricity, labor, for example) or the standards. See Table 16 above for a economy continues moving toward full- other factors such as improved labor variety of important energy market employment, employment impacts are productivity and reduced health care impacts for 2020, 2025, and 2030 under of particular concern and questions may expenditures resulting from cleaner air. both the rate-based and mass-based arise about their existence and For these reasons, the numbers reported illustrative plan approaches. magnitude. here should not be interpreted as a net It is important to note that the EPA’s States have the responsibility and national employment impact. modeling does not necessarily account flexibility to implement policies and practices for compliance with the final F. What are the benefits of the final for all of the factors that may influence goals? business decisions regarding future guidelines. Quantifying the associated coal-fired capacity. Many power employment impacts is complicated by Implementing the final standards will companies already factor a potential the wide range of approaches that states generate benefits by reducing emissions financial liability associated with may use. As such, the EPA’s of CO2 and criteria pollutant precursors, carbon emissions into their long term employment analysis includes projected including SO2, NOX, and directly- emitted particles. SO and NO are capacity planning that would further employment impacts associated with 2 X precursors to PM (particles smaller influence business decisions to replace illustrative plan approaches for these 2.5 guidelines for the electric power than 2.5 microns), and NOX is a these aging assets with modern, and industry, coal and natural gas precursor to ozone. The estimated significantly cleaner, generation. production, and demand-side EE benefits associated with these emission The compliance modeling done to activities. These projections are derived, reductions are beyond those achieved support the final rule assumes that in part, from a detailed model of the by previous EPA rulemakings including overall electric demand will decrease as utility power sector used for this the Mercury and Air Toxics Standards states ramp up programs that result in regulatory analysis, and U.S government rule. The health and welfare benefits lower overall demand. Demand-side EE data on employment and labor from reducing air pollution are levels are expected to increase such that productivity. In the electricity, coal, and considered co-benefits for these they achieve about a 7.8 percent natural gas sectors, the EPA estimates standards. For this rulemaking, we were reduction on overall electricity demand that these guidelines could result in a only able to quantify the climate levels in 2030 under the final net decrease of approximately 25,000 benefits from reduced emissions of CO2 guidelines. job-years in 2025 for the final guidelines and the health co-benefits associated Changes in price or demand for under the rate-based illustrative plan with reduced exposure to PM2.5 and electricity, natural gas, and coal can approach and approximately 26,000 job- ozone. There are many additional impact markets for goods and services years in 2025 under the mass-based benefits which we are not able to produced by sectors that use these approach. For 2030, the estimates of the quantify, leading to an underestimate of energy inputs in the production process net decrease in job-years are 31,000 monetized benefits. In summary, we or supply those sectors. Changes in the under the rate-based approach and estimate the total combined climate cost of production may result in changes 34,000 under the mass-based approach. benefits and health co-benefits for the in prices, quantities produced, and The agency is also offering an rate-based approach to be $3.5 to $4.6 profitability of affected firms. The EPA illustrative calculation of potential billion in 2020, $18 to $28 billion in recognizes that these guidelines provide employment effects due to demand-side 2025, and $34 to $54 billion in 2030 (3 significant flexibilities and states EE programs. Employment impacts from percent discount rate, 2011$). Total demand-side energy EE programs in combined climate benefits and health 1050 The MR&R costs estimates are $65 million in 2020, $15 million in 2025 and $15 million in 2030 2030 could range from approximately co-benefits for the mass-based approach and are assumed to be the same for both rate-based 52,000 to 83,000 jobs under the final are estimated to be $5.3 to $8.1 billion and mass-based illustrative plan approaches. guidelines. in 2020, $19 to $29 billion in 2025, and

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00268 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64929

$32 to $48 billion in 2030 (3 percent emission reductions and monetized discount rates is provided in Tables 15 discount rate, 2011$). A summary of the benefits estimated for this rule at all through 22 of this preamble.

TABLE 18—SUMMARY OF THE MONETIZED GLOBAL CLIMATE BENEFITS FOR THE FINAL GUIDELINES [Billions of 2011$] a

Monetized climate benefits Year Discount rate (statistic) 2020 2025 2030

Rate-based Approach

CO2 Reductions (million short tons) ...... 69 232 415 5 percent (average SC-CO2) ...... $0.80 $3.1 $6.4 3 percent (average SC-CO2) ...... $2.8 $10 $20 2.5 percent (average SC-CO2) ...... $4.1 $15 $29 3 percent (95th percentile SC-CO2) ...... $8.2 $31 $61

Mass-based Approach

CO2 Reductions (million short tons) ...... 81 265 413 5 percent (average SC-CO2) ...... $0.94 $3.6 $6.4 3 percent (average SC-CO2) ...... $3.3 $12 $20 2.5 percent (average SC-CO2) ...... $4.9 $17 $29 3 percent (95th percentile SC-CO2) ...... $9.7 $35 $60

a Climate benefit estimates reflect impacts from CO2 emission changes in the analysis years presented in the table and do not account for changes in non-CO2 GHG emissions. These estimates are based on the global social cost of carbon (SC-CO2) estimates for the analysis years and are rounded to two significant figures.

TABLE 19—SUMMARY OF THE MONETIZED HEALTH CO-BENEFITS IN THE U.S. FOR THE FINAL GUIDELINES, RATE-BASED APPROACH [Billions of 2011$] a

National Monetized Monetized emission health Health Pollutant reductions co-benefits Co-benefits (thousands of (3 percent (7 percent short tons) discount) discount)

Final Guidelines, Rate-based Approach, 2020

b PM2.5 precursors: SO2 ...... 14 $0.44 to $0.99 .. $0.39 to $0.89 NOX ...... 50 $0.14 to $0.33 .. $0.13 to $0.30 Ozone precursor: c NOX (ozone season only) ...... 19 $0.12 to $0.52 .. $0.12 to $0.52

Total Monetized Health Co-benefits ...... $0.70 to $1.8 .... $0.64 to $1.7 Total Monetized Health Co-benefits combined with Monetized Climate Benefits d ...... $3.5 to $4.6 ...... $3.5 to $4.5

Final Guidelines, Rate-based Approach, 2025

b PM2.5 precursors: SO2 ...... 178 $6.4 to $14 ...... $5.7 to $13 NOX ...... 165 $0.56 to $1.3 .... $0.50 to $1.1 Ozone precursor: c NOX (ozone season only) ...... 70 $0.49 to $2.1 .... $0.49 to $2.1

Total Monetized Health Co-benefits ...... $7.4 to $18 ...... $6.7 to $16 Total Monetized Health Co-benefits combined with Monetized Climate Benefits d $18 to $28 ...... $17 to $26

Final Guidelines, Rate-based Approach, 2030

b PM2.5 precursors: SO2 ...... 318 $12 to $28 ...... $11 to $25 NOX ...... 282 $1.0 to $2.3 ...... $0.93 to $2.1 Ozone precursor: c NOX (ozone season only) ...... 118 $0.86 to $3.7 .... $0.86 to $3.7

Total Monetized Health Co-benefits ...... $14 to $34 ...... $13 to $31 Total Monetized Health Co-benefits combined with Monetized Climate Benefits. d $34 to $54 ...... $33 to $51 a All estimates are rounded to two significant figures, so estimates may not sum. It is important to note that the monetized co-benefits do not include reduced health effects from direct exposure to SO2, direct exposure to NO2, exposure to mercury, ecosystem effects or visibility impair- ment. Air pollution health co-benefits are estimated using regional benefit-per-ton estimates for the contiguous U.S.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00269 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64930 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

b The monetized PM2.5 co-benefits reflect the human health benefits associated with reducing exposure to PM2.5 through reductions of PM2.5 precursors, such as SO2 and NOX. The co-benefits do not include the benefits of reductions in directly emitted PM2.5. These additional benefits would increase overall benefits by a few percent based on the analyses conducted for the proposed rule. PM co-benefits are shown as a range reflecting the use of two concentration-response functions, with the lower end of the range based on a function from Krewski et al. (2009) and the upper end based on a function from Lepeule et al. (2012). These models assume that all fine particles, regardless of their chemical composi- tion, are equally potent in causing premature mortality because the scientific evidence is not yet sufficient to allow differentiation of effect esti- mates by particle type. c The monetized ozone co-benefits reflect the human health benefits associated with reducing exposure to ozone through reductions of NOX during the ozone season. Ozone co-benefits are shown as a range reflecting the use of several different concentration-response functions, with the lower end of the range based on a function from Bell, et al. (2004) and the upper end based on a function from Levy, et al. (2005). Ozone co-benefits occur in the analysis year, so they are the same for all discount rates. d We estimate climate benefits associated with four different values of a one ton CO2 reduction (model average at 2.5 percent discount rate, 3 percent, and 5 percent; 95th percentile at 3 percent). Referred to as the social cost of carbon, each value increases over time. For the purposes of this table, we show the benefits associated with the model average at 3 percent discount rate, however we emphasize the importance and value of considering the full range of social cost of carbon values. We provide combined climate and health estimates based on additional dis- count rates in the RIA.

TABLE 20—SUMMARY OF THE MONETIZED HEALTH CO-BENEFITS IN THE U.S. FOR THE FINAL GUIDELINES, MASS-BASED APPROACH [Billions of 2011$] a

National Monetized Monetized emission health health Pollutant reductions co-benefits co-benefits (thousands of (3 percent (7 percent short tons) discount) discount)

Final Guidelines, Mass-based Approach, 2020

b PM2.5 precursors: SO2 ...... 54 $1.7 to $3.8 $1.5 to $3.4 NOX ...... 60 $0.17 to $0.39 $0.16 to $0.36 Ozone precursor: c NOX (ozone season only) ...... 23 $0.14 to $0.61 $0.14 to $0.61

Total Monetized Health Co-benefits ...... $2.0 to $4.8 $1.8 to $4.4 Total Monetized Health Co-benefits combined with Monetized Climate Benefits d ...... $5.3 to $8.1 $5.1 to $7.7

Final Guidelines, Mass-based Approach, 2025

b PM2.5 precursors: SO2 ...... 185 $6.0 to $13 $5.4 to $12 NOX ...... 203 $0.58 to $1.3 $0.52 to $1.2 Ozone precursor: c NOX (ozone season only) ...... 88 $0.56 to $2.4 $0.56 to $2.4

Total Monetized Health Co-benefits ...... $7.1 to $17 $6.5 to $16 Total Monetized Health Co-benefits combined with Monetized Climate Benefits d ...... $19 to $29 $18 to $27

Final Guidelines, Mass-based Approach, 2030

b PM2.5 precursors: SO2 ...... 280 $10 to $23 $9.0 to $20 NOX ...... 278 $0.87 to $2.0 $0.79 to $1.8 Ozone precursor: c NOX (ozone season only) ...... 121 $0.82 to $3.5 $0.82 to $3.5

Total Monetized Health Co-benefits ...... $12 to $28 $11 to $26 Total Monetized Health Co-benefits combined with Monetized Climate Benefits d ...... $32 to $48 $31 to $46 a All estimates are rounded to two significant figures, so estimates may not sum. It is important to note that the monetized co-benefits do not include reduced health effects from direct exposure to SO2, direct exposure to NO2, exposure to mercury, ecosystem effects or visibility impair- ment. Air pollution health co-benefits are estimated using regional benefit-per-ton estimates for the contiguous U.S. b The monetized PM2.5 co-benefits reflect the human health benefits associated with reducing exposure to PM2.5 through reductions of PM2.5 precursors, such as SO2 and NOX. The co-benefits do not include the benefits of reductions in directly emitted PM2.5. These additional benefits would increase overall benefits by a few percent based on the analyses conducted for the proposed rule. PM co-benefits are shown as a range reflecting the use of two concentration-response functions, with the lower end of the range based on a function from Krewski et al. (2009) and the upper end based on a function from Lepeule et al. (2012). These models assume that all fine particles, regardless of their chemical composi- tion, are equally potent in causing premature mortality because the scientific evidence is not yet sufficient to allow differentiation of effect esti- mates by particle type. c The monetized ozone co-benefits reflect the human health benefits associated with reducing exposure to ozone through reductions of NOX during the ozone season. Ozone co-benefits are shown as a range reflecting the use of several different concentration-response functions, with the lower end of the range based on a function from Bell, et al. (2004) and the upper end based on a function from Levy, et al. (2005). Ozone co-benefits occur in the analysis year, so they are the same for all discount rates. d We estimate climate benefits associated with four different values of a one ton CO2 reduction (model average at 2.5 percent discount rate, 3 percent, and 5 percent; 95th percentile at 3 percent). Referred to as the social cost of carbon, each value increases over time. For the purposes of this table, we show the benefits associated with the model average at 3 percent discount rate, however we emphasize the importance and value of considering the full range of social cost of carbon values. We provide combined climate and health estimates based on additional dis- count rates in the RIA.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00270 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64931

The EPA has used the social cost of provides a complete discussion of the the complete response to comments carbon (SC-CO2) estimates presented in methods used to develop these received on SC-CO2 as part of this the Technical Support Document: estimates and the current TSD presents rulemaking. Technical Update of the Social Cost of and discusses the 2013 update Concurrent with OMB’s publication of Carbon for Regulatory Impact Analysis (including two recent minor corrections the response to comments on SC-CO2 Under Executive Order 12866 (May to the estimates).1053 and announcement of the Academies 2013, Revised June 2015) (‘‘current The EPA received numerous process, OMB posted a revised TSD that TSD’’) to analyze CO2 climate impacts of comments on the SC-CO2 estimates as includes two minor technical this rulemaking.1051 We refer to these part of this rulemaking. The comments corrections to the current estimates. One estimates, which were developed by the covered a wide range of topics including technical correction addressed an U.S. Government, as ‘‘SC-CO2 the technical details of the modeling inadvertent omission of climate change estimates.’’ The SC-CO2 is a metric that conducted to develop the SC-CO2 damages in the last year of analysis estimates the monetary value of impacts estimates, the aggregation and (2300) in one model and the second associated with marginal changes in presentation of the SC-CO2 estimates, addressed a minor indexing error in CO2 emissions in a given year. It and the process by which the SC-CO2 another model. On average the revised includes a wide range of anticipated estimates were derived. Many but not SC-CO2 estimates are one dollar less climate impacts, such as net changes in all commenters were supportive of the than the mean SC-CO2 estimates agricultural productivity and human SC-CO2 and its application to this reported in the November 2013 revision health, property damage from increased rulemaking. Commenters also provided to the May 2013 TSD. The change in the flood risk, and changes in energy system constructive recommendations for estimates associated with the 95th costs, such as reduced costs for heating potential opportunities to improve the percentile estimates when using a 3 and increased costs for air conditioning. SC-CO2 estimates in future updates. percent discount rate is slightly larger, It is typically used to assess the avoided Many of these comments were similar to as those estimates are heavily damages as a result of regulatory actions those that OMB’s Office of Information influenced by the results from the (i.e., benefits of rulemakings that lead to and Regulatory Affairs received in model that was affected by the indexing an incremental reduction in cumulative response to a separate request for public error. comment on the approach used to global CO2 emissions). The EPA, as a member of the IWG on develop the estimates. After careful The SC-CO2 estimates used in this the SC-CO2, has carefully examined and analysis were developed over many evaluation of the full range of comments evaluated the minor technical years, using the best science available, submitted to OMB, the IWG continues corrections in the revised TSD and the and with input from the public. to recommend the use of the SC-CO2 public comments submitted to OMB’s estimates in regulatory impact Specifically, an interagency working separate SC-CO2 comment process. 1054 group (IWG) that included the EPA and analysis. With the release of the Additionally, the EPA has carefully other executive branch agencies and response to comments, the IWG examined and evaluated all comments announced plans to obtain expert offices used three integrated assessment received regarding the SC-CO2 through independent advice from the National models (IAMs) to develop the SC-CO2 this rulemaking process. The EPA estimates and recommended four global Academies of Sciences, Engineering, concurs with the IWG’s conclusion that values for use in regulatory analyses. and Medicine (Academies) to ensure it is reasonable, and scientifically that the SC-CO2 estimates continue to The SC-CO2 estimates were first appropriate, to use the current SC-CO2 released in February 2010 and updated reflect the best available scientific and estimates for purposes of regulatory in 2013 using new versions of each economic information on climate impact analysis, including for this change. The Academies review will be IAM. The 2010 SC-CO2 Technical proceeding. Support Document (2010 TSD) 1052 informed by the public comments The four SC-CO2 estimates are as received and focus on the technical follows: $12, $40, $60, and $120 per 1051 Docket ID EPA–HQ–OAR–2013–0495, merits and challenges of potential short ton of CO2 emissions in the year Technical Support Document: Technical Update of approaches to improving the SC-CO2 2020 (2011$).1055 The first three values the Social Cost of Carbon for Regulatory Impact estimates in future updates. See the EPA are based on the average SC-CO2 from Analysis Under Executive Order 12866, Interagency Response to Comments document for Working Group on Social Cost of Carbon, with the three IAMs, at discount rates of 5, participation by Council of Economic Advisers, 3, and 2.5 percent, respectively. The SC- www.whitehouse.gov/sites/default/files/omb/ Council on Environmental Quality, Department of CO2 value at several discount rates are Agriculture, Department of Commerce, Department inforeg/for-agencies/Social-Cost-of-Carbon-for- included because the literature shows of Energy, Department of Transportation, Domestic RIA.pdf. Policy Council, Environmental Protection Agency, 1053 The current version of the TSD is available that the SC-CO2 is quite sensitive to National Economic Council, Office of Management at: https://www.whitehouse.gov/sites/default/files/ assumptions about the discount rate, and Budget, Office of Science and Technology omb/inforeg/scc-response-to-comments-final-july- and because no consensus exists on the Policy, and Department of the Treasury (May 2013, 2015.pdf, Docket ID EPA–HQ–OAR–2013–0495, appropriate rate to use in an Revised July 2015). Available at: http:// Technical Support Document: Technical Update of www.whitehouse.gov/sites/default/files/omb/ the Social Cost of Carbon for Regulatory Impact intergenerational context (where costs inforeg/scc-tsd-final-july-2015.pdf. Analysis Under Executive Order 12866, Interagency and benefits are incurred by different 1052 Docket ID EPA–HQ–OAR–2009–0472– Working Group on Social Cost of Carbon, with generations). The fourth value is the 114577, Technical Support Document: Social Cost participation by Council of Economic Advisers, 95th percentile of the SC-CO2 from all of Carbon for Regulatory Impact Analysis Under Council on Environmental Quality, Department of Executive Order 12866, Interagency Working Group Agriculture, Department of Commerce, Department three models at a 3 percent discount on Social Cost of Carbon, with participation by the of Energy, Department of Transportation, Domestic Council of Economic Advisers, Council on Policy Council, Environmental Protection Agency, 1055 The current version of the TSD is available Environmental Quality, Department of Agriculture, National Economic Council, Office of Management at: https://www.whitehouse.gov/sites/default/files/ Department of Commerce, Department of Energy, and Budget, Office of Science and Technology omb/inforeg/scc-tsd-final-july-2015.pdf. The 2010 Department of Transportation, Environmental Policy, and Department of Treasury (May 2013, and 2013 TSDs present SC-CO2 in 2007$ per metric Protection Agency, National Economic Council, Revised July 2015). ton. The estimates were adjusted to (1) short tons Office of Energy and Climate Change, Office of 1054 See https://www.whitehouse.gov/omb/oira/ for using conversion factor 0.90718474 and (2) Management and Budget, Office of Science and social-cost-of-carbon for additional details, 2011$ using GDP Implicit Price Deflator, http:// Technology Policy, and Department of Treasury including the OMB Response to Comments and the www.gpo.gov/fdsys/pkg/ECONI-2013-02/pdf/ (February 2010). Also available at: http:// SC-CO2 TSDs. ECONI-2013-02-Pg3.pdf.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00271 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64932 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

rate. It is included to represent higher- to calculate average regional benefit-per- These models assume that all fine than-expected impacts from temperature ton estimates using the health impact particles, regardless of their chemical change further out in the tails of the SC- assumptions used in the PM NAAQS composition, are equally potent in 1057 CO2 distribution (representing less RIA and Ozone NAAQS causing premature mortality because the likely, but potentially catastrophic, RIAs.1058 1059 The three regions were the scientific evidence is not yet sufficient outcomes). Eastern U.S., Western U.S., and to allow differentiation of effect There are limitations in the estimates California. To calculate the co-benefits estimates by particle type. Even though of the benefits from the final emission for the final standards, we multiplied we assume that all fine particles have guidelines, including the omission of the regional benefit-per-ton estimates equivalent health effects, the benefit- climate and other CO2 related benefits generated from modeling of the per-ton estimates vary between PM2.5 that could not be monetized. The 2010 proposed standards by the precursors depending on the location TSD discusses a number of limitations corresponding regional emission and magnitude of their impact on PM2.5 to the SC-CO2 analysis, including the reductions for the final standards.1060 concentrations, which drive population incomplete way in which the IAMs All benefit-per-ton estimates reflect the exposure. capture catastrophic and non- geographic distribution of the modeled It is important to note that the catastrophic impacts, their incomplete emissions for the proposed standards, magnitude of the PM2.5 and ozone co- treatment of adaptation and which may not exactly match the benefits is largely driven by the technological change, uncertainty in the emission reductions in this final concentration response functions for extrapolation of damages to high rulemaking, and thus they may not premature mortality and the value of a temperatures, and assumptions reflect the local variability in population statistical life used to value reductions regarding risk aversion. Currently, IAMs density, meteorology, exposure, baseline in premature mortality. For PM2.5, we do not assign value to all of the health incidence rates, or other local use two key empirical studies, one important impacts of CO2 recognized in factors for any specific location. More based on the American Cancer Society the literature, such as ocean information regarding the derivation of cohort study (Krewski et al., 2009) and acidification or potential tipping points, the benefit-per-ton estimates is available one based on the extended Six Cities for various reasons, including the in the RIA. cohort study (Lepuele et al., 2012). We inherent difficulties in valuing non- PM benefit-per-ton values are present the PM2.5 co-benefits results as market impacts and the fact that the generated using two concentration- a range based on benefit-per-ton science incorporated into these models response functions, Krewski et al. estimates calculated using the understandably lags behind the most (2009) 1061 and Lepeule et al. (2012).1062 concentration-response functions from recent research. Nonetheless, these these two epidemiology studies, but this estimates and the discussion of their 1057 U.S. Environmental Protection Agency (U.S. range does not capture the full range of limitations represent the best available EPA). 2012. Regulatory Impact Analysis for the uncertainty inherent in the co-benefits information about the social benefits of Final Revisions to the National Ambient Air Quality estimates. In the RIA for this rule, which Standards for Particulate Matter. Research Triangle CO2 emission reductions to inform the Park, NC: Office of Air Quality Planning and is available in the docket, we also benefit-cost analysis. As previously Standards, Health and Environmental Impacts include PM2.5 co-benefits estimates noted, the IWG plans to seek Division. (EPA document number EPA–452/R–12– using benefit-per-ton estimates based on 003, December). Available at: . 2 1058 U.S. Environmental Protection Agency (U.S. on premature mortality (Roman et al., 1063 estimates from the Academies. The EPA). 2008b. Final Ozone NAAQS Regulatory 2008) as a characterization of Academies process will help to ensure Impact Analysis. Research Triangle Park, NC: Office uncertainty regarding the PM2.5- that the SC-CO2 estimates used by the of Air Quality Planning and Standards, Health and mortality relationship. federal government continue to reflect Environmental Impacts Division, Air Benefit and For the ozone co-benefits, we present Cost Group Research. (EPA document number EPA– the best available science and 452/R–08–003, March). Available at: . different concentration-response The health co-benefits estimates 1059 U.S. Environmental Protection Agency (U.S. functions for mortality, with the lower represent the total monetized human EPA). 2010. Section 3: Re-analysis of the Benefits of Attaining Alternative Ozone Standards to end of the range based on a benefit-per- health benefits for populations exposed Incorporate Current Methods. Available at: . 1060 using the function from Levy et al. U.S. Environmental Protection Agency. 2013. 1065 final standards. Unlike the global SC- Technical support document: Estimating the benefit (2005). Similar to PM2.5, the range of CO2 estimates, the air pollution health per ton of reducing PM2.5 precursors from 17 ozone co-benefits does not capture the co-benefits are estimated for the sectors. Research Triangle Park, NC: Office of Air full range of inherent uncertainty. contiguous U.S. only. We used a and Radiation, Office of Air Quality Planning and In this analysis, in estimating the Standards, January. Available at: . 1063 create the PM2.5 benefit-per-ton 1061 Krewski D.; M. Jerrett; R.T. Burnett; R. Ma; E. Roman, H., et al. 2008. ‘‘Expert Judgment estimates, we conducted air quality Hughes; Y. Shi, et al. 2009. Extended Follow-up and Assessment of the Mortality Impact of Changes in modeling for an illustrative scenario Spatial Analysis of the American Cancer Society Ambient Fine Particulate Matter in the U.S.’’ Study Linking Particulate Air Pollution and Environmental Science & Technology, Vol. 42, No. reflecting the proposed standards to Mortality. Health Effects Institute. (HEI Research 7, February, pp. 2268–2274. convert precursor emissions into Report number 140). Boston, MA: Health Effects 1064 Bell, M.L., et al. 2004. ‘‘Ozone and Short- changes in ambient PM2.5 and ozone Institute. Available at http://www.healtheffects.org/ Term Mortality in 95 U.S. Urban Communities, concentrations. We then used these air Pubs/RR140-Krewski.pdf. 1987–2000.’’ Journal of the American Medical 1062 Association, 292(19), pp. 2372–8. 1056 Lepeule, J.; F. Laden; D. Dockery; J. Schwartz. quality modeling results in BenMAP 2012. ‘‘Chronic Exposure to Fine Particles and 1065 Levy, J.I., S.M. Chemerynski, and J.A. Sarnat. Mortality: An Extended Follow-Up of the Harvard 2005. ‘‘Ozone exposure and mortality: An empiric 1056 http://www.epa.gov/airquality/benmap/ Six Cities Study from 1974 to 2009.’’ Environmental Bayes metaregression analysis.’’ Epidemiology. index.html. Health Perspective, 120(7), July, pp. 965–970. 16(4): p. 458–68.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00272 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64933

the EPA assumes that the health impact baseline incidence rates, population, A. Executive Order 12866: Regulatory function for fine particles is without a and change in air quality. Planning and Review, and Executive threshold. This is based on the Every benefit analysis examining the Order 13563: Improving Regulation and conclusions of EPA’s Integrated Science potential effects of a change in Regulatory Review 1066 Assessment for Particulate Matter, environmental protection requirements This final action is an economically which evaluated the substantial body of is limited, to some extent, by data gaps, significant regulatory action that was published scientific literature, reflecting model capabilities (such as geographic submitted to the OMB for review. Any thousands of epidemiology, toxicology, coverage) and uncertainties in the changes made in response to OMB and clinical studies that documents the underlying scientific and economic recommendations have been

association between elevated PM2.5 studies used to configure the benefit and documented in the docket. The EPA concentrations and adverse health cost models. Despite these uncertainties, prepared an analysis of the potential effects, including increased premature we believe the air quality co-benefit costs and benefits associated with this mortality. This assessment, which was analysis for this rule provides a action. This analysis, which is twice reviewed by the EPA’s reasonable indication of the expected contained in the ‘‘Regulatory Impact independent Science Advisory Board, health benefits of the air pollution Analysis for Clean Power Plan Final concluded that the scientific literature emission reductions for the illustrative Rule’’ (EPA–452/R–15–003, July 2015), consistently finds that a no-threshold analysis of the final standards under a is available in the docket and is briefly model most adequately portrays the PM- set of reasonable assumptions. This summarized in section XI of this mortality concentration-response analysis does not include the type of preamble. relationship. In general, we are more confident in detailed uncertainty assessment found Consistent with Executive Order the magnitude of the risks we estimate in the 2012 PM2.5 National Ambient Air 12866 and Executive Order 13563, the Quality Standard (NAAQS) RIA (U.S. EPA estimated the costs and benefits for from simulated PM2.5 concentrations that coincide with the bulk of the EPA, 2012) because we lack the illustrative compliance approaches of observed PM concentrations in the necessary air quality input and implementing the guidelines. The final epidemiological studies that are used to monitoring data to conduct a complete rule establishes: (1) Carbon dioxide estimate the benefits. Likewise, we are benefits assessment. In addition, using a (CO2) emission performance rates for less confident in the risk we estimate benefit-per-ton approach adds another two source categories of existing fossil important source of uncertainty to the fuel-fired EGUs, fossil fuel-fired electric from simulated PM2.5 concentrations that fall below the bulk of the observed benefits estimates. The 2012 PM2.5 utility steam generating units and data in these studies. NAAQS benefits analysis provides an stationary combustion turbines, and (2) For this analysis, policy-specific air indication of the sensitivity of our guidelines for the development, quality data are not available,1067 and results to various assumptions. submittal and implementation of state thus, we are unable to estimate the We note that the monetized co- plans that implement the CO2 emission percentage of premature mortality benefits estimates shown here do not performance rates. Actions taken to associated with this specific rule that is include several important benefit comply with the guidelines will also reduce the emissions of directly-emitted above the lowest measured PM2.5 levels categories, including exposure to SO2, PM2.5, SO2 and NOX. The benefits (LML) for the two PM2.5 mortality NOX, and hazardous air pollutants (e.g., epidemiology studies that form the basis mercury and hydrogen chloride), as well associated with these PM2.5, SO2 and for our analysis. As a surrogate measure as ecosystem effects and visibility NOX reductions are referred to as co- of mortality impacts above the LML, we impairment. Although we do not have benefits, as these reductions are not the provide the percentage of the sufficient information or modeling primary objective of this rule. population exposed above the lowest available to provide monetized The EPA has used the social cost of measured PM2.5 level (LML) in each of estimates for this rule, we include a carbon estimates presented in the the two studies, using the estimates of qualitative assessment of these Technical Support Document: baseline projected PM2.5 from the air unquantified benefits in the RIA for the Technical Update of the Social Cost of quality modeling for the proposed final guidelines. In addition, in the RIA Carbon for Regulatory Impact Analysis guidelines used to calculate the benefit- for the final standards, we did not Under Executive Order 12866 (May per-ton estimates for the EGU sector. estimate changes in emissions of 2013, Revised July 2015) (‘‘current Using the Krewski et al. (2009) study, 88 directly emitted particles. As a result, TSD’’) to analyze CO2 climate impacts of this rulemaking. We refer to these percent of the population is exposed to quantified PM2.5 related benefits are annual mean PM2.5 levels at or above the underestimated by a relatively small estimates, which were developed by the LML of 5.8 micrograms per cubic meter amount. In the RIA for the proposed U.S. government, as ‘‘SC-CO2 3 (mg/m ). Using the Lepeule et al. (2012) guidelines, the benefits from reductions estimates.’’ The SC-CO2 is an estimate of study, 46 percent of the population is the monetary value of impacts in directly emitted PM2.5 were less than 3 exposed above the LML of 8 mg/m . It 10 percent of total monetized health co- associated with a marginal change in is important to note that baseline benefits across all scenarios and years. CO2 emissions in a given year. The four exposure is only one parameter in the SC-CO2 estimates are associated with health impact function, along with For more information on the benefits different discount rates (model average analysis, please refer to the RIA for this at 2.5 percent discount rate, 3 percent, 1066 U.S. Environmental Protection Agency. 2009. rule, which is available in the and 5 percent; 95th percentile at 3 Integrated Science Assessment for Particulate rulemaking docket. percent), and each increases over time. Matter (Final Report). Research Triangle Park, NC: National Center for Environmental Assessment, XII. Statutory and Executive Order In this summary, the EPA provides the RTP Division. (EPA document number EPA–600–R– Reviews estimate of climate benefits associated 08–139F, December). Available at: http:// with the SC-CO2 value deemed to be cfpub.epa.gov/ncea/cfm/ Additional information about these central in the current TSD: The model recordisplay.cfm?deid=216546. Statutory and Executive Orders can be 1067 In addition, site-specific emission reductions average at 3 percent discount rate. will depend upon how states implement the found at http://www2.epa.gov/laws- In the final emission guidelines, the guidelines. regulations/laws-and-executive-orders. EPA has translated the source category-

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00273 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64934 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

specific CO2 emission performance rates air pollution health co-benefits in 2020 and compliance costs) in 2025 are into equivalent state-level rate-based are estimated to be $2.0 billion to $4.8 estimated to range from $17 billion to and mass-based CO2 goals in order to billion (2011$) for a 3 percent discount $27 billion (2011$) for the rate-based maximize the range of choices that rate and $1.8 billion to $4.4 billion approach and $16 billion to $26 billion states will have in developing their (2011$) for a 7 percent discount rate. (2011$) for the mass-based approach, plans. Because of the range of choices The annual, illustrative compliance using a 3 percent discount rate (model available to states and the lack of a costs estimated by IPM and inclusive of average). priori knowledge about the specific demand-side EE program and The EPA estimates that, in 2030, the choices states will make in response to participant costs and MRR costs in final guidelines will yield monetized the final goals, the Regulatory Impact 2020, are approximately $2.5 billion for climate benefits (in 2011$) of Analysis (RIA) for this rule analyzed the rate-based approach and $1.4 billion approximately $20 billion for the rate- two implementation scenarios designed for the mass-based approach (2011$). based approach and $20 billion for the to achieve these goals, which we term The quantified net benefits (the mass-based approach (3 percent model the ‘‘rate-based’’ illustrative plan difference between monetized benefits average). For the rate-based approach, approach and the ‘‘mass-based’’ and compliance costs) in 2020 are the air pollution health co-benefits in illustrative plan approach. estimated to range from $1.0 billion to 2030 are estimated to be $14 billion to It is very important to note that the $2.1 billion (2011$) for the rate-based $34 billion (2011$) for a 3 percent differences between the analytical approach and from $3.9 billion to 6.7 discount rate and $13 billion to $31 results for the rate-based and mass- billion (2011$) for the mass-based billion (2011$) for a 7 percent discount based illustrative plan approaches approach, using a 3 percent discount rate. For the mass-based approach, the presented in the RIA may not be rate (model average). air pollution health co-benefits in 2030 indicative of likely differences between The EPA estimates that, in 2025, the are estimated to be $12 billion to $28 the approaches if implemented by states final guidelines will yield monetized billion (2011$) for a 3 percent discount and affected EGUs in response to the climate benefits (in 2011$) of rate and $11 billion to $26 billion final guidelines. Rather, the two sets of approximately $10 billion for the rate- (2011$) for a 7 percent discount rate. analyses are intended to illustrate two based approach and $12 billion for the The annual, illustrative compliance different approaches to accomplish the mass-based approach (3 percent model costs estimated by IPM and inclusive of emission performance rates finalized in average). For the rate-based approach, demand-side EE program and the Clean Power Plan Final Rule. In the air pollution health co-benefits in participant costs and MRR costs in other words, if one approach performs 2025 are estimated to be $7.4 billion to 2030, are approximately $8.4 billion for differently than the other on a given $18 billion (2011$) for a 3 percent the rate-based approach and $5.1 billion metric during a given time period, this discount rate and $6.7 billion to $16 for the mass-based approach (2011$). does not imply this will apply in all billion (2011$) for a 7 percent discount The quantified net benefits (the instances in all time periods in all rate. For the mass-based approach, the difference between monetized benefits places. air pollution health co-benefits in 2025 and compliance costs) in 2030 are The EPA estimates that, in 2020, the are estimated to be $7.1 billion to $17 estimated to range from $26 billion to final guidelines will yield monetized billion (2011$) for a 3 percent discount $45 billion (2011$) for the rate-based climate benefits (in 2011$) of rate and $6.5 billion to $16 billion approach and from $26 billion to $43 approximately $2.8 billion for the rate- (2011$) for a 7 percent discount rate. billion (2011$) for the mass-based based approach and $3.3 billion for the The annual, illustrative compliance approach, using a 3 percent discount mass-based approach (3 percent model costs estimated by IPM and inclusive of rate (model average). average). For the rate-based approach, demand-side EE program and Tables 20 and 21 provide the the air pollution health co-benefits in participant costs and MRR costs in estimates of the climate benefits, health 2020 are estimated to be $0.7 billion to 2025, are approximately $1.0 billion for co-benefits, compliance costs and net $1.8 billion (2011$) for a 3 percent the rate-based approach and $3.0 billion benefits of the final emission guidelines discount rate and $0.64 billion to $1.7 for the mass-based approach (2011$). for rate-based and mass-based billion (2011$) for a 7 percent discount The quantified net benefits (the illustrative plan approaches, rate. For the mass-based approach, the difference between monetized benefits respectively.

TABLE 21—SUMMARY OF THE MONETIZED BENEFITS, COMPLIANCE COSTS, AND NET BENEFITS FOR THE FINAL GUIDELINES IN 2020, 2025 AND 2030 UNDER THE RATE-BASED ILLUSTRATIVE PLAN APPROACH [Billions of 2011$] a

Rate-based approach 2020 2025 2030

Climate Benefits b 5% discount rate ...... $0.80 $3.1 $6.4 3% discount rate ...... $2.8 $10 $20 2.5% discount rate ...... $4.1 $15 $29 95th percentile at 3% discount rate ...... $8.2 $31 $61

Air Quality Co-benefits Discount Rate

3% ...... 7% ...... 3% ...... 7% ...... 3% ...... 7% Air Quality Health Co-benefits c ...... $0.70 to $1.8 $0.64 to $1.7 $7.4 to $18 ... $6.7 to $16 ... $14 to $34 .... $13 to $31

Compliance Costs d ...... $2.5 $1.0 $8.4

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00274 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64935

Net Benefits e ...... $1.0 to $2.1 .. $1.0 to $2.0 .. $17 to $27 .... $16 to $25 .... $26 to $45 .... $25 to $43

Non-Monetized Benefits ...... Non-monetized climate benefits. Reductions in exposure to ambient NO2 and SO2. Reductions in mercury deposition. Ecosystem benefits associated with reductions in emissions of NOX, SO2, PM, and mercury. Visibility impairment. a All are rounded to two significant figures, so figures may not sum. b The climate benefit estimate in this summary table reflects global impacts from CO2 emission changes and does not account for changes in non-CO2 GHG emissions. Also, different discount rates are applied to SC-CO2 than to the other estimates because CO2 emissions are long-lived and subsequent damages occur over many years. The benefit estimates in this table are based on the average SC-CO2 estimated for a 3 per- cent discount rate. However, we emphasize the importance and value of considering the full range of SC-CO2 values. As shown in the RIA, cli- mate benefits are also estimated using the other three SC-CO2 estimates (model average at 2.5 percent discount rate, 3 percent, and 5 percent; 95th percentile at 3 percent). The SC-CO2 estimates are year-specific and increase over time. c The air pollution health co-benefits reflect reduced exposure to PM2.5 and ozone associated with emission reductions of SO2 and NOX. The range reflects the use of concentration-response functions from different epidemiology studies. The co-benefits do not include the benefits of re- ductions in directly emitted PM2.5. These additional benefits would increase overall benefits by a few percent based on the analyses conducted for the proposed rule. The reduction in premature fatalities each year accounts for over 98 percent of total monetized co-benefits from PM2.5 and ozone. These models assume that all fine particles, regardless of their chemical composition, are equally potent in causing premature mortality because the scientific evidence is not yet sufficient to allow differentiation of effect estimates by particle type. d Total costs are approximated by the illustrative compliance costs estimated using the Integrated Planning Model for the final guidelines and a discount rate of approximately 5 percent. This estimate includes monitoring, recordkeeping, and reporting costs and demand-side EE program and participant costs. e The estimates of net benefits in this summary table are calculated using the global SC-CO2 at a 3 percent discount rate (model average). The RIA includes combined climate and health estimates based on additional discount rates.

TABLE 22—SUMMARY OF THE MONETIZED BENEFITS, COMPLIANCE COSTS, AND NET BENEFITS FOR THE FINAL GUIDELINES IN 2020, 2025 AND 2030 UNDER THE MASS-BASED ILLUSTRATIVE PLAN APPROACH [Billions of 2011$] a

Mass-based approach 2020 2025 2030

Climate Benefits b 5% discount rate ...... $0.9 $3.6 $6.4 3% discount rate ...... $3.3 $12 $20 2.5% discount rate ...... $4.9 $17 $29 95th percentile at 3% discount rate ...... $9.7 $35 $60

Air Quality Co-benefits Discount Rate

3% ...... 7% ...... 3% ...... 7% ...... 3% ...... 7% Air Quality Health Co-benefits c ...... $2.0 to $4.8 .. $1.8 to $4.4 .. $7.1 to $17 ... $6.5 to $16 ... $12 to $28 .... $11 to $26

Compliance Costs d ...... $1.4 $3.0 $5.1

Net Benefits e ...... $3.9 to $6.7 .. $3.7 to $6.3 .. $16 to $26 .... $15 to $24 .... $26 to $43 .... $25 to $40

Non-Monetized Benefits ...... Non-monetized climate benefits. Reductions in exposure to ambient NO2 and SO2. Reductions in mercury deposition. Ecosystem benefits associated with reductions in emissions of NOX, SO2, PM, and mercury. Visibility improvement. a All are rounded to two significant figures, so figures may not sum. b The climate benefit estimate in this summary table reflects global impacts from CO2 emission changes and does not account for changes in non-CO2 GHG emissions. Also, different discount rates are applied to SC-CO2 than to the other estimates because CO2 emissions are long-lived and subsequent damages occur over many years. The benefit estimates in this table are based on the average SC-CO2 estimated for a 3 per- cent discount rate. However, we emphasize the importance and value of considering the full range of SC-CO2 values. As shown in the RIA, cli- mate benefits are also estimated using the other three SC-CO2 estimates (model average at 2.5 percent discount rate, 3 percent, and 5 percent; 95th percentile at 3 percent). The SC-CO2 estimates are year-specific and increase over time. c The air pollution health co-benefits reflect reduced exposure to PM2.5 and ozone associated with emission reductions of SO2 and NOX. The co-benefits do not include the benefits of reductions in directly emitted PM2.5. These additional benefits would increase overall benefits by a few percent based on the analyses conducted for the proposed rule. The range reflects the use of concentration-response functions from different epidemiology studies. The reduction in premature fatalities each year accounts for over 98 percent of total monetized co-benefits from PM2.5 and ozone. These models assume that all fine particles, regardless of their chemical composition, are equally potent in causing premature mortality because the scientific evidence is not yet sufficient to allow differentiation of effect estimates by particle type. d Total costs are approximated by the illustrative compliance costs estimated using the Integrated Planning Model for the final guidelines and a discount rate of approximately 5 percent. This estimate includes monitoring, recordkeeping, and reporting costs and demand-side EE program and participant costs. e The estimates of net benefits in this summary table are calculated using the global SC-CO2 at a 3 percent discount rate (model average). The RIA includes combined climate and health estimates based on additional discount rates.

There are additional important modeling limitations, our estimates of impacts like ocean acidification or benefits that the EPA could not the benefits from reducing CO2 potential tipping points in natural or monetize. Due to current data and emissions do not include important managed ecosystems. Unquantified

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00275 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64936 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

benefits also include climate benefits implementing, and enforcing a plan to arising when the EPA establishes from reducing emissions of non-CO2 limit CO2 emissions from existing NAAQS, which do not impose any GHGs (e.g., nitrous oxide and methane) sources in the utility power sector. requirements on regulated entities. As and co-benefits from reducing direct These recordkeeping and reporting here, any impact of a NAAQS on small exposure to SO2, NOX and hazardous air requirements are specifically authorized entities would only arise when states pollutants (e.g., mercury), as well as by CAA section 114 (42 U.S.C. 7414). take subsequent action to maintain and/ from reducing ecosystem effects and All information submitted to the EPA or achieve the NAAQS through their visibility impairment. Based upon the pursuant to the recordkeeping and SIPs. See American Trucking Assoc. v. foregoing discussion, it remains clear reporting requirements for which a EPA, 175 F.3d 1029, 1043–45 (D.C. Cir. that the benefits of this final action are claim of confidentiality is made is 1999) (NAAQS do not have significant substantial, and far exceed the costs. safeguarded according to agency impacts upon small entities because Additional details on benefits, costs, policies set forth in 40 CFR part 2, NAAQS themselves impose no and net benefits estimates are provided subpart B. regulations upon small entities). in this RIA. The annual burden for this collection Nevertheless, the EPA is aware that of information for the states (averaged there is substantial interest in the rule B. Paperwork Reduction Act (PRA) over the first 3 years following among small entities and, as detailed in The information collection promulgation) is estimated to be a range section III.A of the preamble to the requirements in this rule have been of 505,000 to 821,000 hours at a total proposed carbon pollution emission submitted for approval to OMB under annual labor cost of $35.8 to $58.1 guidelines for existing EGUs (79 FR the PRA. The Information Collection million. The lower bound estimate 34845–34847; June 18, 2014) and in Request (ICR) document prepared by the reflects the assumption that some states section II.D of the preamble to the EPA has been assigned the EPA ICR already have EE and RE programs in proposed carbon pollution emission number 2503.02. You can find a copy of place. The higher bound estimate guidelines for existing EGUs in Indian the ICR in the docket for this rule, and reflects the overly-conservative Country and U.S. Territories (79 FR it is briefly summarized here. The assumption that no states have EE and 65489; November 4, 2014), has information collection requirements are RE programs in place. conducted an unprecedented amount of not enforceable until OMB approves The total annual burden for the stakeholder outreach. As part of that them. federal government associated with the outreach, agency officials participated This rule does not directly impose state collection of information (averaged in many meetings with individual specific requirements on EGUs located over the first 3 years following utilities and electric utility associations, in states or areas of Indian country. The promulgation) is estimated to be 54,000 as well as industry leaders and trade rule also does not impose specific hours at a total annual labor cost of association representatives from various requirements on tribal governments that $3.00 million. Burden is defined at 5 industries. While formulating the have affected EGUs located in their area CFR 1320.3(b). provisions of the rule, the EPA of Indian country. For areas of Indian An agency may not conduct or considered the input provided over the country, the rule establishes CO2 sponsor, and a person is not required to course of the stakeholder outreach as emission performance goals that could respond to, a collection of information well as the input provided in the many be addressed through either tribal or unless it displays a currently valid OMB public comments. federal plans. A tribe would have the control number. The OMB control opportunity under the Tribal Authority numbers for the EPA’s regulations in 40 D. Unfunded Mandates Reform Act (UMRA) Rule (TAR), but not the obligation, to CFR are listed in 40 CFR part 9. When apply to the EPA for Treatment as State OMB approves this ICR, the agency will This action does not contain an (TAS) for purposes of a CAA section announce that approval in the Federal unfunded mandate of $100 million or 111(d) plan and, if approved by the Register and publish a technical more as described in UMRA, 2 U.S.C. EPA, to establish a CAA section 111(d) amendment to 40 CFR part 9 to display 1531–1538, and does not significantly or plan for its area of Indian country. To the OMB control number for the uniquely affect small governments. The date, no tribe has requested or obtained approved information collection emission guidelines do not impose any TAS eligibility for purposes of a CAA activities contained in this final rule. direct compliance requirements on section 111(d) plan. For areas of Indian EGUs located in states or areas of Indian country with affected EGUs where a C. Regulatory Flexibility Act (RFA) country. As explained in section XII.B tribe has not applied for TAS and I certify that this action will not have above, the rule also does not impose submitted any needed plan, if the EPA a significant economic impact on a specific requirements on tribal determines that a CAA section 111(d) substantial number of small entities governments that have affected EGUs plan is necessary or appropriate, the under the RFA. This action will not located in their area of Indian country. EPA would have the responsibility to impose any requirements on small The rule does impose specific establish the plans. Because tribes are entities. Specifically, emission requirements on state governments that not required to implement section guidelines established under CAA have affected EGUs. Specifically, states 111(d) plans and because no tribe has section 111(d) do not impose any are required to develop plans to yet sought TAS eligibility for this requirements on regulated entities and, implement the guidelines under CAA purpose, this action is not anticipated to thus, will not have a significant section 111(d) for affected EGUs. The impose any information collection economic impact upon a substantial burden for states to develop CAA burden on tribal governments over the number of small entities. After emission section 111(d) plans in the 3-year period 3-year period covered by this ICR. guidelines are promulgated, states following promulgation of the rule was This rule does impose specific establish emission standards on existing estimated and is listed in section XII.B requirements on state governments with sources, and it is those requirements above, but this burden is estimated to be affected EGUs. The information that could potentially impact small below $100 million in any one year. collection requirements are based on the entities. Thus, this rule is not subject to the recordkeeping and reporting burden Our analysis here is consistent with requirements of section 202 or section associated with developing, the analysis of the analogous situation 205 of the UMRA.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00276 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64937

This rule is also not subject to the and existing sources. The EPA invited achieving reductions that encompassed requirements of section 203 of UMRA the following 10 national organizations the building blocks, the BSER, and because it contains no regulatory representing state and local elected associated timing for achievement of requirements that might significantly or officials to a meeting on April 12, 2011, interim CO2 levels. State commenters, in uniquely affect small governments. in Washington, DC: (1) National particular, identified changes to the Specifically, the state governments to Governors Association; (2) National stringency of the building blocks, which rule requirements apply are not Conference of State Legislatures, (3) concerns with the timeframe over which considered small governments. Council of State Governments, (4) reductions must be achieved, and In light of the interest among National League of Cities, (5) U.S. concerns with the approaches and governmental entities, the EPA Conference of Mayors, (6) National measures used for the BSER. For the conducted outreach with national Association of Counties, (7) final rule, in response to stakeholder organizations representing state and International City/County Management comments, the EPA has made local elected officials and tribal Association, (8) National Association of refinements to the building blocks, the governmental entities while formulating Towns and Townships, (9) County period of time over which measures are the provisions of this rule. Sections III.A Executives of America, and (10) deployed, and the stringency of and XI.F of the preamble to the Environmental Council of States. The emission limitations that those proposed carbon pollution emission National Association of Clean Air measures can achieve in a practical and guidelines for existing EGUs (79 FR Agencies also participated. On February reasonable cost way. The final BSER 34845–34847; June 18, 2014) and 26, 2014, the EPA re-engaged with those reflects those refinements. sections II.D and VI.F of the preamble to governmental entities to provide a pre- To many commenters, the proposal’s the proposed carbon pollution emission proposal update on the emission 2020 compliance date, together with the guidelines for existing EGUs in areas of guidelines for existing EGUs and stringency of the interim CO2 goal, bore Indian Country and U.S. Territories (79 emission standards for modified and significant reliability implications. In FR 65489; November 4, 2014) describes reconstructed EGUs. In addition, as this final rule, the agency is addressing the extensive stakeholder outreach the described in section III.A of the those concerns via adjustments to the EPA has conducted on setting emission preamble to the proposed carbon compliance timeframe (an 8-year guidelines for existing EGUs. The EPA pollution emission guidelines for interim period that begins in 2022) and considered the input provided over the existing EGUs (79 FR 34845–34847; to the approach for meeting interim CO course of the stakeholder outreach as 2 June 18, 2014), extensive stakeholder emission performance rates (a glide path well as the input provided in the many outreach conducted by the EPA allowed separated into three steps, 2022–2024, public comments when developing the state leaders, including governors, state 2025–2027, and 2028–2029), as well as provisions of these emission guidelines. attorneys general, environmental a more gradual phase in of the emission E. Executive Order 13132: Federalism commissioners, energy officers, public reduction expectations. These utility commissioners, and air directors, The EPA has concluded that this adjustments provide more time for opportunities to engage with EPA planning, consultation and decision action may have federalism officials and provide input regarding making in the formulation of state plans implications, pursuant to agency policy reducing carbon pollution from power and in EGUs’ choices of compliance for implementing the Order, because it plants. imposes substantial direct compliance In the spirit of Executive Order 13132, strategies. The final rule also retains costs on state or local governments, and and consistent with the EPA’s policy to flexibilities presented in the proposal the federal government will not provide promote communications between the and offers additional opportunities, the funds necessary to pay those costs. EPA and state and local governments, including opportunities for trading As discussed in the Supporting the EPA specifically solicited comment within and between states, and other Statement found in the docket for this on the proposed action from state and multi-state compliance approaches that rulemaking, the development of state local officials. The EPA received will further support electric system plans will entail many hours of staff comments from over 400 entities reliability. The EPA is also requiring time to develop and coordinate representing state and local each state to demonstrate in its final programs for compliance with the rule, governments. state that it has considered electric as well as time to work with state Several themes emerged from state system reliability issues in developing legislatures as appropriate, to develop a and local government comments. its plan—and is providing the time to do plan submittal. Consistent with this Commenters raised concerns with the so. Even with this foundation of determination, the EPA provides the building blocks that comprise the best flexibility in place, these final following federalism summary impact system of emission reduction (BSER), guidelines further provide states with statement. including the stringency of the building the option of proposing amendments to The EPA consulted with state and blocks, and the timing of achieving approved plans in the event that local officials early in the process of interim CO2 levels. They also identified unanticipated and significant reliability developing the proposed action to the potential for electric system challenges arise. permit them to have meaningful and reliability issues and stranded assets Commenters provided compelling timely input into its development. As due to the proposed timeframe for plan information indicating that it will take described in the Federalism discussion submittals and CO2 emission longer than the agency initially in the preamble to the proposed reductions. In addition, states anticipated to for states to complete the standards of performance for GHG commented on state plan development tasks necessary to finalize a state plan, emissions from new EGUs (79 FR 1501; and implementation topics, including including administrative and potential January 8, 2014), the EPA consulted state plan approaches, early actions, legislative processes. Recognizing this, with state and local officials in the trading programs, interstate crediting for as well as the urgent need for actions to process of developing the proposed RE, and EPA guidance and outreach. reduce GHG emissions, the EPA is standards for newly constructed EGUs. Commenters identified overarching requiring states to make an initial This outreach addressed planned concerns regarding the stringency of the submittal by September 6, 2016, and is actions for new, reconstructed, modified CO2 goals and the timeframe for allowing states two additional years to

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00277 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64938 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

submit a final plan, if justified (to be In their comments, many states F. Executive Order 13175: Consultation submitted by September 6, 2018). identified the need for the EPA to and Coordination With Indian Tribal States commented on state plan provide guidance, including guidance Governments development and implementation topics on RE and EE emission measurement that included state plan approaches, and verification (EM&V), and to This action has tribal implications. early actions being taken into account, maintain regular contact/forums with However, it will neither impose trading programs being allowed, states throughout the implementation substantial direct compliance costs on interstate crediting for RE being process. To provide state and local federally recognized tribal governments, allowed, and guidance and outreach governments and other stakeholders nor preempt tribal law. Tribes are not being provided by the EPA. For the state with an understanding of the rule required to develop or adopt CAA plan approaches, commenters expressed requirements, and to provide programs, but they may apply to the concerns with the proposed ‘‘portfolio efficiencies where possible and reduce EPA for treatment in a manner similar approach’’ for state plans, including the cost and administrative burden, the to states (TAS) and, if approved, do so. concerns with enforceability of EPA will continue outreach throughout As a result, tribes are not required to requirements, and identified a ‘‘state the plan development and submittal develop plans to implement the commitment approach’’ with backstop process. Outreach will include guidelines under CAA section 111(d) for measures as an option for state plans. In opportunities for states to participate in affected EGUs in their areas of Indian this final rule, in response to briefings, teleconferences, and meetings country. To the extent that a tribal stakeholder comments on the portfolio about the final rule. The EPA’s 10 government seeks and attains TAS approach and alternative approaches, regional offices will continue to be the status for that purpose, these emission the EPA is finalizing a ‘‘state measures’’ entry point for states and tribes to ask guidelines would require that planning approach that includes a requirement technical and policy questions. The requirements be met and emission for the inclusion of backstop measures. agency will host (or partner with management implementation plans be State commenters supported executed by the tribes. The EPA notes providing incentives for states and appropriate groups to co-host) a number of webinars about various components that this rule does not directly impose utilities to deploy CO2-reducing of the final rule during the first two specific requirements on affected EGUs, investments, such as RE and demand- including those located in areas of side EE measures, as early as possible. months after the final rule is issued. The EPA will use information from this Indian country, but provides guidance The EPA recognizes the value of such to any tribe approved by the EPA to early actions, and in this final rule is outreach process to inform the training address CO2 emissions from EGUs establishing the CEIP to provide and other tools that will be of most use to the states and tribes that are subject to section 111(d) of the CAA. opportunities for investment in RE and The EPA also notes that none of the demand-side EE projects that deliver implementing the final rule. The EPA expects to issue guidance on specific affected EGUs are owned or operated by results in 2020 and/or 2021. tribal governments. Many state commenters supported the topics, including evaluation, use of mass-based and rate-based measurement and verification (EM&V) As described in sections III.A and emission trading programs in state for RE and demand-side EE, state- XI.F of the preamble to the proposed plans, including interstate emission community engagement, and resources carbon pollution emission guidelines for trading programs. The EPA also and financial assistance for RE and existing EGUs (79 FR 34845–34847; received a number of comments from demand-side EE. As guidance June 18, 2014) and sections II.D and states and stakeholders about the value documents, tools, templates and other VI.F of the preamble to the proposed of EPA support in developing and/or resources become available, the EPA, in carbon pollution emission guidelines for administering tracking systems to consultation with the U.S. Department existing EGUs in Indian Country and support state administration of rate- of Energy and other federal agencies, U.S. Territories (79 FR 65489; November based and mass-based emission trading will continue to make these resources 4, 2014), the rule was developed after programs. In this final rule, states may available via a dedicated Web site. extensive and vigorous outreach to use trading or averaging approaches and tribal governments. These tribes A list of the state and local expressed varied points of view. Some technologies or strategies that are not government commenters has been explicitly mentioned in any of the three tribes raised concerns about the impacts provided to OMB and has been placed building blocks as part of their overall of the regulations on EGUs located in in the docket for this rulemaking. In plans, as long as they achieve the their areas of Indian country and the addition, the detailed response to required emission reductions from subsequent impact on jobs and revenue comments from these entities is affected fossil-fuel-fired EGUs. In for their tribes. Other tribes expressed contained in the EPA’s response to addition, in response to concerns from concern about the impact the states and power companies that the comments document on this final regulations would have on the cost of need for up-front interstate cooperation rulemaking, which has also been placed water covered under treaty to their in developing multi-state plans could in the docket for this rulemaking. communities as a result of increased inhibit the development of interstate As required by section 8(a) of costs to the EGU that provide energy to programs that could lower cost, the final Executive Order 13132, the EPA transport the water to the tribes. Other rule provides additional options to included a certification from its tribes raised concerns about the impacts allow individual EGUs to use creditable Federalism Official stating that the EPA of climate change on their communities, out-of-state reductions to achieve had met the Executive Order’s resources, ways of life and hunting and required CO2 reductions, without the requirements in a meaningful and treaty rights. The tribes were also need for up-front interstate agreements. timely manner when it sent the draft of interested in the scope of the guidelines The EPA is committed to working with this final action to OMB for review being considered by the agency (e.g., states to provide support for tracking of pursuant to Executive Order 12866. A over what time period, relationship to emissions and allowances or credits, to copy of the certification is included in state and multi-state plans) and how help implement multi-state trading or the public version of the official record tribes will participate in these planning averaging approaches. for this final action. activities.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00278 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64939

The EPA consulted with tribal proposal should clarify that RE projects rulemaking. As required by section 7(a), officials under the EPA Policy on located within the Navajo Nation that the EPA’s Tribal Consultation Official Consultation and Coordination with provide electricity outside the Navajo has certified that the requirements of the Indian Tribes early in the process of Nation should be counted toward executive order have been met in a developing this action to permit them to meeting the relevant state’s RE goals meaningful and timely manner. A copy have meaningful and timely input into under the Clean Power Plan. of the certification is included in the its development. A summary of that After issuing the supplemental docket for this action. consultation follows. proposal, the EPA held additional G. Executive Order 13045: Protection of Prior to issuing the supplemental consultation with tribes. On November Children From Environmental Health proposal on November 4, 2014, the EPA 18, 2014, the EPA held consultations Risks and Safety Risks consulted with tribes as follows. The with the following tribes: Fort EPA held a consultation with the Ute McDowell Yavapai Nation, Fort Mojave This action is subject to Executive Tribe, the Crow Nation, and the Tribe, Hopi Tribe, Navajo Nation, and Order 13045 (62 FR 19885, April 23, Mandan, Hidatsa, Arikara (MHA) Nation Ak-Chin Indian Community. A 1997) because it is an economically on July 18, 2014. On August 22, 2014, consultation with the Ute Indian Tribe significant regulatory action as defined the EPA held a consultation with the of the Uintah and Ouray Reservation by Executive Order 12866, and the EPA Fort Mojave Tribe. On September 15, was held on December 16, 2014 and believes that the environmental health 2014, the EPA held a consultation with with the Gila River Indian Community or safety risk addressed by this action the Navajo Nation. The Navajo Nation on January 15, 2015. The Navajo Nation has a disproportionate effect on sent a letter to the EPA on September reiterated the concerns raised during the children. Accordingly, the agency has 18, 2014, summarizing the information previous consultation. Several tribes evaluated the environmental health and presented at the consultation and the also again indicated that they wanted to welfare effects of climate change on Navajo Nation’s position on the ensure they would be included in the children. supplemental proposal. One issue raised development of any tribal or federal CO2 is a potent GHG that contributes by tribal officials was the potential plans for areas of Indian country. The to climate change and is emitted in impacts of the June 18, 2014 proposal Fort Mojave Tribe and the Navajo significant quantities by fossil fuel-fired and the supplemental proposal on tribes Nation expressed concern with using power plants. The EPA believes that the with budgets that are dependent on data from 2012 as the basis for the goal CO2 emission reductions resulting from revenue from coal mines and power for their areas of Indian country; in their implementation of these final plants, as well as employment at the view, that year was not representative guidelines, as well as substantial ozone mines and power plants. The tribes for the affected EGU. On April 28, 2015, and PM2.5 emission reductions as a co- noted the high unemployment rates and the EPA held an additional consultation benefit, will further improve children’s lack of access to basic services on their with the Navajo Nation. The issues health. lands. Tribal officials also asked raised by the Navajo Nation during the The assessment literature cited in the whether the rules will have any impact consultation included whether the EPA EPA’s 2009 Endangerment Finding on a tribe’s ability to seek TAS. Tribal has the authority to set less stringent concluded that certain populations and officials also expressed interest in standards on a case-by-case basis, and a lifestages, including children, the agency actions with regard to facilitating suggested ‘‘parity glide path’’ that elderly, and the poor, are most power plant compliance with regulatory would account and adjust for the very vulnerable to climate-related health requirements. The Navajo Nation made low electricity usage by the Navajo effects. The assessment literature since the following recommendations in their Nation and promote Navajo Nation 2009 strengthens these conclusions by letter of September 18, 2014: The Navajo economic growth and demand. providing more detailed findings Nation supports a mass-based CO2 Furthermore, on July 7, 2015 the EPA regarding these groups’ vulnerabilities emission standard based on the highest conducted an additional consultation and the projected impacts they may historical CO2 emissions since 1996; the with the Navajo Nation. One of the goals experience. Navajo Nation requests that the EPA of the consultation was for the new These assessments describe how grant the Navajo Nation carbon credits government of the Navajo Nation to children’s unique physiological and and that the Navajo Nation retains deepen their understanding of the developmental factors contribute to ownership and control of such credits; rulemaking. The questions raised by the making them particularly vulnerable to building block 2 is not appropriate for nation had to do with goal setting and climate change. Impacts to children are the Navajo Nation because there are no carbon credits, the timing of the expected from heat waves, air pollution, NGCC plants located on the Navajo rulemaking, and the proposed federal infectious and waterborne illnesses, and Nation; building block 3 is not plan. Additionally, on July 14, 2015 the mental health effects resulting from appropriate for the Navajo Nation EPA conducted an additional extreme weather events. In addition, because the Navajo people already consultation with the Fort Mojave Tribe. children are among those especially receive virtually all of their electricity The Fort Mojave tribes expressed susceptible to most allergic diseases, as from carbon-free sources (mostly concerns that 2012 is not a well as health effects associated with hydroelectric power) and their use of representative year, that natural gas- heat waves, storms, and floods. electricity is negligible compared to the fired combined cycle power plants Additional health concerns may arise in generation at the power plants; building should be treated differently from coal- low income households, especially block 4 is not appropriate for the Navajo fired power plants, and that the those with children, if climate change Nation because of the inadequate access proposed goal for Fort Mojave was not reduces food availability and increases to electricity, and the goal should allow appropriate. Additionally, they also prices, leading to food insecurity within for an increase in energy consumption expressed interest in being engaged in households. on the Navajo Nation; the supplemental the federal plan process. Responses to More detailed information on the proposal should consider the useful life these comments and others received are impacts of climate change to human of the power plants located on the available in the Response to Comment health and welfare is provided in Navajo Nation; and the supplemental Document that is in the docket for this section II.A of this preamble.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00279 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64940 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

H. Executive Order 13211: Actions and welfare impacts from GHG impacts, including coastal erosion and Concerning Regulations That emissions that were detailed in the 2009 shifts in the range or abundance of wild Significantly Affect Energy Supply, Endangerment Finding under CAA species crucial to their livelihoods and Distribution, or Use section 202(a)(1).1068 As part of the well-being. The most recent assessments continue This action, which is a significant Endangerment Finding, the to strengthen scientific understanding of regulatory action under EO 12866, is Administrator considered climate change risks to minority populations climate change risks to minority likely to have a significant effect on the and low-income populations, finding populations and low-income supply, distribution, or use of energy. that certain parts of the population may populations in the U.S.1069 The new The EPA has prepared a Statement of be especially vulnerable based on their assessment literature provides more Energy Effects for this action as follows. characteristics or circumstances. detailed findings regarding these We estimate a 1 to 2 percent change in Populations that were found to be populations’ vulnerabilities and retail electricity prices on average across particularly vulnerable to climate projected impacts they may experience. the contiguous U.S. in 2025, and a 22 change risks include the poor, the In addition, the most recent assessment to 23 percent reduction in coal-fired elderly, the very young, those already in reports provide new information on electricity generation as a result of this poor health, the disabled, those living how some communities of color (more rule. The EPA projects that utility power alone, and/or indigenous populations specifically, populations defined jointly sector delivered natural gas prices will dependent on one or a few resources. by ethnic/racial characteristics and increase by up to 2.5 percent in 2030. See sections XII.F and XII.G, above, geographic location) may be uniquely For more information on the estimated where the EPA discusses Consultation vulnerable to climate change health energy effects, please refer to the and Coordination with Tribal impacts in the U.S. These reports find economic impact analysis for this Governments and Protection of that certain climate change related proposal. The analysis is available in Children. The Administrator placed impacts—including heat waves, the RIA, which is in the public docket. weight on the fact that certain groups, degraded air quality, and extreme I. National Technology Transfer and including children, the elderly, and the weather events—have disproportionate Advancement Act (NTTAA) poor, are most vulnerable to climate- effects on low-income populations and some communities of color, raising This rulemaking does not involve related health effects. The record for the 2009 environmental justice concerns. Existing technical standards. Endangerment Finding summarizes the health disparities and other inequities J. Executive Order 12898: Federal strong scientific evidence in the major in these communities increase their Actions To Address Environmental assessment reports by the U.S. Global vulnerability to the health effects of Justice in Minority Populations and Change Research Program (USGCRP), climate change. In addition, assessment Low-Income Populations the Intergovernmental Panel on Climate reports also find that climate change poses particular threats to health, well- Executive Order 12898 (59 FR 7629; Change (IPCC), and the National Research Council (NRC) of the National being, and ways of life of indigenous February 16, 1994) establishes federal peoples in the U.S. executive policy on environmental Academies that the potential impacts of climate change raise environmental As the scientific literature presented justice. Its main provision directs above and as the 2009 Endangerment federal agencies, to the greatest extent justice issues. These reports concluded that poor communities can be especially Finding illustrates, low income practicable and permitted by law, to populations and some communities of make environmental justice part of their vulnerable to climate change impacts because they tend to have more limited color are especially vulnerable to the mission by identifying and addressing, health and other adverse impacts of as appropriate, disproportionately high adaptive capacities and are more dependent on climate-sensitive climate change. The EPA believes that and adverse human health or communities will benefit from this final environmental effects of their programs, resources such as local water and food supplies. In addition, Native American rulemaking because this action directly policies, and activities on minority addresses the impacts of climate change populations and low-income tribal communities possess unique vulnerabilities to climate change, populations in the U.S. The EPA defines 1069 Melillo, Jerry M., Terese (T.C.) Richmond, environmental justice as the fair particularly those impacted by and Gary W. Yohe, Eds., 2014: Climate Change treatment and meaningful involvement degradation of natural and cultural Impacts in the United States: The Third National of all people regardless of race, color, resources within established reservation Climate Assessment. U.S. Global Change Research boundaries and threats to traditional Program, 841 pp. national origin, or income with respect IPCC, 2014: Climate Change 2014: Impacts, to the development, implementation, subsistence lifestyles. Tribal Adaptation, and Vulnerability. Part A: Global and and enforcement of environmental laws, communities whose health, economic Sectoral Aspects. Contribution of Working Group II regulations, and policies. The EPA has well-being, and cultural traditions that to the Fifth Assessment Report of the depend upon the natural environment Intergovernmental Panel on Climate Change [Field, this goal for all communities and C.B., V.R. Barros, D.J. Dokken, K.J. Mach, M.D. persons across this Nation. It will be will likely be affected by the Mastrandrea, T.E. Bilir, M. Chatterjee, K.L. Ebi, Y.O. achieved when everyone enjoys the degradation of ecosystem goods and Estrada, R.C. Genova, B. Girma, E.S. Kissel, A.N. same degree of protection from services associated with climate change. Levy, S. MacCracken, P.R. Mastrandrea, and L.L. The 2009 Endangerment Finding record White (eds.)]. Cambridge University Press, 1132 pp. environmental and health hazards and https://www.ipcc.ch/report/ar5/wg2/. equal access to the decision-making also specifically noted that Southwest IPCC, 2014: Climate Change 2014: Impacts, process to have a healthy environment native cultures are especially vulnerable Adaptation, and Vulnerability. Part B: Regional in which to live, learn, and work. to water quality and availability Aspects. Contribution of Working Group II to the impacts. Native Alaskan communities Fifth Assessment Report of the Intergovernmental Leading up to this rulemaking the Panel on Climate Change [Barros, V.R., C.B. Field, EPA summarized the public health and are already experiencing disruptive D.J. Dokken, M.D. Mastrandrea, K.J. Mach, T.E. welfare effects of GHG emissions in its Bilir, M. Chatterjee, K.L. Ebi, Y.O. Estrada, R.C. 1068 ‘‘Endangerment and Cause or Contribute Genova, B. Girma, E.S. Kissel, A.N. Levy, S. 2009 Endangerment Finding. See, Findings for Greenhouse Gases Under Section MacCracken, P.R. Mastrandrea, and L.L. White section VIII.A of this preamble where 202(a) of the Clean Air Act,’’ 74 FR 66496 (Dec. 15, (eds.)]. Cambridge University Press, 688 pp. https:// the EPA summarizes the public health 2009) (‘‘Endangerment Finding’’). www.ipcc.ch/report/ar5/wg2/.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00280 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64941

by limiting GHG emissions through the discussed in section IX. Additionally, as State to meet its CAA section 111(d) establishment of CO2 emission outlined in sections I and IX of this obligations? guidelines for existing affected fossil preamble, the EPA has engaged with 60.5730 Is there an approval process for a fuel-fired EGUs. communities throughout this negative declaration letter? 60.5735 What authorities will not be In addition to reducing CO2 rulemaking and has devised a robust emissions, the guidelines finalized in delegated to State, local, or tribal outreach strategy for continual agencies? this rulemaking would reduce other engagement throughout the 60.5736 Will the EPA impose any emissions from affected EGUs that implementation phase of this sanctions? reduce generation due to higher rulemaking. 60.5737 What is the Clean Energy Incentive adoption of EE and RE. These emission Program and how do I participate? reductions will include SO and NO , K. Congressional Review Act (CRA) 2 X State and Multi-State Plan Requirements which form ambient PM2.5 and ozone in This final action is subject to the CRA, the atmosphere, and HAP, such as and the EPA will submit a rule report 60.5740 What must I include in my mercury and hydrochloric acid. In the to each House of the Congress and to the federally enforceable State or multi-State Comptroller General of the United plan? final rule revising the annual PM2.5 60.5745 What must I include in my final 1070 States. This action is a ‘‘major rule’’ as NAAQS, the EPA identified low- plan submittal? income populations as being a defined by 5 U.S.C. 804(2). 60.5750 Can I work with other States to vulnerable population for experiencing XIII. Statutory Authority develop a multi-State plan? adverse health effects related to PM 60.5760 What are the timing requirements exposures. Low-income populations The statutory authority for this action for submitting my plan? have been generally found to have a is provided by sections 111, 301, 302, 60.5765 What must I include in an initial higher prevalence of pre-existing and 307(d)(1)(C) of the CAA as amended submittal if requesting an extension for diseases, limited access to medical (42 U.S.C. 7411, 7601, 7602, a final plan submittal? treatment, and increased nutritional 7607(d)(1)(C)). This action is also 60.5770 What schedules, performance periods, and compliance periods must I deficiencies, which can increase this subject to section 307(d) of the CAA (42 U.S.C. 7607(d)). include in my plan? population’s susceptibility to PM- 60.5775 What emission standards must I 1071 related effects. In areas where this List of Subjects in 40 CFR Part 60 include in my plan? rulemaking reduces exposure to PM , 2.5 Environmental protection, 60.5780 What State measures may I rely ozone, and methylmercury, low-income Administrative practice and procedure, upon in support of my plan? populations will also benefit from such 60.5785 What is the procedure for revising Air pollution control, Intergovernmental emissions reductions. The RIA for this my plan? relations, Reporting and recordkeeping rulemaking, included in the docket for 60.5790 What must I do to meet my plan requirements. this rulemaking, provides additional obligations? information regarding the health and Dated: August 3, 2015. Emission Rate Credit Requirements ecosystem effects associated with these Gina McCarthy, 60.5795 What affected EGUs qualify for emission reductions. Administrator. generation of ERCs? Additionally, as outlined in the For the reasons stated in the 60.5800 What other resources qualify for community and environmental justice preamble, title 40, chapter I, part 60 of issuance of ERCs? considerations section IX of this the Code of the Federal Regulations is 60.5805 What is the process for the preamble, the EPA has taken a number amended as follows: issuance of ERCs? of actions to help ensure that this action 60.5810 What applicable requirements are will not have potential PART 60—STANDARDS OF there for an ERC tracking system? disproportionately high and adverse PERFORMANCE FOR NEW Mass Allocations Requirements human health or environmental effects STATIONARY SOURCES 60.5815 What are the requirements for State on overburdened communities. The ■ 1. The authority citation for Part 60 allocation of allowances in a mass-based EPA consulted its May 2015, Guidance program? on Considering Environmental Justice continues to read as follows: 60.5820 What are my allowance tracking During the Development of Regulatory Authority: 42 U.S.C. 7401 et seq. requirements? 60.5825 What is the process for affected Actions, when determining what actions ■ 2. Add subpart UUUU to read as 1072 EGUs to demonstrate compliance in a to take. As described in the follows: community and environmental justice mass-based program? considerations section of this preamble Subpart—UUUU Emission Guidelines Evaluation Measurement and Verification the EPA also conducted a proximity for Greenhouse Gas Emissions and Plans and Monitoring and Verification analysis, which is available in the Compliance Times for Electric Utility Reports docket of this rulemaking and is Generating Units 60.5830 What are the requirements for EM&V plans for eligible resources? 1070 ‘‘National Ambient Air Quality Standards for Sec. 60.5835 What are the requirements for M&V reports for eligible resources? Particulate Matter, Final Rule,’’ 78 FR 3086 (Jan. 15, Introduction 2013). Applicability of Plans to Affected EGUs 1071 U.S. Environmental Protection Agency (U.S. 60.5700 What is the purpose of this EPA). 2009. Integrated Science Assessment for subpart? 60.5840 Does this subpart directly affect Particulate Matter (Final Report). EPA–600–R–08– 60.5705 Which pollutants are regulated by EGU owners and operators in my State? 139F. National Center for Environmental this subpart? 60.5845 What affected EGUs must I address Assessment—RTP Division. December. Available on 60.5710 Am I affected by this subpart? in my State plan? the Internet at . process for my State plan? being affected EGUs? 1072 Guidance on Considering Environmental Justice During the Development of Regulatory 60.5720 What if I do not submit a plan or 60.5855 What are the CO2 emission Actions. http://epa.gov/environmentaljustice/ my plan is not approvable? performance rates for affected EGUs? resources/policy/considering-ej-in-rulemaking- 60.5725 In lieu of a State plan submittal, are 60.5860 What applicable monitoring, guide-final.pdf. May 2015. there other acceptable option(s) for a recordkeeping, and reporting

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00281 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64942 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

requirements do I need to include in my § 51.166(b)(48) and in any State plan for your State according to § 60.27. plan for affected EGUs? Implementation Plan (SIP) approved by The Federal plan will implement the Recordkeeping and Reporting Requirements the EPA that is interpreted to emission guidelines contained in this 60.5865 What are my recordkeeping incorporate, or specifically incorporates, subpart. Owners and operators of requirements? § 51.166(b)(48) of this chapter. affected EGUs not covered by an 60.5870 What are my reporting and (2) For the purposes of approved plan must comply with a notification requirements? § 52.21(b)(50)(ii), with respect to GHG Federal plan implemented by the EPA 60.5875 How do I submit information emissions from facilities regulated in for the State. required by these emission guidelines to the plan, the ‘‘pollutant that is subject (b) After a Federal plan has been the EPA? to the standard promulgated under implemented in your State, it will be Definitions section 111 of the Act’’ shall be withdrawn when your State submits, 60.5880 What definitions apply to this considered to be the pollutant that and the EPA approves, a final plan. subpart? otherwise is subject to regulation under § 60.5725 In lieu of a State plan submittal, Table 1 to Subpart UUUU of Part 60—CO2 the Act as defined in § 52.21(b)(49) of Emission Performance Rates (Pounds of this chapter. are there other acceptable option(s) for a State to meet its CAA section 111(d) CO2 per Net MWh) (3) For the purposes of § 70.2 of this Table 2 to Subpart UUUU of Part 60— chapter, with respect to greenhouse gas obligations? Statewide Rate-based CO2 Emission Goals emissions from facilities regulated in A State may meet its CAA section (Pounds of CO2 per Net MWh) the plan, the ‘‘pollutant that is subject 111(d) obligations only by submitting a Table 3 to Subpart UUUU of Part 60— to any standard promulgated under final State or multi-State plan submittal Statewide Mass-based CO Emission Goals 2 section 111 of the Act’’ shall be or a negative declaration letter (if (Short Tons of CO2) Table 4 to Subpart UUUU of Part 60— considered to be the pollutant that applicable). Statewide Mass-based CO2 Emission Goals otherwise is ‘‘subject to regulation’’ as defined in § 70.2 of this chapter. § 60.5730 Is there an approval process for plus New Source CO2 Emission a negative declaration letter? Complement (Short Tons of CO2) (4) For the purposes of § 71.2, with respect to greenhouse gas emissions No. The EPA has no formal review Introduction from facilities regulated in the plan, the process for negative declaration letters. § 60.5700 What is the purpose of this ‘‘pollutant that is subject to any Once your negative declaration letter subpart? standard promulgated under section 111 has been received, the EPA will place a This subpart establishes emission of the Act’’ shall be considered to be the copy in the public docket and publish guidelines and approval criteria for pollutant that otherwise is ‘‘subject to a notice in the Federal Register. If, at a State or multi-State plans that establish regulation’’ as defined in § 71.2 of this later date, an affected EGU for which emission standards limiting greenhouse chapter. construction commenced on or before January 8, 2014 is found in your State, gas (GHG) emissions from an affected § 60.5710 Am I affected by this subpart? steam generating unit, integrated you will be found to have failed to If you are the Governor of a State in submit a final plan as required, and a gasification combined cycle (IGCC), or the contiguous United States with one stationary combustion turbine. An Federal plan implementing the emission or more affected EGUs that commenced guidelines contained in this subpart, affected steam generating unit, IGCC, or construction on or before January 8, stationary combustion turbine shall, for when promulgated by the EPA, will 2014, you must submit a State or multi- apply to that affected EGU until you the purposes of this subpart, be referred State plan to the U.S. Environmental to as an affected EGU. These emission submit, and the EPA approves, a final Protection Agency (EPA) that State plan. guidelines are developed in accordance implements the emission guidelines with section 111(d) of the Clean Air Act contained in this subpart. If you are the § 60.5735 What authorities will not be and subpart B of this part. To the extent Governor of a State in the contiguous delegated to State, local, or tribal agencies? any requirement of this subpart is United States with no affected EGUs for The authorities that will not be inconsistent with the requirements of which construction commenced on or delegated to State, local, or tribal subparts A or B of this part, the before January 8, 2014, in your State, agencies are specified in paragraphs (a) requirements of this subpart will apply. you must submit a negative declaration and (b) of this section. § 60.5705 Which pollutants are regulated letter in place of the State plan. (a) Approval of alternatives, not by this subpart? § 60.5715 What is the review and approval already approved by this subpart, to the (a) The pollutants regulated by this process for my plan? CO2 emission performance rates in subpart are greenhouse gases. The The EPA will review your plan Table 1 to this subpart established emission guidelines for greenhouse according to § 60.27 except that under under § 60.5855. gases established in this subpart are § 60.27(b) the Administrator will have (b) Approval of alternatives, not expressed as carbon dioxide (CO2) 12 months after the date the final plan already approved by this subpart, to the emission performance rates and or plan revision (as allowed under CO2 emissions goals in Tables 2, 3 and equivalent statewide CO2 emission § 60.5785) is submitted, to approve or 4 to this subpart established under goals. disapprove such plan or revision or § 60.5855. (b) PSD and Title V Thresholds for each portion thereof. If you submit an Greenhouse Gases. § 60.5736 Will the EPA impose any initial submittal under § 60.5765(a) in sanctions? (1) For the purposes of lieu of a final plan submittal the EPA § 51.166(b)(49)(ii), with respect to GHG will follow the procedure in No. The EPA will not withhold any emissions from facilities, the ‘‘pollutant § 60.5765(b). existing federal funds from a State on that is subject to the standard account of a State’s failure to submit, promulgated under section 111 of the § 60.5720 What if I do not submit a plan or implement, or enforce an approvable Act’’ shall be considered to be the my plan is not approvable? plan or plan revision, or to meet any pollutant that otherwise is subject to (a) If you do not submit an approvable other requirements under this subpart or regulation under the Act as defined in plan the EPA will develop a Federal subpart B of this part.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00282 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64943

§ 60.5737 What is the Clean Energy mechanism is not required to account paragraph (a)(2)(ii) of this section if your Incentive Program and how do I for matching ERCs or allowances that plan: participate? may be issued to the State by the EPA. (A) Imposes emission standards on all (a) This subpart establishes the Clean (d) If you are submitting an initial affected EGUs that, assuming full Energy Incentive Program (CEIP). submittal by September 6, 2016, and compliance by all affected EGUs, Participation in this program is you intend to participate in the CEIP, mathematically assure achievement of optional. The program enables States to you must include a non-binding the CO2 emission performance rates in award early action emission rate credits statement of intent to participate in the the plan for each plan period; (ERCs) and allowances to eligible program. If you are submitting a final (B) Imposes emission standards on all renewable energy (RE) or demand-side plan by September 6, 2016, and you affected EGUS that, assuming full energy efficiency (EE) projects that intend to participate in the CEIP, your compliance by all affected EGUs, generate megawatt hours (MWh) or State plan must either include mathematically assure achievement of reduce end-use energy demand during requirements establishing the necessary the CO2 emission goals; or 2020 and/or 2021. Eligible projects are infrastructure to implement such a (C) Imposes emission standards on all those that: program and authorizing your affected affected EGUs that, assuming full (1) Are located in or benefit a state EGUs to use early action allowances or compliance by all affected EGUs, in that has submitted a final state plan that ERCs as appropriate, or you must conjunction with applicable includes requirements establishing its include a non-binding statement of requirements under state law for EGUs participation in the CEIP; and intent as part of your supporting subject to subpart TTTT of this subpart, (2) Commence construction in the documentation and revise your plan to assuming the applicable requirements case of RE, or commence operation in include the appropriate requirements at under state law are met by all EGUs the case of demand-side EE, following a later date. subject to subpart TTTT of this subpart, (e) If you intend to participate in the the submission of a final state plan to achieve the applicable mass-based CO CEIP, your final State plan, or plan 2 the EPA, or after September 6, 2018 for emission goals plus new source CO revision if applicable, must require that 2 a state that chooses not to submit a final emission complement allowed for in projects eligible under this program be state plan by that date; and either § 60.5790(b)(5). (3) Generate metered MWh from any evaluated, monitored, and verified, and (ii) If your plan does not meet the type of wind or solar resources; or that resulting ERCs or allowances be requirements of (a)(2)(i) or (iii) of this (4) Result in quantified and verified issued, per applicable requirements of electricity savings (MWh) through the State plan approved by the EPA as section, your plan must include the demand-side EE implemented in low- meeting § 60.5805 through § 60.5835. requirement for corrective measures to income communities. be implemented if triggered. Upon (b) The EPA will award matching State and Multi-State Plan triggering corrective measures, if you do ERCs or allowances to States that award Requirements not already have them included in your approved State plan, you must submit early action ERCs or allowances, up to § 60.5740 What must I include in my a match limit equivalent to 300 million federally enforceable State or multi State corrective measures to EPA for approval as a plan revision per the requirements tons of CO2 emissions. The awards will plan? be executed as follows: (a) You must include the components of § 60.5785(c). These corrective (1) For RE projects that generate described in paragraphs (a)(1) through measures must ensure that the interim metered MWh from wind or solar (5) of this section in your plan period and final period CO2 emission resources: For every two MWh submittal. The final plan must meet the performance rates or CO2 emission goals generated, the project will receive one requirements and include the are achieved by your affected EGUs, as early action ERC (or the equivalent information required under § 60.5745. applicable, and must achieve additional number of allowances) from the State, (1) Identification of affected EGUs. emission reductions to offset any and the EPA will provide one matching Consistent with § 60.25(a), you must emission performance shortfall. Your ERC (or the equivalent number of identify the affected EGUs covered by plan must include the requirement that allowances) to the State to award to the your plan and all affected EGUs in your corrective measures be triggered and project. State that meet the applicability criteria implemented according to paragraphs (2) For EE projects implemented in in § 60.5845. In addition, you must (a)(2)(ii)(A) through (H) of this section. low-income communities: For every two include an inventory of CO2 emissions (A) Your plan must include a trigger MWh in end-use demand savings from the affected EGUs during the most for an exceedance of an interim step 1 achieved, the project will receive two recent calendar year for which data is or interim step 2 CO2 emission early action ERCs (or the equivalent available prior to the submission of the performance rate or CO2 emission goal number of allowances) from the State, plan. by 10 percent or greater, either on and the EPA will provide two matching (2) Emission standards. You must average or cumulatively (if applicable). ERCs (or the equivalent number of include an identification of all emission (B) Your plan must include a trigger allowances) to the State to award to the standards for each affected EGU for an exceedance of an interim step 1 project. according to § 60.5775, compliance goal or interim step 2 goal of 10 percent (c) You may participate in this periods for each emission standard or greater based on either reported CO2 program by including in your State plan according to § 60.5770, and a emissions with applied plus or minus a mechanism that enables issuance of demonstration that the emission net allowance export or import early action ERCs or allowances by the standards, when taken together, achieve adjustments (if applicable), or based on State to parties effectuating reductions the applicable CO2 emission the adjusted CO2 emission rate (if in the calendar years 2020 and/or 2021 performance rates or CO2 emission goals applicable). in a manner that would have no impact described in § 60.5855. Allowance (C) Your plan must include a trigger on the emission performance of affected systems are an acceptable form of for a failure to meet an interim period EGUs required to meet rate-based or emission standards under this subpart. goal based on reported CO2 emissions mass-based emission standards during (i) Your plan does not need to include with applied plus or minus net the performance periods. This corrective measures specified in allowance export or import adjustments

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00283 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64944 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

(if applicable), or based on the adjusted months of the due date of the report the requirements must be consistent CO2 emission rate (if applicable). required in § 60.5870(b). The emission with or no less stringent than the (D) Your plan must include a trigger standards on the affected EGUs as part requirements specified in § 60.5860. for a failure to meet the interim period of the backstop must be able to meet (5) State reporting. You must include or any final reporting period CO2 either the CO2 emission performance in your plan a description of the emission performance rate or CO2 rates or mass-based or rate-based CO2 process, contents, and schedule for State emission goal, either on average or emission goal for your State during the reporting to the EPA about plan cumulatively (as applicable). interim and final periods. You must implementation and progress, including (E) Your plan must include a trigger either submit, along with the backstop information required under § 60.5870. for a failure to meet any final reporting emission standards, provisions to adjust (i) You must include in your plan a period goal based on reported CO2 the emission standards to make up for requirement for a report to be submitted emissions with applied plus or minus the prior emission performance by July 1, 2021, that demonstrates that net allowance export or import shortfall, such that no later plan the State has met, or is on track to meet, adjustments (if applicable). revision to modify the emission the programmatic milestone steps (F) Your plan must include a trigger standards is necessary in order to indicated in the timeline required in for a failure to meet the interim period address the emission performance § 60.5770. CO emission performance rate or CO 2 2 shortfall, or you must submit, as part of (b) You must follow the requirements emission goal based on the adjusted CO 2 the final plan, backstop emission of subpart B of this part and emission rate (if applicable). standards that assure affected EGUs (G) Your plan must include a trigger demonstrate that they were met in your would achieve your State’s CO2 for a failure to meet any final reporting State plan. However, the provisions of emission performance rates or emission § 60.24(f) shall not apply. period CO2 emission performance rate goals during the interim and final or CO2 emission goal based on the periods, and then later submit § 60.5745 What must I include in my final adjusted CO2 emission rate (if appropriate revisions to the backstop plan submittal? applicable). emission standards adjusting for the (a) In addition to the components of (H) A net allowance import shortfall through the State plan revision the plan listed in § 60.5740, a final plan adjustment represents the CO 2 process described in § 60.5785. The submittal to the EPA must include the emissions (in tons) equal to the number backstop must also include the information in paragraphs (a)(1) through of net imported CO allowances. This 2 requirements in paragraphs (a)(3)(i) (13) of this section. This information adjustment is subtracted from reported through (iii) of this section, as must be submitted to the EPA as part of CO emissions. Under this adjustment, 2 applicable. your final plan submittal but will not be such allowances must be issued by a (i) You must include a trigger for the codified as part of the federally state with an emission budget trading backstop to go into effect upon: enforceable plan upon approval by EPA. program that only applies to affected (A) A failure to meet a programmatic (1) You must include a description of EGUs (or affected EGUs plus EGUs milestone; your plan approach and the geographic covered by subpart TTTT of this part as (B) An exceedance of 10 percent or scope of the plan (i.e., State or multi- applicable). A net allowance export greater of an interim step 1 goal or State, geographic boundaries related to adjustment represents the CO 2 interim step 2 goal based on reported the plan elements), including, if emissions (in tons) equal to the number CO2 emissions, with applied plus or applicable, identification of multi-State of net exported CO allowances. This 2 minus net allowance export or import plan participants. adjustment is added to reported CO 2 adjustments (if applicable); (2) You must identify CO emission emissions. (C) A failure to meet the interim 2 performance rates or equivalent (iii) If your plan relies upon State period goal based on reported CO 2 statewide CO emission goals that your measures, in addition to or in lieu of emissions, with applied plus or minus 2 affected EGUs will achieve. If the emission standards on your affected net allowance export or import EGUs, then the final State plan must geographic scope of your plan is a single adjustments (if applicable); or include the requirements in paragraph (D) A failure to meet any final State, then you must identify CO2 (a)(3) of this section and the submittal reporting period goal based on reported emission performance rates or emission goals according to § 60.5855. If your must include the information listed in CO2 emissions, with applied plus or § 60.5745(a)(6). minus net allowance export or import plan includes multiple States and you (iv) If your plan requires emission adjustments (if applicable). elect to set CO2 emission goals, you standards in addition to relying upon (ii) You may include in your plan any must identify CO2 emission goals State measures, then you must additional triggers so long as they do not calculated according to § 60.5750. demonstrate that the emission standards reduce the stringency of the triggers (i) You must specify in the plan and State measures, when taken required under paragraph (a)(3)(i) of this submittal the CO2 emission performance together, result in the achievement of section. rates or emission goals that affected the applicable mass-based CO2 emission (iii) You must include a schedule for EGUs will meet for the interim period, goal described in § 60.5855 by your implementation of the backstop once each interim step, and the final period State’s affected EGUs. triggered, and you must identify all (including each final reporting period) (3) State measures backstop. If your necessary State administrative and pursuant to § 60.5770. plan relies upon State measures, you technical procedures for implementing (ii) [Reserved] must submit, as part of the plan in lieu the backstop. (3) You must include a demonstration of the requirements in paragraph (4) Identification of applicable that the affected EGUs covered by the (a)(2)(i) and (ii) of this section, a monitoring, reporting, and plan are projected to achieve the CO2 federally enforceable backstop that recordkeeping requirements for each emission performance rates or CO2 includes emission standards for affected affected EGU. You must include in your emission goals described in § 60.5855. EGUs that will be put into place, if there plan all applicable monitoring, (4) You must include a demonstration is a triggering event listed in paragraph reporting and recordkeeping that each affected EGU’s emission (a)(3)(i) of this section, within 18 requirements for each affected EGU and standard is quantifiable, non-

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00284 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64945

duplicative, permanent, verifiable, and (E) If a state plan provides for the (I) A demonstration that each enforceable according to § 60.5775. ability of renewable energy resources emission standard included in your (5) If your plan includes emission located in states with mass-based plans plan meets the requirements of standards on your affected EGUs to be issued ERCs, consideration in the § 60.5775. sufficient to meet either the CO2 projection that such resources must (J) Any ERC or emission allowance emission performance rates or CO2 meet geographic eligibility prices, when applicable. emission goals, you must include in requirements, consistent with (K) An identification of planning your plan submittal the information in § 60.5800(a); and reserve margins. paragraphs (a)(5)(i) through (v) of this (F) Any other applicable assumptions (L) Any other applicable assumptions section as applicable. used in the projection. used in the projection. (i) If your plan applies separate rate- (iii) If a plan establishes mass-based (6) If your plan relies upon State based CO2 emission standards for emission standards for affected EGUs measures, in addition to or in lieu of the affected EGUs (in lbs CO2/MWh) that that cumulatively do not exceed the emission standards required by are equal to or lower than the CO2 State’s EPA-specified mass CO2 paragraph § 60.5740(a)(2), the final State emission performance rates listed in emission goal, then no additional plan submittal must include the Table 1 of this subpart or uniform rate- demonstration is required beyond information under paragraphs (a)(5)(v) based CO2 emission standards equal to inclusion of the emission standards in and (a)(6)(i) through (v) of this section.

or lower than the rate-based CO2 the plan. (i) You must include a description of emission goals listed in Table 2 of this (iv) If a plan applies mass-based all the State measures the State will rely subpart, then no additional emission standards to individual upon to achieve the applicable CO demonstration is required beyond affected EGUs that cumulatively exceed 2 emission goals required under inclusion of the emission standards in the State’s EPA-specified mass CO2 § 60.5855(e), the projected impacts of the plan. emission goal, then you must include a (ii) If a plan applies rate-based demonstration that your mass-based the State measures over time, the emission standards to individual emission program will be designed such applicable State laws or regulations affected EGUs at a lbs CO /MWh rate that compliance by affected EGUs related to such measures, and 2 identification of parties or entities that differs from the CO2 emission would achieve the State mass-based CO2 performance rates in Table 1 of this emission goals. This demonstration subject to or implementing such State measures. subpart or the State’s rate-based CO2 includes the information listed in emission goal in Table 2 of this subpart, paragraph (a)(5)(v) of this section. (ii) You must include the schedule then a further demonstration is required (v) Your plan demonstration to be and milestones for the implementation of the State measures. If the State that the application of the CO2 emission included in your plan submittal, if measures in your plan submittal rely standards will achieve the CO2 emission applicable, must include the performance rates or State rate-based information listed in paragraphs upon measures that do not have a direct effect on the CO2 emissions measured at CO2 emission goal. You must (a)(5)(v)(A) through (L) of this section. demonstrate through a projection that (A) A summary of each affected EGU’s an affected EGU’s stack, you must also demonstrate how the minimum the adjusted weighted average CO2 anticipated future operation emission rate of affected EGUs, when characteristics, including: emission, monitoring and verification weighted by generation (in MWh), will (1) Annual generation; (EM&V) requirements listed under be equal to or less than the CO (2) CO2 emissions; § 60.5795 that apply to those programs 2 (3) Fuel use, fuel prices (when emission performance rates or the rate- and projects will be met. applicable), fuel carbon content; (iii) You must demonstrate that based CO2 emission goal. This (4) Fixed and variable operations and federally enforceable emission projection must address the interim maintenance costs (when applicable); period and the final period. The standards for affected EGUs in (5) Heat rates; and conjunction with any State measures projection in the plan submittal must (6) Electric generation capacity and include the information listed in relied upon for your plan, are sufficient capacity factors. to achieve the mass-based CO emission paragraph (a)(5)(v) of this section and in (B) An identification of any planned 2 goal for the interim period, each interim addition the following: new electric generating capacity. (A) An analysis of the change in (C) Analytic treatment of the potential step in that interim period, the final generation of affected EGUs given the for building unplanned new electric period, and each final reporting period. compliance costs and incentives under generating capacity. In addition, you must demonstrate that the application of different emission (D) A timeline for implementation of each emission standard included in rate standards across affected EGUs in a EGU-specific actions (if applicable). your plan meets the requirements of State; (E) All wholesale electricity prices. § 60.5775 and each State measure (B) A projection showing how (F) A geographic representation included in your plan submittal meets generation is expected to shift between appropriate for capturing impacts and/ the requirements of § 60.5780. affected EGUs and across affected EGUs or changes in the electric system. (iv) You must include a CO2 and non-affected EGUs over time; (G) A time period of analysis, which performance projection of your State (C) Assumptions regarding the must extend through at least 2031. measures that shows how the measures, availability and anticipated use of the (H) An anticipated electricity demand whether alone or in conjunction with MWh of electricity generation or forecast (MWh load and MW peak any federally enforceable CO2 emission electricity savings from eligible demand) at the State and regional level, standards for affected EGUs, will result resources that can be issued ERCs; including the source and basis for these in the achievement of the future CO2 (D) The specific calculation (or estimates, and, if appropriate, performance at affected EGUs. Elements assumption) of how eligible resource justification and documentation of of this projection must include those MWh of electricity generation or savings underlying assumptions that inform the specified in paragraph (a)(5)(v) of this are being used in the projection to development of the demand forecast section, as applicable, and the following adjust the reported CO2 emission rate of (e.g., annual economic and demand for the interim period and the final affected EGUs; growth rate or population growth rate). period:

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00285 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64946 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

(A) A baseline demand and supply affected EGUs identified under the plan, the multi-State plan, including forecast as well as the underlying according to paragraph (a)(3) of this necessary State legal authority to assumptions and data sources of each section; implement the plan, such as State forecast; (iii) Materials supporting any regulations and statutes. (B) The magnitude of energy and calculations for CO2 emission goals (2) States participating in a multi- emission impacts from all measures calculated according to § 60.5855, if State plan may submit a single plan included in the plan and applicable applicable; and submittal, signed by authorized officials assumptions; (iv) Any other materials necessary to from each participating State, which (C) An identification of State- support evaluation of the plan by the addresses common plan elements. Each enforceable measures with electricity EPA. participating State must, in addition, savings and RE generation, in MWh, (b) You must submit your final plan provide individual plan submittals that expected for individual and collective to the EPA electronically according to address State-specific elements of the measures and any assumptions related § 60.5875. multi-State plan. to the quantification of the MWh, as (3) States participating in a multi- applicable. § 60.5750 Can I work with other States to State plan may separately make develop a multi-State plan? (7) Your plan submittal must include individual submittals that address all a demonstration that the reliability of A multi-State plan must include all elements of the multi-State plan. The the electrical grid has been considered the required elements for a plan plan submittals must be materially in the development of your plan. specified in § 60.5740(a). A multi-State consistent for all common plan elements (8) Your plan submittal must include plan must meet the requirements of that apply to all participating States, a timeline with all the programmatic paragraphs (a) and (b) of this section. and also must address individual State- milestone steps the State intends to take (a) The multi-State plan must specific aspects of the multi-State plan. between the time of the State plan demonstrate that all affected EGUs in all Each individual State plan submittal

submittal and January 1, 2022 to ensure participating States will meet the CO2 must address all required plan the plan is effective as of January 1, emission performance rates listed in components in § 60.5740. 2022. Table 1 of this subpart or an equivalent (c) A State may elect to participate in (9) Your plan submittal must CO2 emission goal according to more than one multi-State plan. If your adequately demonstrate that your State paragraphs (a)(1) or (2) of this section. State elects to participate in more than has the legal authority (e.g., through States may only follow the procedures one multi-State plan then you must regulations or legislation) and funding in (a)(1) or (2) if they have functionally identify in the State plan submittal to implement and enforce each equivalent requirements meeting required under § 60.5745, the subset of component of the State plan submittal, § 60.5775 and § 60.5790 included in affected EGUs that are subject to the including federally enforceable their plans. specific multi-State plan or your State’s emission standards for affected EGUs, (1) For States electing to demonstrate individual plan. An affected EGU can and State measures as applicable. performance with a CO2 emission rate- only be subject to one plan. (10) Your State plan submittal must based goal, the CO2 emission goals (d) A State may elect to allow its demonstrate that each interim step goal identified in the plan according to affected EGUs to interact with affected required under § 60.5855(c), will be met § 60.5855 will be an adjusted weighted EGUs in other States through mass- and include in its supporting (by net energy output) average lbs CO2/ based trading programs or a rate-based documentation, if applicable, a MWh emission rate to be achieved by all trading program without entering into a description of the analytic process, affected EGUs in the multi-State area formal multi-State plan allowed for tools, methods, and assumptions used to during the plan periods; or under this section, so long as such make this demonstration. (2) For States electing to demonstrate programs are part of an EPA-approved (11) Your plan submittal must include performance with a CO2 emission mass- state plan and meet the requirements of certification that a hearing required based goal, the CO2 emission goals paragraphs (d)(1) and (2) of this section, under § 60.23(c)(1) on the State plan identified in the multi-State plan as applicable. was held, a list of witnesses and their according to § 60.5855 will be total mass (1) For States that elect to do mass- organizational affiliations, if any, CO2 emissions by all affected EGUs in based trading under this option the appearing at the hearing, and a brief the multi-State area during the plan State must indicate in its plan that its written summary of each presentation or periods, representing the sum of all emission budget trading program will be written submission, pursuant to the individual mass CO2 goals for states administered using an EPA-approved requirements of § 60.23(d) and (f). participating in the multi-state plan. (or EPA-administered) emission and (12) Your plan submittal must include (b) Options for submitting a multi- allowance tracking system. documentation of any conducted State plan include the following: (2) For States that elect to use a rate- community outreach and community (1) States participating in a multi- based trading program which allows the involvement, including engagement State plan may submit one multi-State affected EGUs to use ERCs from other with vulnerable communities. plan submittal on behalf of all State rate-based trading programs, the (13) Your plan submittal must include participating States. The joint submittal plan must require affected EGUs within supporting material for your plan must be signed electronically, according their State to comply with emission to § 60.5875, by authorized officials for including: standards equal to the sub-category CO2 (i) Materials demonstrating the State’s each of the States participating in the emission performance rates in Table 1 of legal authority and funding to multi-State plan. In this instance, the this subpart. implement and enforce each component joint submittal will have the same legal of its plan, including emissions effect as an individual submittal for § 60.5760 What are the timing standards and/or State measures that the each participating State. The joint requirements for submitting my plan? plan relies upon; submittal must address plan (a) You must submit a final plan with (ii) Materials supporting that the CO2 components that apply jointly for all the information required under emission performance rates or CO2 participating States and components § 60.5745 by September 6, 2016, unless emission goals will be achieved by that apply for each individual State in you are submitting an initial submittal,

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00286 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64947

allowed under § 60.5765, in lieu of a (c) If an extension for submission of (d) If your plan relies upon State final State plan submittal, according to a final plan has been granted, you must measures in lieu of or in addition to paragraph (b) of this section. submit a progress report by September emission standards for affected EGUs (b) For States seeking a two year 6, 2017. The 2017 report must include regulated under the plan, then the extension for a final plan submittal, you the following: performance periods must be identical must include the information in (1) A summary of the status of each to the compliance periods for affected § 60.5765(a) in an initial submittal by component of the final plan, including EGUs listed in paragraphs (c)(1) through September 6, 2016, to receive an an update from the 2016 initial (3) of this section. extension to submit your final State submittal and a list of which final plan components are not complete. § 60.5775 What emission standards must I plan submittal by September 6, 2018. include in my plan? (c) You must submit all information (2) A commitment to a plan approach (a) Emission standard(s) for affected required under paragraphs (a) and (b) of (e.g., single or multi-State, rate-based or EGUs included under your plan must be this section according to the electronic mass-based emission performance level, rate-based or mass-based emission demonstrated to be quantifiable, reporting requirements in § 60.5875. standards), including draft or proposed verifiable, non-duplicative, permanent, § 60.5765 What must I include in an initial legislation and/or regulations. and enforceable with respect to each submittal if requesting an extension for a (3) An updated comprehensive affected EGU. The plan submittal must final plan submittal? roadmap with a schedule and include the methods by which each (a) You must sufficiently demonstrate milestones for completing the final plan, emission standard meets each of the that your State is able to undertake steps including any updates to community following requirements in paragraphs and processes necessary to timely engagement undertaken and planned. (b) through (f) of this section. (b) An affected EGU’s emission submit a final plan by the extended date § 60.5770 What schedules, performance of September 6, 2018, by addressing the periods, and compliance periods must I standard is quantifiable if it can be following required components in an include in my plan? reliably measured in a manner that can be replicated. initial submittal by September 6, 2016, (a) The affected EGUs covered by your (c) An affected EGU’s emission if requesting an extension for a final plan must meet the CO emission 2 standard is verifiable if adequate plan submittal: requirements required under § 60.5855 monitoring, recordkeeping and (1) An identification of final plan for the interim period, interim steps, reporting requirements are in place to approach or approaches under and the final reporting periods enable the State and the Administrator consideration and a description of according to paragraph (b) of this to independently evaluate, measure, and progress made to date on the final plan section. You must also include in your verify compliance with the emission components; plan compliance periods for each standard. (2) An appropriate explanation of why affected EGU regulated under the plan (d) An affected EGU’s emission the State requires additional time to according to paragraphs (c) and (d) of standard is non-duplicative with respect submit a final plan by September 6, this section. to a State plan if it is not already 2018; and (b) Your plan must require your incorporated as an emission standard in affected EGUs to achieve each CO2 (3) A demonstration or description of another State plan unless incorporated the opportunity for public comment on emission performance rate or CO2 emission goal, as applicable, required in multi-State plan. the initial submittal and meaningful (e) An affected EGU’s emission engagement with stakeholders, under § 60.5855 over the periods according to paragraphs (b)(1) through standard is permanent if the emission including vulnerable communities, standard must be met for each during the time in preparation of the (3) of this section. (1) The interim period. compliance period, unless it is replaced initial submittal and the plans for by another emission standard in an engagement during development of the (2) Each interim step. (3) Each final reporting period. approved plan revision, or the State final plan. (c) The emission standards for demonstrates in an approvable plan (b) You must submit an initial affected EGUs regulated under the plan revision that the emission reductions submittal allowed in paragraph (a) of must include the following compliance from the emission standard are no this section, information required under periods: longer necessary for the State to meet its paragraph (c) of this section (only if a (1) For the interim period, affected State level of performance. State elects to submit an initial EGUs must have emission standards (f) An affected EGU’s emission submittal to request an extension for a that have compliance periods that are standard is enforceable if: final plan submittal), and a final State no longer than each interim step and are (1) A technically accurate limitation plan submittal according to § 60.5870. If imposed for the entirety of the interim or requirement and the time period for a State submits an initial submittal, an step either alone or in combination. the limitation or requirement are extension for a final State plan submittal (2) For the final period, affected EGUs specified; is considered granted and a final State must have emission standards that have (2) Compliance requirements are plan submittal is due according to compliance periods that are no longer clearly defined; § 60.5760(b) unless a State is notified than each final reporting period and are (3) The affected EGUs responsible for within 90 days of the EPA receiving the imposed for the entirety of the final compliance and liable for violations can initial submittal that the EPA finds the reporting period either alone or in be identified; initial submittal does not meet the combination. (4) Each compliance activity or requirements listed in paragraph (a) of (3) Compliance periods for each measure is enforceable as a practical this section. If the EPA notifies the State interim step and each final reporting matter; and that the initial submittal does not meet period may take forms shorter than (5) The Administrator, the State, and such requirements, the EPA will also specified in this regulation, provided third parties maintain the ability to notify the State that it has failed to the schedules of compliance collectively enforce against violations (including if submit the final plan required by end on the same schedule as each an affected EGU does not meet its September 6, 2016. interim step and final reporting period. emission standard based on its

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00287 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64948 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

emissions, its allowances if it is subject (iii) The affected entities responsible requirements of § 60.28(a). The State to a mass-based emission standard, or for compliance and liable for violations must implement corrective measures its ERCs if it is subject to a rate-based can be identified; within 6 months of the EPA’s approval emission standard) and secure (iv) Each compliance activity or of a plan revision adding them. The appropriate corrective actions, in the measure is enforceable as a practical shortfall must be made up as case of the Administrator pursuant to matter; and expeditiously as practicable. CAA sections 113(a)–(h), in the case of (v) The State maintains the ability to (d) If your plan relies upon State a State, pursuant to its plan, State law enforce violations and secure measures, your backstop is triggered or CAA section 304, as applicable, and appropriate corrective actions. under § 60.5740(a)(3)(i), and your State in the case of third parties, pursuant to (b) [Reserved] measures plan backstop does not include a mechanism to make up the CAA section 304. § 60.5785 What is the procedure for revising my plan? shortfall, you must revise your backstop § 60.5780 What State measures may I rely emission standards to make up the upon in support of my plan? (a) EPA-approved plans can be shortfall. The shortfall must be made up You may rely upon State measures in revised only with approval by the as expeditiously as practicable. support of your plan that are not Administrator. The Administrator will (e) Reliability Safety Valve: emission standard(s) on affected EGUs, approve a plan revision if it is (1) In order to trigger a reliability provided those State measures meet the satisfactory with respect to the safety valve, you must notify the EPA requirements in paragraph (a) of this applicable requirements of this subpart within 48 hours of an unforeseen, section. and any applicable requirements of emergency situation that threatens subpart B of this part, including the (a) Each State measure is quantifiable, reliability, such that your State will requirement in § 60.5745(a)(3) to verifiable, non-duplicative, permanent, need a short-term modification of demonstrate achievement of the CO and enforceable with respect to each 2 emission standards under a State plan emission performance rates or CO affected entity (e.g., entities other than 2 for a specified affected EGU or EGUs. emission goals in § 60.5855. If one (or affected EGUs with no federally The EPA will consider the notification more) of the elements of the plan set in enforceable obligations under a State in § 60.5870(g)(1) to be an approved § 60.5740 require revision with respect plan), and your plan supporting short-term modification to the State to achieving the CO emission materials include the methods by which 2 plan without needing to go through the performance rates or CO emission goals each State measure meets each of the 2 full State plan revision process if the in § 60.5855, a request must be following requirements in paragraphs State provides a second notification to submitted to the Administrator (a)(1) through (5) of this section. the EPA within seven days of the first indicating the proposed revisions to the (1) A State measure is quantifiable notification. The short-term plan to ensure the CO emission with respect to an affected entity if it 2 modification under a reliability safety performance rates or CO emission goals can be reliably measured in a manner 2 valve allows modification to emission are met. In addition, the following that can be replicated. standards under the State plan for an provisions in paragraphs (b) through (d) affected EGU or EGUs for an initial (2) A State measure is verifiable with of this section may apply. period of up to 90 days. During that respect to an affected entity if adequate (b) You may submit revisions to a period of time, the affected EGU or monitoring, recordkeeping and plan to adjust CO2 emission goals EGUs will need to comply with the reporting requirements are in place to according to § 60.5855(d). modified emission standards identified enable the State to independently (c) If your State is required to submit in the initial notification required under evaluate, measure, and verify a notification according to § 60.5870(d) § 60.5870(g)(1) or amended in the compliance with the State measure. indicating a triggering of corrective second notification required under (3) A State measure is non-duplicative measures as described in § 60.5870(g)(2). For the duration of the with respect to an affected entity if it is § 60.5740(a)(2)(i) and your plan does not up to 90-day short-term modification, not already incorporated as a State already include corrective measures to the CO2 emissions of the affected EGU measure or an emission standard in be implemented if triggered, you must or EGUs that exceed their obligations another State plan or State plan revise your State plan to include under the originally approved State plan supporting material unless incorporated corrective measures to be implemented. will not be counted against the State’s in a multi-State plan. The corrective measures must ensure CO2 emission performance rate or CO2 (4) A State measure is permanent with achievement of the CO2 emission emission goal. The EPA reserves the respect to an affected entity if the State performance rates or State CO2 emission right to review any such notification measure must be met for at least each goal. Additionally, the corrective required under § 60.5870(g), and, in the compliance period, or unless either it is measures must achieve additional CO2 event that the EPA finds such replaced by another State measure in an emission reductions to offset any CO2 notification is improper, the EPA may approved plan revision, or the State emission performance shortfall relative disallow the short-term modification demonstrates in an approved plan to the overall interim period or final and affected EGUs must continue to revision that the emission reductions period CO2 emission performance rate operate under the approved State plan from the State measure are no longer or State CO2 emission goal. The State emission standards. As described more necessary for the State’s affected EGUs plan revision submission must explain fully in § 60.5870(g)(3), at least seven to meet their mass-based CO2 emission how the corrective measures both make days before the end of the initial 90-day goal. up for the shortfall and address the State reliability safety valve period, the State (5) A State measure is enforceable plan deficiency that caused the must notify the appropriate EPA against an affected entity if: shortfall. The State must submit the regional office whether the reliability (i) A technically accurate limitation or revised plan and explanation to the EPA concern has been addressed and the requirement and the time period for the within 24 months after submitting the affected EGU or EGUs can resume limitation or requirement are specified; State report required in § 60.5870(a) meeting the original emission standards (ii) Compliance requirements are indicating the CO2 emission established in the State plan prior to the clearly defined; performance deficiency in lieu of the short-term modification or whether a

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00288 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64949

serious, ongoing reliability issue must include emission standards and applicable to your State in Table 4 of necessitates the affected EGU or EGUs requirements that specify the allowance this subpart. If you choose this option, emitting beyond the amount allowed system, related compliance the term ‘‘mass-based CO2 goal plus new under the State plan. requirements and mechanisms, and the source CO2 emission complement’’ shall (2) Plan revisions submitted pursuant emission budget as appropriate. These apply rather than ‘‘CO2 mass-based to § 60.5870(g)(3) must meet the requirements must include those listed goal’’ and the term ‘‘CO2 emission goal’’ requirements for State plan revisions in paragraphs (b)(1) through (5) of this shall include ‘‘mass-based CO2 goal plus under § 60.5785(a). section. new source CO2 emission complement’’ (1) CO2 emission monitoring, in these emission guidelines. § 60.5790 What must I do to meet my plan reporting, and recordkeeping obligations? (ii) You may include requirements in requirements for affected EGUs. your State plan for emission budget (a) To meet your plan obligations, you (2) Requirements for State allocation allowance allocation methods that align must demonstrate that your affected of allowances consistent with § 60.5815. incentives to generate to affected EGUs EGUs are complying with their emission (3) Requirements for tracking of or EGUs covered by subpart TTTT of standards as specified in § 60.5740, and allowances, from issuance through this part that result in the affected EGUs you must demonstrate that the emission submission for compliance, consistent meeting the mass-based CO emission standards on affected EGUs, alone or in 2 with § 60.5820. goal; conjunction with any State measures, (4) The process for affected EGUs to (iii) You may submit for the EPA’s are resulting in achievement of the CO2 demonstrate compliance (allowance emission performance rates or statewide ‘‘true-up’’ with reported CO emissions) approval, an equivalent method which 2 requires affected EGUs to meet the CO2 emission goals by affected EGUs consistent with § 60.5825. using the procedures in paragraphs (b) (5) Requirements that address mass-based CO2 emission goal. The EPA will evaluate the approvability of such through (d) of this section. If your plan potential increased CO2 emissions from requires the use of allowances for your new sources, beyond the emissions an alternative method on a case by case affected EGUs to comply with their expected from new sources if affected basis. mass-based emission standards, you EGUs were given emission standards in (c) If you submit a plan that sets rate- must follow the requirements under the form of the subcategory-specific CO2 based emission standards on your paragraph (b) of this section and emission performance rates. You may affected EGUs, to meet the requirements § 60.5830. If your plan requires the use meet this requirement by requiring one of § 60.5775, you must follow the of ERCs for your affected EGUs to of the options under paragraphs (b)(5)(i) requirements in paragraphs (c)(1) comply with their rate-based emission through (iii) of this section. through (4) of this section. standards, you must follow the (i) You may include, as part of your (1) You must require the owner or requirements under paragraphs (c) and plan’s supporting documentation, operator of each affected EGU covered (d) of this section and §§ 60.5795 requirements enforceable as a matter of by your plan to calculate an adjusted through 60.5805. State law regulating CO2 emissions from CO2 emission rate to demonstrate (b) If you submit a plan that sets a EGUs covered by subpart TTTT of this compliance with its emission standard mass-based emission trading program part under the mass-based CO2 goal plus by factoring stack emissions and any for your affected EGUs, the State plan new source CO2 emission complement ERCs into the following equation:

Where: (ii) An ERC must represent one MWh (c)(1) of this section if it does not meet CO2 emission rate = An affected EGU’s of actual energy generated or saved with the requirements of paragraph (c)(2) of adjusted CO2 emission rate that will be zero associated CO2 emissions. this section or if any State has used that used to determine compliance with the (iii) An ERC must only be issued to same ERC for purposes of demonstrating applicable CO2 emission standard. an eligible resource that meets the achievement of a CO2 emission MCO2 = Measured CO2 mass in units of requirements of § 60.5800 or to an performance rate or CO2 emission goal. pounds (lbs) summed over the affected EGU that meets the compliance period for an affected EGU. The plan must additionally include requirements of § 60.5795 and must MWhop = Total net energy output over the provisions that address requirements for compliance period for an affected EGU only be issued by a State or its State revocation or adjustment that apply if in units of MWh. agent through an EPA-approved ERC an ERC issued by the State is tracking system that meets the MWhERC = ERC replacement generation for subsequently found to have been an affected EGU in units of MWh (ERCs requirements of § 60.5810, or by the improperly issued. are denominated in whole integers as EPA through an EPA-administered specified in paragraph (d) of this tracking system. (4) Your plan must include provisions section). (iv) An ERC must be surrendered and either allowing for or restricting banking retired only once for purpose of of ERCs between compliance periods for (2) Your plan must specify that an compliance with this regulation through affected EGUs, and provisions not ERC qualifies for the compliance an EPA-approved ERC tracking system allowing any borrowing of any ERCs demonstration specified in paragraph that meets the requirements of from future compliance periods by (c)(1) of this section if the ERC meets the § 60.5810, or by the EPA through an affected EGUs or eligible resources. requirements of paragraphs (c)(2)(i) EPA-administered tracking system. through (iv) of this section. (3) Your plan must specify that an (i) An ERC must have a unique serial ERC does not qualify for the compliance number. demonstration specified in paragraph

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00289 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 ER23OC15.005 64950 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

Emission Rate Credit Requirements paragraphs (a)(1) through (4) of this (vi) A demand-side EE or demand- section. side management measure that saves § 60.5795 What affected EGUs qualify for (1) Resources qualifying for eligibility electricity and is calculated on the basis generation of ERCs? only include resources that increased of quantified ex post savings, not (a) For issuance of ERCs to the installed electrical generation nameplate ‘‘projected’’ or ‘‘claimed’’ savings; or affected EGUs that generate them, the capacity, or implemented new electrical (vii) A category identified in a State plan must specify the accounting savings measures, on or after January 1, plan and approved by the EPA to method and process for ERC issuance. 2013. If a resource had a nameplate generate ERCs. For plans that require that affected capacity uprate, ERCs may be issued (b) Any resource that does not meet EGUs meet a rate-based CO2 emission only for the difference in generation the requirements of this subpart or an goal, where all affected EGUs have between its uprated nameplate capacity approved State plan cannot be issued identical emission standards, you must and its nameplate capacity prior to the ERCs for use by an affected EGU with specify the accounting method listed in uprate. ERCs must not be issued for its compliance demonstration required paragraph (a)(1) of this section for generation for an uprate that followed a under § 60.5790(c). generating ERCs. For plans that require derate that occurred on or after January (c) ERCs may not be issued to or for affected EGUs to meet the CO2 emission 1, 2013. A resource that is relicensed or any of the following: performance rates or CO2 emission goals receives a license extension is (1) New, modified, or reconstructed where affected EGUs have emission considered existing capacity and is not EGUs that are subject to subpart TTTT standards that are not equal for all an eligible resource, unless it receives a of this part, except CHP units that meet affected EGUs, you must specify the capacity uprate as a result of the the requirements of a CHP unit under accounting methods listed in paragraphs relicensing process that is reflected in paragraph (a); (a)(1) and (2) of this section for its relicensed permit. In such a case, (2) EGUs that do not meet the generating ERCs. only the difference in nameplate applicability requirements of §§ 60.5845 (1) You must include the calculation capacity between its relicensed permit and 60.5850, except CHP units that meet method for determining the number of and its prior permit is eligible to be the requirements of a CHP unit under ERCs, denominated in MWh, that may issued ERCs. paragraph (a); (3) Measures that reduce CO be generated by and issued to an (2) The resource must be connected 2 emissions outside the electric power affected EGU that is in compliance with to, and deliver energy to or save sector, including, for example, GHG its emission standard, based on the electricity on, the electric grid in the offset projects representing emission difference between its emission contiguous United States. reductions that occur in the forestry and standard and its reported CO2 emission (3) The resource must be located in agriculture sectors, direct air capture, rate for the compliance period; and either: (2) You must include the calculation and crediting of CO2 emission (i) A State whose affected EGUs are method for determining the number of reductions that occur in the subject to rate-based emission standards ERCs, denominated in MWh, that may transportation sector as a result of pursuant to this regulation; or be issued to affected EGUs that meet the vehicle electrification; and (ii) A State with a mass-based CO definition of a stationary combustion 2 (4) Any measure not approved by the emission goal, and the resource can turbine based on the displaced EPA for issuance of ERCs in connection demonstrate (e.g., through a power emissions from affected EGUs not with a specific State plan. purchase agreement or contract for meeting the definition of a stationary (d) You must include the appropriate delivery) that the electricity generated is combustion turbine, resulting from the requirements in paragraphs (d)(1) delivered with the intention to meet difference between its annualized net through (3) of this section for an load in a State with affected EGUs energy output in MWh for the calendar applicable eligible resource in your which are subject to rate-based emission year(s) in the compliance period and its plan. standards pursuant to this regulation, net energy output in MWh for the 2012 (1) If qualified biomass is an eligible and was treated as a generation resource calendar year (January 1, 2012, through resource, the plan must include a used to serve regional load that December 31, 2012). description of why the proposed included the State whose affected EGUs (b) Any ERCs generated through the feedstocks or feedstock categories are subject to rate-based emission method described as required by should qualify as an approach for standards. Notwithstanding any other paragraph (a)(2) of this section must not controlling increases of CO2 levels in provision of paragraph (a)(4) of this be used by any affected EGUs other than the atmosphere as well as the proposed section, the only type of eligible steam generating units or IGCCs to valuation of biogenic CO2 emissions. In resource in the State with mass-based demonstrate compliance as prescribed addition, for sustainably-derived emission standards is renewable under § 60.5790(c)(1). agricultural and forest biomass (c) Any states in a multi-State plan generating technologies listed in (a)(4)(i) feedstocks, the state plan must that requires the use of ERCs for affected of this section. adequately demonstrate that such EGUs to comply with their emission (4) The resource falls into one of the feedstocks appropriately control standards must have functionally following categories of resources: increases of CO2 levels in the equivalent requirements pursuant to (i) Renewable electric generating atmosphere and methods for adequately paragraphs (a)(1) and (2) of this section technologies using one of the following monitoring and verifying these for generating ERCs. renewable energy resources: Wind, feedstock sources and related solar, geothermal, hydro, wave, tidal; sustainability practices. For all qualified § 60.5800 What other resources qualify for (ii) Qualified biomass; biomass feedstocks, plans must specify issuance of ERCs? (iii) Waste-to-energy (biogenic portion how biogenic CO2 emissions will be (a) ERCs may only be issued for only); monitored and reported, and identify generation or savings produced on or (iv) Nuclear power; specific EM&V, tracking and auditing after January 1, 2022, to a resource that (v) A non-affected combined heat and approaches. qualifies as an eligible resource because power (CHP) unit, including waste heat (2) If waste-to-energy is an eligible it meets each of the requirements in power; resource, the plan must assess both the

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00290 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64951

capacity to strengthen existing or (b) Registration. Your plan must the period it does not meet the implement new waste reduction, reuse, require that any affected EGU or eligible requirements of your State plan. recycling and composting programs, and resource register with an ERC tracking measures to minimize any potential system that meets the requirements of § 60.5810 What applicable requirements are there for an ERC tracking system? negative impacts of waste-to-energy § 60.5810 prior to the issuance of ERCs, operations on such programs. and your plan must specify that you (a) Your plan must include provisions Additionally the plan must include a will only register an affected EGU or for an ERC tracking system, if method for determining the proportion eligible resource after you approve its applicable, that meets the following of total MWh generation from a waste- eligibility application and determine requirements: to-energy facility that is eligible for use that the requirements of paragraph (a) of (1) It electronically records the issuance of ERCs, transfers of ERCs in adjusting a CO2 emission rate (i.e., this section are met. that which is generated from biogenic (c) M&V reports. For an eligible among accounts, surrender of ERCs by materials). resource registered pursuant to affected EGUs as part of a compliance demonstration, and retirement or (3) If carbon capture and utilization paragraph (b) of this section, your plan cancellation of ERCs; and (CCU) is an eligible resource in a plan, must require that, prior to issuance of ERCs by you, the owner or operator (2) It documents and provides the plan must include analysis electronic, internet-based public access supporting how the proposed qualifying must submit the following: (1) An M&V report that meets the to all information that supports the CCU technology results in CO2 emission eligibility of eligible resources and mitigation from affected EGUs and requirements of your State plan as approved by the EPA as meeting issuance of ERCs and functionality to provide monitoring, reporting, and generate reports based on such verification requirements to § 60.5835; and (2) A verification report from an information, which must include, for demonstrate the reductions. each ERC, an eligibility application, (e) States and areas of Indian country independent verifier that verifies that the requirements for the M&V report are EM&V plan, M&V reports, and that do not have any affected EGUs, and independent verifier verification other countries, may provide ERCs to met. (e) Issuance of ERCs. Your plan must reports. adjust CO emissions provided they are 2 specify your procedure for issuance of (b) If approved in a State plan, an ERC connected to the contiguous U.S. grid ERCs based on your review of an M&V tracking system may provide for and meet the other requirements for report and verification report, and must transfers of ERCs to or from another ERC eligibility and eligible resources and the require that ERCs be issued only on the tracking system approved in a State issuance of ERCs included in these basis of energy actually generated or plan, or provide for transfers of ERCs to emission guidelines, except that such saved, and that only one ERC is issued or from an EPA-administered ERC States and other countries may not for each verified MWh. tracking system used to administer a provide ERCs from resources described (f) Tracking system. Your plan must Federal plan. in § 60.5800(a)(4)(vi). require that ERCs may only be issued Mass Allocation Requirements § 60.5805 What is the process for the through an ERC tracking system issuance of ERCs? approved as part of the State plan. § 60.5815 What are the requirements for (g) Error adjustment. Your plan must State allocation of allowances in a mass- If your plan uses ERCs your plan must based program? include the process and requirements include a mechanism to adjust the (a) For a mass-based trading program, for issuance of ERCs to affected EGUs number of ERCs issued if any are issued a State plan must include requirements and eligible resources set forth in based on error (clerical, formula input for CO allowance allocations according paragraphs (a) through (f) of this section. error, etc.). 2 (h) Qualification status of an eligible to paragraphs (b) through (f) of this (a) Eligibility application. Your plan resource. Your plan must include a section. must require that, to receive ERCs, the mechanism to temporarily or (b) Provisions for allocation of owner or operator must submit an permanently revoke the qualification allowances for each compliance period eligibility application to you that status of an eligible resource, such that prior to the beginning of the compliance demonstrates that the requirements of it can no longer be issued ERCs for at period. your State plan as approved by the EPA least the duration that it does not meet (c) Provisions for allocation of set- as meeting § 60.5795 (for an affected the requirements for being issued ERCs aside allowance, if applicable, must be EGU) or § 60.5800 (for an eligible in your State plan. established to ensure that the eligible resource) are met, and, in the case of an (i) Qualification status of an resources must meet the same eligible resource, includes at a independent verifier—(1) Eligibility. To requirements for the ERC eligible minimum: be an independent verifier, a person resource requirements of § 60.5800, and (1) Documentation that the eligibility must be approved by the State as: the State must include eligibility application has only been submitted to (A) An independent verifier, as application and verification provisions you, or pursuant to an EPA-approved defined by this regulation; and equivalent to those for ERCs in multi-State collaborative approach; (B) Eligible to verify eligibility § 60.5805 and EM&V plan and M&V (2) An EM&V plan that meets the applications, EM&V plans, and/or M&V report provisions that meet the requirements of the State plan as reports per the requirements of the requirements of § 60.5830 and approved by the EPA as meeting approved State plan as meeting § 60.5835. § 60.5830; and §§ 60.5830 and 60.5835 respectively. (d) Provisions for adjusting (3) A verification report from an (2) Revocation of qualification. Your allocations if the affected EGUs or independent verifier that verifies the plan must include a mechanism to eligible resources are incorrectly eligibility of the eligible resource to be temporarily or permanently revoke the allocated CO2 allowances. issued an ERC and that the EM&V plan qualification status of an independent (e) Provisions allowing for or meets the requirements of the State plan verifier, such that it can no longer verify restricting banking of allowances as approved by the EPA of meeting eligibility applications, EM&V plans or between compliance periods for affected § 60.5805. M&V reports for at least the duration of EGUs.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00291 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64952 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

(f) Provisions not allowing any Evaluation Measurement and § 60.5805, in support of the issuance of borrowing of allowances from future Verification Plans and Monitoring and an ERC or set-aside allocation that can compliance periods by affected EGUs. Verification Reports be used in accordance with § 60.5790, must meet the requirements of this § 60.5820 What are my allowance tracking § 60.5830 What are the requirements for section. requirements? EM&V plans for eligible resources? (b) Your plan must require that each (a) Your plan must include provisions (a) If your plan requires your affected M&V report include the following: for an allowance tracking system, if EGUs to meet their emission standards (1) For the first M&V report applicable, that meets the following in accordance with § 60.5790, your plan submitted, documentation that the requirements: must include requirements that any energy-generating resources, energy- (1) It electronically records the EM&V plan that is submitted in saving measures, or practices were issuance of allowances, transfers of accordance with the requirements of installed or implemented consistent allowances among accounts, surrender § 60.5805, in support of the issuance of with the description in the approved of allowances by affected EGUs as part an ERC or set-aside allowance that can eligibility application required in of a compliance demonstration, and be used in accordance with § 60.5790, § 60.5805(a). retirement of allowances; and must meet the EM&V criteria approved (2) Each M&V report submitted must (2) It documents and provides as part of your State plan. include the following: electronic, internet-based public access (b) Your plan must require each (i) Identification of the time period to all information that supports the EM&V plan to include identification of covered by the M&V report; eligibility of eligible resources and the eligible resource. (ii) A description of how relevant issuance of set aside allowances, if (c) Your plan must require that an quantification methods, protocols, applicable, and functionality to generate EM&V plan must contain specific guidelines, and guidance specified in reports based on such information, criteria, as applicable to the specific the EM&V plan were applied during the which must include, for each set aside eligible resource. reporting period to generate the allowance, an eligibility application, (1) For RE resources, your plan must quantified MWh of generation or MWh EM&V plan, M&V reports, and include requirements discussing how of energy savings; independent verifier verification the generation data will be physically (iii) Documentation (including data) reports. measured on a continuous basis using, of the energy generation and/or energy (b) If approved in a State plan, an for example, a revenue-quality meter. savings from any activity, project, (2) For demand-side EE, your plan allowance tracking system may provide measure, resource, or program must require that each EM&V plan for transfers of allowances to or from addressed in the EM&V plan, quantified quantify and verify electricity savings another allowance tracking system and verified in MWh for the period on a retrospective (ex-post) basis using approved in a State plan, or provide for covered by the M&V report, in industry best-practice EM&V protocols transfers of allowances to or from an accordance with its EM&V plan, and and methods that yield accurate and EPA-administered allowance tracking based on ex-post energy generation or reliable measurements of electricity system used to administer a Federal savings; and savings. Your plan must also require plan. (iv) Documentation of any change in each EM&V plan to include an the energy generation or savings § 60.5825 What is the process for affected assessment of the independent factors capability of the eligible resource from EGUs to demonstrate compliance in a that influence the electricity savings, the mass-based program? the description of the resource in the expected life of the savings (in years), approved eligibility application during (a) A plan must require an affected and a baseline that represents what the period covered by the M&V report EGU’s owners or operators to would have happened in the absence of and the date on which the change demonstrate compliance with emission the demand-side EE activity. occurred, and/or demonstration that the standards in a mass based program by Additionally, your plan must require eligible resource continued to meet the holding an amount of allowances not that each EM&V plan include a requirements of § 60.5800. less than the tons of total CO2 emissions demonstration of how the industry best- for such compliance period from the practices protocol and methods were Applicability of Plans to Affected EGUs affected EGUs in the account for the applied to the specific activity, project, affected EGU’s emissions in the measure, or program covered in the § 60.5840 Does this subpart directly affect EGU owners or operators in my State? allowance tracking system required EM&V plan, and include an explanation under § 60.5820 during the applicable of why these protocols or methods were (a) This subpart does not directly compliance period. selected. EM&V plans must require affect EGU owners or operators in your (b) In a mass-based trading program a eligible resources to demonstrate how State. However, affected EGU owners or plan may allow multiple affected EGUs all such best-practice approaches will be operators must comply with the plan co-located at the same facility to applied for the purposes of quantifying that a State or States develop to demonstrate that they are meeting the and verifying MWh results. Subsequent implement the emission guidelines applicable emission standards on a reporting of demand-side EE savings contained in this subpart. facility-wide basis by the owner or values must demonstrate and explain (b) If a State does not submit a final operator holding enough allowances to how the EM&V plan was followed. plan to implement and enforce the cover the CO2 emissions of all the emission guidelines contained in this affected EGUs at the facility. § 60.5835 What are the requirements for subpart, or an initial submittal for (1) If there are not enough allowances M&V reports for eligible resources? which an extension to submit a final to cover the facility’s affected EGUs’ (a) If your plan requires your affected plan can be granted, by September 6, CO2 emissions then there must be EGUs to meet their emission standards 2016, or the EPA disapproves a final provisions for determining the in accordance with § 60.5790, your plan plan, the EPA will implement and compliance status of each affected EGU must include requirements that any enforce a Federal plan, as provided in located at that facility. M&V report that is submitted in § 60.5720, applicable to each affected (2) [Reserved] accordance with the requirements of EGU within the State that commenced

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00292 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64953

construction on or before January 8, (f) EGUs that serve a generator along same form, either both rate (in units of 2014. with other steam generating unit(s), pounds per net MWh) or both mass (in IGCC(s), or stationary combustion tons); and § 60.5845 What affected EGUs must I turbine(s) where the effective generation (2) You must set interim step goals address in my State plan? capacity (determined based on a that will either on average or (a) The EGUs that must be addressed prorated output of the base load rating cumulatively meet the State’s interim by your plan are any affected steam of each steam generating unit, IGCC, or period goal, as applicable to a rate-based generating unit, IGCC, or stationary stationary combustion turbine) is 25 or mass-based CO2 emission goal. combustion turbine that commenced MW or less; (d) Your plan’s interim period and construction on or before January 8, (g) EGUs that are a municipal waste final period CO2 emission goals required 2014. combustor unit that is subject to subpart to be met pursuant to paragraph (b)(1) (b) An affected EGU is a steam Eb of this part; and or (2) of this section, may be changed in generating unit, IGCC, or stationary (h) EGUs that are a commercial or the plan only according to situations combustion turbine that meets the industrial solid waste incineration unit listed in paragraphs (d)(1) through (3) of relevant applicability conditions that is subject to subpart CCCC of this this section. If a situation requires a specified in paragraph (b)(1) through (3) part. plan revision, you must follow the of this section, as applicable, except as procedures in § 60.5785 to submit a plan provided in § 60.5850. § 60.5855 What are the CO2 emission revision. (1) Serves a generator or generators performance rates for affected EGUs?

connected to a utility power distribution (1) If your plan implements CO2 (a) You must require, in your plan, emission goals, you may submit a plan system with a nameplate capacity emission standards on affected EGUs to greater than 25 MW-net (i.e., capable of or plan revision, allowed in § 60.5785, meet the CO2 emission performance to make corrections to them, subject to selling greater than 25 MW of rates listed in Table 1 of this subpart electricity); EPA’s approval, as a result of changes in except as provided in paragraph (b) of the inventory of affected EGUs; and (2) Has a base load rating (i.e., design this section. In addition, you must set heat input capacity) greater than 260 GJ/ (2) If you elect to require your affected CO2 emission performance rates for the EGUs to meet emission standards to hr (250 MMBtu/hr) heat input of fossil interim steps, according to paragraph meet mass-based CO2 emission goals in fuel (either alone or in combination (a)(1) of this section, except as provided with any other fuel); and your plan, you may elect to incorporate, in paragraph (b) of this section. as a matter of state law, the mass (3) Stationary combustion turbines (1) You must set CO emission that meet the definition of either a 2 emissions from EGUs that are subject to performance rates for your affected combined cycle or combined heat and subpart TTTT of this part that are EGUs to meet during the interim step power combustion turbine. considered new affected EGUs under periods on average and as applicable for subpart TTTT of this part. § 60.5850 What EGUs are excluded from the two subcategories of affected EGUs. (e) If your plan relies upon State being affected EGUs? (2) [Reserved] measures in addition to or in lieu of EGUs that are excluded from being (b) You may elect to require your emission standards, you must only use affected EGUs are: affected EGUs to meet emission the mass-based goals allowed for in

(a) EGUs that are subject to subpart standards that differ from the CO2 paragraph (b)(2) of this section to TTTT of this part as a result of emission performance rates listed in demonstrate that your affected EGUs are commencing construction after the Table 1 of this subpart, provided that meeting the required emissions subpart TTTT applicability date; you demonstrate that the affected EGUs performance. (b) Steam generating units and IGCCs in your State will collectively meet their (f) Nothing in this subpart precludes that are, and always have been, subject CO2 emission performance rate by an affected EGU from complying with to a federally enforceable permit achieving statewide emission goals that its emission standard or you from limiting annual net-electric sales to one- are equivalent and no less stringent than meeting your obligations under the State third or less of its potential electric the CO2 emission performance rates plan. output, or 219,000 MWh or less; listed in Table 1, and provided that your (c) Non-fossil units (i.e., units that are equivalent statewide CO2 emission goals § 60.5860 What applicable monitoring, capable of combusting 50 percent or take one of the following forms: recordkeeping, and reporting requirements more non-fossil fuel) that have always (1) Average statewide rate-based CO2 do I need to include in my plan for affected historically limited the use of fossil emission goals listed in Table 2 of this EGUs? fuels to 10 percent or less of the annual subpart, except as provided in (a) Your plan must include capacity factor or are subject to a paragraphs (c) and (d); or monitoring for affected EGUs that is no federally enforceable permit limiting (2) Cumulative statewide mass-based less stringent than what is described in fossil fuel use to 10 percent or less of CO2 emission goals listed in Table 3 of (a)(1) through (8) of this section. the annual capacity factor; this subpart, except as provided in (1) The owner or operator of an (d) Stationary combustion turbines paragraphs (c) and (d) of this section. affected EGU (or group of affected EGUs not capable of combusting natural gas (c) If your plan meets CO2 emission that share a monitored common stack) (e.g., not connected to a natural gas goals listed in paragraphs (b)(1) or (2) of that is required to meet rate-based or pipeline); this section you must develop your own mass-based emission standards must (e) EGUs that are combined heat and interim step goals and final reporting prepare a monitoring plan in accordance power units that have always period goal for your affected EGUs to with the applicable provisions in historically limited, or are subject to a meet either on average (in the case of § 75.53(g) and (h) of this chapter, unless federally enforceable permit limiting, rate-based goals) or cumulatively (in the such a plan is already in place under annual net-electric sales to a utility case of mass-based goals). Additionally another program that requires CO2 mass distribution system to no more than the the following applies if you develop emissions to be monitored and reported greater of either 219,000 MWh or the your own goals: according to part 75 of this chapter. product of the design efficiency and the (1) The interim period and interim (2) For rate-based emission standards, potential electric output; steps CO2 emission goals must be in the each compliance period shall include

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00293 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64954 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

only ‘‘valid operating hours’’ in the section), calculate the hourly CO2 mass section), multiply the hourly tons/hr compliance period, i.e., full or partial emission rate (tons/hr), either from CO2 mass emission rate from paragraph unit (or stack) operating hours for Equation F–11 in Appendix F to part 75 (a)(4)(ii) of this section by the EGU or which: of this chapter (if CO2 concentration is stack operating time in hours (as (i) ‘‘Valid data’’ (as defined in measured on a wet basis), or by defined in § 72.2 of this chapter), to § 60.5880) are obtained for all of the following the procedure in section 4.2 of convert it to tons of CO2. Then, multiply parameters used to determine the hourly Appendix F to part 75 of this chapter (if the result by 2,000 lbs/ton to convert it CO2 mass emissions (lbs). For the CO2 concentration is measured on a dry to lbs. purposes of this subpart, substitute data basis). (iv) The hourly CO2 tons/hr values recorded under part 75 of this chapter (iii) Next, multiply each hourly CO2 and EGU (or stack) operating times used are not considered to be valid data; and mass emission rate by the EGU or stack to calculate CO2 mass emissions are (ii) The corresponding hourly net operating time in hours (as defined in required to be recorded under § 75.57(e) energy output value is also valid data § 72.2 of this chapter), to convert it to of this chapter and must be reported (Note: For operating hours with no tons of CO2. Multiply the result by 2,000 electronically under § 75.64(a)(6), if useful output, zero is considered to be lbs/ton to convert it to lbs. required by a plan. You must use these a valid value). (iv) The hourly CO2 tons/hr values data, or equivalent data, to calculate the (3) For rate-based emission standards, and EGU (or stack) operating times used hourly CO2 mass emissions. the owner or operator of an affected to calculate CO2 mass emissions are (v) Sum all of the hourly CO2 mass EGU must measure and report the required to be recorded under § 75.57(e) emissions values (lb) from paragraph hourly CO2 mass emissions (lbs) from of this chapter and must be reported (a)(4)(iii) of this section over the entire each affected unit using the procedures electronically under § 75.64(a)(6), if compliance period. in paragraphs (a)(3)(i) through (vi) of required by a plan. The owner or (vi) The owner or operator of an this section, except as otherwise operator must use these data, or affected EGU may determine site- provided in paragraph (a)(4) of this equivalent data, to calculate the hourly specific carbon-based F-factors (Fc) section. CO2 mass emissions. using Equation F–7b in section 3.3.6 of (i) The owner or operator of an (v) Sum all of the hourly CO2 mass appendix F to part 75 of this chapter, affected EGU must install, certify, emissions values from paragraph and may use these Fc values in the operate, maintain, and calibrate a CO2 (a)(3)(ii) of this section over the entire emissions calculations instead of using continuous emissions monitoring compliance period. the default Fc values in the Equation G– system (CEMS) to directly measure and (vi) For each continuous monitoring 4 nomenclature. record CO2 concentrations in the system used to determine the CO2 mass (5) For both rate-based and mass- affected EGU exhaust gases emitted to emissions from an affected EGU, the based standards, the owner or operator the atmosphere and an exhaust gas flow monitoring system must meet the of an affected EGU (or group of affected rate monitoring system according to applicable certification and quality units that share a monitored common § 75.10(a)(3)(i) of this chapter. As an assurance procedures in § 75.20 of this stack) must install, calibrate, maintain, alternative to direct measurement of chapter and Appendices A and B to part and operate a sufficient number of watt CO2 concentration, provided that the 75 of this chapter. meters to continuously measure and affected EGU does not use carbon (4) The owner or operator of an record on an hourly basis net electric separation (e.g., carbon capture and affected EGU that exclusively combusts output. Measurements must be storage), the owner or operator of an liquid fuel and/or gaseous fuel may, as performed using 0.2 accuracy class affected EGU may use data from a an alternative to complying with electricity metering instrumentation and certified oxygen (O2) monitor to paragraph (a)(3) of this section, calibration procedures as specified calculate hourly average CO2 determine the hourly CO2 mass under ANSI Standards No. C12.20. concentrations, in accordance with emissions according to paragraphs Further, the owner or operator of an § 75.10(a)(3)(iii) of this chapter. (a)(4)(i) through (a)(4)(vi) of this section. affected EGU that is a combined heat However, when an O2 monitor is used (i) Implement the applicable and power facility must install, this way, it only quantifies the procedures in appendix D to part 75 of calibrate, maintain and operate combustion CO2; therefore, if the EGU is this chapter to determine hourly EGU equipment to continuously measure and equipped with emission controls that heat input rates (MMBtu/hr), based on record on an hourly basis useful thermal produce non-combustion CO2 (e.g., from hourly measurements of fuel flow rate output and, if applicable, mechanical sorbent injection), this additional CO2 and periodic determinations of the gross output, which are used with net electric must be accounted for, in accordance calorific value (GCV) of each fuel output to determine net energy output. with section 3 of appendix G to part 75 combusted. The fuel flow meter(s) used The owner or operator must use the of this chapter. If CO2 concentration is to measure the hourly fuel flow rates following procedures to calculate net measured on a dry basis, the owner or must meet the applicable certification energy output, as appropriate for the operator of the affected EGU must also and quality-assurance requirements in type of affected EGU(s). install, certify, operate, maintain, and sections 2.1.5 and 2.1.6 of appendix D (i) Determine Pnet the hourly net calibrate a continuous moisture to part 75 (except for qualifying energy output in MWh. For rate-based monitoring system, according to commercial billing meters). The fuel standards, perform this calculation only § 75.11(b) of this chapter. Alternatively, GCV must be determined in accordance for valid operating hours (as defined in the owner or operator of an affected with section 2.2 or 2.3 of appendix D, paragraph (a)(2) of this section). For EGU may either use an appropriate fuel- as applicable. mass-based standards, perform this specific default moisture value from (ii) For each measured hourly heat calculation for all unit (or stack) § 75.11(b) or submit a petition to the input rate, use Equation G–4 in operating hours, i.e., full or partial Administrator under § 75.66 of this Appendix G to part 75 of this chapter to hours in which any fuel is combusted. chapter for a site-specific default calculate the hourly CO2 mass emission (ii) If there is no net electrical output, moisture value. rate (tons/hr). but there is mechanical or useful (ii) For each ‘‘valid operating hour’’ (iii) For each ‘‘valid operating hour’’ thermal output, either for a particular (as defined in paragraph (a)(2) of this (as defined in paragraph (a)(2) of this valid operating hour (for rate-based

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00294 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64955

applications), or for a particular hour must be used in the compliance the following equation. All terms in the operating hour (for mass-based determination. For hours or partial equation must be expressed in units of applications), the owner or operator of hours where the gross electric output is MWh. To convert each hourly net the affected EGU must still determine equal to or less than the auxiliary loads, energy output value reported under part the net energy output for that hour. net electric output shall be counted as 75 of this chapter to MWh, multiply by (iii) For rate-based applications, if zero for this calculation. the corresponding EGU or stack there is no (i.e., zero) gross electrical, (iv) Calculate Pnet for your affected operating time. mechanical, or useful thermal output for EGU (or group of affected EGUs that a particular valid operating hour, that share a monitored common stack) using

Where: atmosphere through multiple stacks (or Pnet = Net energy output of your affected EGU if the exhaust gases are routed to a for each valid operating hour (as defined common stack through multiple ducts in 60.5860(a)(2)) in MWh. Where: and you elect to monitor in the ducts), (Pe)ST = Electric energy output plus Qm = Measured steam flow in kilograms (kg) the hourly CO2 mass emissions and the mechanical energy output (if any) of (or pounds (lbs)) for the operating hour. steam turbines in MWh. ‘‘stack operating time’’ (as defined in H = Enthalpy of the steam at measured § 72.2 of this chapter) at each stack or (Pe)CT = Electric energy output plus temperature and pressure (relative to duct must be monitored separately. In mechanical energy output (if any) of SATP conditions or the energy in the stationary combustion turbine(s) in condensate return line, as applicable) in this case, the owner or operator of an MWh. Joules per kilogram (J/kg) (or Btu/lb). affected EGU must determine (Pe)IE = Electric energy output plus CF = Conversion factor of 3.6 x 109 J/MWh compliance with an applicable mechanical energy output (if any) of or 3.413 x 106 Btu/MWh. emissions standard by summing the CO2 your affected EGU’s integrated (vi) For rate-based standards, sum all mass emissions measured at the equipment that provides electricity or individual stacks or ducts and dividing mechanical energy to the affected EGU or of the values of Pnet for the valid operating hours (as defined in paragraph by the net energy output for the affected auxiliary equipment in MWh. EGU. (Pe)A = Electric energy used for any auxiliary (a)(2) of this section), over the entire loads in MWh. compliance period. Then, divide the (8) Consistent with § 60.5775 or § 60.5780, if two or more affected EGUs (Pt)PS = Useful thermal output of steam total CO2 mass emissions for the valid (measured relative to SATP conditions, operating hours from paragraph (a)(3)(v) serve a common electric generator, you as applicable) that is used for or (a)(4)(v) of this section, as applicable, must apportion the combined hourly net energy output to the individual affected applications that do not generate by the sum of the Pnet values for the additional electricity, produce valid operating hours plus any ERC EGUs according to the fraction of the mechanical energy output, or enhance replacement generation (as shown in total steam load contributed by each the performance of the affected EGU. EGU. Alternatively, if the EGUs are This is calculated using the equation § 60.5790(c)), to determine the CO2 emissions rate (lb/net MWh) for the identical, you may apportion the specified in paragraph (a)(5)(v) of this combined hourly net electrical load to section in MWh. compliance period. the individual EGUs according to the (Pt)HR = Non-steam useful thermal output (vii) For mass-based standards, sum (measured relative to SATP conditions, all of the values of Pnet for all operating fraction of the total heat input as applicable) from heat recovery that is hours, over the entire compliance contributed by each EGU. used for applications other than steam period. (b) For mass-based standards, the generation or performance enhancement (6) In accordance with § 60.13(g), if owner or operator of an affected EGU of the affected EGU in MWh. two or more affected EGUs must determine the CO2 mass emissions (Pt)IE = Useful thermal output (relative to implementing the continuous emissions (tons) for the compliance period as SATP conditions, as applicable) from monitoring provisions in paragraph follows: any integrated equipment is used for (a)(2) of this section share a common (1) For each operating hour, calculate applications that do not generate the hourly CO mass (tons) according to additional steam, electricity, produce exhaust gas stack and are subject to the 2 mechanical energy output, or enhance same emissions standard, the owner or paragraph (a)(3) or (4) of this section, the performance of the affected EGU in operator may monitor the hourly CO2 except that a complete data record is MWh. mass emissions at the common stack in required, i.e., CO2 mass emissions must TDF = Electric Transmission and Distribution lieu of monitoring each EGU separately. be reported for each operating hour. Factor of 0.95 for a combined heat and If an owner or operator of an affected Therefore, substitute data values power affected EGU where at least on an EGU chooses this option, the hourly net recorded under part 75 of this chapter annual basis 20.0 percent of the total electric output for the common stack for CO2 concentration, stack gas flow gross or net energy output consists of must be the sum of the hourly net rate, stack gas moisture content, fuel electric or direct mechanical output and electric output of the individual affected flow rate and/or GCV shall be used in 20.0 percent of the total net energy the calculations; and output consist of useful thermal output EGUs and the operating time must be on a 12-operating month rolling average expressed as ‘‘stack operating hours’’ (as (2) Sum all of the hourly CO2 mass basis, or 1.0 for all other affected EGUs. defined in § 72.2 of this chapter). emissions values over the entire (7) In accordance with § 60.13(g), if compliance period. (v) If applicable to your affected EGU the exhaust gases from an affected EGU (3) The owner or operator of an (for example, for combined heat and implementing the continuous emissions affected EGU must install, calibrate, power), you must calculate (Pt)PS using monitoring provisions in paragraph maintain, and operate a sufficient the following equation: (a)(2) of this section are emitted to the number of watt meters to continuously

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00295 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 ER23OC15.006 ER23OC15.007 64956 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

measure and record on an hourly basis with a unique serial identification reporting the information specified in net electric output. Measurements must number was surrendered and/or retired. those paragraphs, the owner or operator be performed using 0.2 accuracy class (d) Your plan must require the owner may report: electricity metering instrumentation and or operator of an affected EGU covered (A) The cumulative annual CO2 mass calibration procedures as specified by your plan to include in a report emissions (tons) for each year of the under ANSI Standards No. C12.20. submitted to you at the end of each compliance period, derived from the Further, the owner or operator of an compliance period the information in electronic emissions report for the affected EGU that is a combined heat paragraphs (d)(1) through (5) of this fourth calendar quarter of that year, and power facility must install, section. submitted to EPA under § 75.64(a) of calibrate, maintain and operate (1) Owners or operators of an affected this chapter; and equipment to continuously measure and EGU must include in the report all (B) The sum of the cumulative annual record on an hourly basis useful thermal hourly CO2 emissions, for each affected CO2 mass emissions values from output and, if applicable, mechanical EGU (or group of affected EGUs that paragraph (c)(3)(v)(A) of this section, if output, which are used with net electric share a monitored common stack). the compliance period includes output to determine net energy output (2) For rate-based standards, each multiple years. (Pnet). The owner or operator must report must include: (4) For each affected EGU’s calculate net energy output according to (i) The hourly CO2 mass emission rate compliance period, the report must also paragraphs (a)(5)(i)(A) and (B) of this values (tons/hr) and unit (or stack) include the applicable emission section. operating times, (as monitored and standard and demonstration that it met (c) Your plan must require the owner reported according to part 75 of this the emission standard. An owner or or operator of each affected EGU chapter), for each valid operating hour operator must also include in the report covered by your plan to maintain the in the compliance period; the affected EGU’s calculated emission (ii) The net electric output and the net records, as described in paragraphs performance as a CO2 emission rate or (b)(1) and (2) of this section, for at least energy output (Pnet) values for each valid cumulative mass in units of the 5 years following the date of each operating hour in the compliance emission standard required in compliance period, occurrence, period; §§ 60.5790(b) through (c) and 60.5855, measurement, maintenance, corrective (iii) The calculated CO2 mass as applicable. action, report, or record. emissions (lb) for each valid operating (5) If the owner or operator of an (1) The owner or operator of an hour in the compliance period; affected EGU is complying with an (iv) The sum of the hourly net energy affected EGU must maintain each record emission standard by using ERCs, they output values and the sum of the hourly on site for at least 2 years after the date must include in the report a list of all CO mass emissions values, for all of the of each compliance period, occurrence, 2 unique ERC serial numbers that were valid operating hours in the compliance measurement, maintenance, corrective retired in the compliance period, and, period; action, report, or record, whichever is for each ERC, the date an ERC was (v) ERC replacement generation (if latest, according to § 60.7. The owner or surrendered and retired and eligible any), properly justified (see paragraph operator of an affected EGU may resource identification information maintain the records off site and (c)(5) of this section); and (vi) The calculated CO mass emission sufficient to demonstrate that it meets electronically for the remaining year(s). 2 the requirements of § 60.5800 and (2) The owner or operator of an rate for the compliance period (lbs/net qualifies to be issued ERCs (including affected EGU must keep all of the MWh). location, type of qualifying generation following records, in a form suitable and (3) For mass-based standards, each or savings, date commenced generating readily available for expeditious review: report must include: or saving, and date of generation or (i) All documents, data files, and (i) The hourly CO2 mass emission rate savings for which the ERC was issued). calculations and methods used to value (tons/hr) and unit (or stack) demonstrate compliance with an operating time, as monitored and (6) If the owner or operator of an affected EGU’s emission standard under reported according to part 75 of this affected EGU is complying with an § 60.5775. chapter, for each unit or stack operating emission standard by using allowances, (ii) Copies of all reports submitted to hour in the compliance period; they must include in the report a list of all unique allowance serial numbers the State under paragraph (c) of this (ii) The calculated CO2 mass section. emissions (tons) for each unit or stack that were retired in the compliance (iii) Data that are required to be operating hour in the compliance period, and, for each allowance, the date recorded by 40 CFR part 75 subpart F. period; an allowance was surrendered and (iv) Data with respect to any ERCs (iii) The sum of the CO2 mass retired and if the allowance was a set- generated by the affected EGU or used emissions (tons) for all of the unit or aside allowance the eligible resource by the affected EGU in its compliance stack operating hours in the compliance identification information sufficient to demonstration including the period; demonstrate that it meets the information in paragraphs (c)(2)(iv)(A) (iv) The net electric output and the requirements of § 60.5815(c) and and (B) of this section. net energy output (Pnet) values for each qualifies to be issued set-aside (A) All documents related to any unit or stack operating hour in the allowances (including location, type of ERCs used in a compliance compliance period; and qualifying generation or savings, date demonstration, including each (v) The sum of the hourly net energy commenced generating or saving, and eligibility application, EM&V plan, M&V output values for all of the unit or stack date of generation or savings for which report, and independent verifier operating hours in the compliance the allowance was issued). verification report associated with the period. (e) The owner or operator of an issuance of each specific ERC. (vi) Notwithstanding the requirements affected EGU must follow any (B) All records and reports relating to in paragraphs (c)(3)(i) through (c)(3)(iii) additional requirements for monitoring, the surrender and retirement of ERCs for of this section, if the compliance period recordkeeping and reporting in a plan compliance with this regulation, is a discrete number of calendar years that are required under § 60.5745(a)(4), including the date each individual ERC (e.g., one year, three years), in lieu of if applicable.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00296 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64957

(f) If an affected EGU captures CO2 to information relied upon in support of EGU is in compliance with its emission meet the applicable emission limit, the any continued demonstration that the standard and whether the collective of owner or operator must report in final CO2 emission performance rates or all affected EGUs covered by the State accordance with the requirements of 40 CO2 emissions goals are being achieved. are on schedule to meet the applicable CFR part 98 subpart PP and either: (b) You must keep records of all data CO2 emission performance rate or (1) Report in accordance with the submitted by the owner or operator of emission goal during the performance requirements of 40 CFR part 98 subpart each affected EGU that is used to periods and compliance periods, as RR, if injection occurs on-site; determine compliance with each specified in the plan. (2) Transfer the captured CO2 to an affected EGU emissions standard or (2) The report must include a EGU or facility that reports in requirements in an approved State plan, comparison of the CO2 emission accordance with the requirements of 40 consistent with the affected EGU performance rate or CO2 emission goal CFR part 98 subpart RR, if injection requirements listed in § 60.5860. identified in the State plan for the occurs off-site; or (c) If your State has a requirement for applicable interim step period versus (3) Transfer the captured CO2 to a all hourly CO2 emissions and net the actual average, cumulative, or facility that has received an innovative generation information to be used to adjusted CO2 emission performance (as technology waiver from EPA pursuant calculate compliance with an annual applicable) achieved by all affected to paragraph (g) of this section. emissions standard for affected EGUs, EGUs. (g) Any person may request the any information that is submitted by the (i) For interim step 3, you do not need Administrator to issue a waiver of the owners or operators of affected EGUs to to include a comparison between the applicable interim step 3 CO2 emission requirement that captured CO2 from an the EPA electronically pursuant to affected EGU be transferred to a facility requirements in Part 75 meets the performance rate or emission goal; you reporting under 40 CFR part 98 subpart recordkeeping requirement of this must only submit the average, RR. To receive a waiver, the applicant section and you are not required to keep cumulative or adjusted CO2 emission must demonstrate to the Administrator records of information that would be in performance (as applicable) of your that its technology will store captured duplicate of paragraph (b) of this affected EGUs during that period in units of your applicable CO2 emission CO2 as effectively as geologic section. sequestration, and that the proposed (d) You must keep records at a performance rate or emission goal. (3) The report must include all other technology will not cause or contribute minimum for 10 years, for the interim required information, as specified in to an unreasonable risk to public health, period, and 5 years, for the final period, your State plan according to welfare, or safety. In making this from the date the record is used to § 60.5740(a)(5). determination, the Administrator shall determine compliance with an emissions standard, plan requirement, (4) If applicable, the report must consider (among other factors) operating include a program review that your history of the technology, whether the CO2 emission performance rate or CO2 emissions goal. Each record must be in State has conducted that addresses all technology will increase emissions or aspects of the administration of the other releases of any pollutant other a form suitable and readily available for expeditious review. State plan and overall program, than CO2, and permanence of the CO2 including State evaluations and storage. The Administrator may test the § 60.5870 What are my reporting and regulatory decisions regarding eligibility system itself, or require the applicant to notification requirements? applications for ERC resources and M&V perform any tests considered by the (a) In lieu of the annual report reports (and associated EM&V Administrator to be necessary to show required under § 60.25(e) and (f) of this activities), and State issuance of ERCs. the technology’s effectiveness, safety, part, you must report the information in The program review must assess and ability to store captured CO2 paragraphs (b) through (f) of this whether the program is being without release. The Administrator may section. administered properly in accordance grant conditional approval of a (b) You must submit a report covering with the approved plan, whether technology, the approval conditioned on each interim step within the interim reported annual MWh of generation and monitoring and reporting of operations. period and each of the final 2-calendar savings from qualified ERC resources The Administrator may also withdraw year periods due no later than July 1 of are being properly quantified, verified, approval of the waiver on evidence of the year following the end of the period. and reported in accordance with releases of CO2 or other pollutants. The The interim period reporting starts with approved EM&V plans, and whether Administrator will provide notice to the a report covering interim step 1 due no appropriate records are being public of any application under this later than July 1, 2025. The final period maintained. The program review must provision, and provide public notice of reports start with a biennial report also address determination of the any proposed action on a petition before covering the first final reporting period eligibility of verifiers by the State and the Administrator takes final action. (which is due by July 1, 2032), a the conduct of independent verifiers, Recordkeeping and Reporting 2-calendar year average of emissions or including the quality of verifier reviews. Requirements cumulative sum of emissions used to (c) If your plan relies upon State determine compliance with the final measures, in lieu of or in addition to § 60.5865 What are my recordkeeping CO2 emission performance rate or CO2 emission standards, then you must requirements? emission goal (as applicable). The report submit an annual report to the EPA in (a) You must keep records of all must include the information in addition to the reports required under information relied upon in support of paragraphs (b)(1) through (4) of this paragraph (b) of this section for the any demonstration of plan components, section. interim period. In the final period, you plan requirements, supporting (1) The report must include the must submit biennial reports consistent documentation, State measures, and the emissions performance achieved by all with those required under paragraph (b) status of meeting the plan requirements affected EGUs during the reporting of this section. The annual reports in the defined in the plan for each interim step period, consistent with the plan interim period must be submitted no and the interim period. After 2029, approach according to § 60.5745(a), and later than July 1 following the end of States must keep records of all identification of whether each affected each calendar year starting with 2022.

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00297 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64958 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

The annual and biennial reports must rate, cumulative sum of CO2 emissions, modification request or an explanation include the information in paragraphs or adjusted CO2 emissions rate (as of why this kind of concurrence cannot (c)(1) and (2) of this section for the applicable) over the interim period and be provided; preceding year or two years, as a comparison of those values to your (v) The modified emission standards applicable. interim CO2 emission performance rate or levels that the affected EGU or EGU (1) You must include in your report or emission goal. The calculated value will be operating at for the remainder of the status of implementation of federally must be in units consistent with the the 90-day period if it has changed from enforceable emission standards (if approach you set in your plan for the the initial notification; and applicable) and State measures. interim period. (vi) Information regarding any system- (2) You must include information (g) The notifications listed in wide or other analysis of the reliability regarding the status of the periodic paragraphs (g)(1) through (3) of this concern conducted by the relevant programmatic milestones to show section are required for the reliability planning authority, if any. progress in program implementation. safety valve allowed in § 60.5785(e). (3) At least 7 days before the end of The programmatic milestones with (1) As required under § 60.5785(e), the 90-day reliability safety valve specific dates for achievement must be you must submit an initial notification period, the State must notify the consistent with the State measures to the appropriate EPA regional office appropriate EPA regional office that included in the State plan submittal. within 48 hours of an unforeseen, either: (d) If your plan includes the emergency situation. The initial (i) The reliability concern has been requirement for emission standards on notification must: addressed and the affected EGU or EGUs your affected EGUs, then you must (i) Include a full description, to the can resume meeting the original submit a notification, if applicable, in extent that it is known, of the emission standards in the State plan the report required under paragraph (b) emergency situation that is being approved prior to the short-term of this section to the EPA if your addressed; modification; or affected EGUs trigger corrective (ii) Identify the affected EGU or EGUs (ii) There still is a serious, ongoing measures as described in that are required to run to assure reliability issue that necessitates the § 60.5740(a)(2)(i). If corrective measures reliability; and affected EGU or EGUs to emit beyond are required and were not previously (iii) Specify the modified emission the amount allowed under the State submitted with your state plan, you standards at which the identified EGU plan. In this case, the State must must follow the requirements in or EGUs will operate. provide a notification to the EPA that it § 60.5785 for revising your plan to (2) Within 7 days of the initial will be submitting a State plan revision implement the corrective measures. notification in § 60.5870(g)(1), the State according to paragraph § 60.5785(a) of (e) If your plan relies upon State must submit a second notification to the this section to address the reliability measures, in lieu of or in addition to appropriate EPA regional office that issue. The notification must provide the emission standards, than you must documents the initial notification. If the date by which a revised State plan will submit a notification as required under State fails to submit this documentation be submitted to EPA and documentation paragraphs (e)(1) and (2) of this section. on a timely basis, the EPA will notify of the ongoing emergency with a written (1) You must submit a notification in the State, which must then notify the concurrence from the relevant reliability the report required under paragraph (c) affected EGU(s) that they must operate coordinator and/or planning authority of this section to the EPA if at the end or resume operations under the original confirming the continuing urgent need of the calendar year your State did not approved State plan emission standards. for the affected EGU or EGUs to operate meet a programmatic milestone This notification must include the beyond the requirements of the State included in your plan submittal. This following: plan and that there is no other notification must detail the (i) A full description of the reliability reasonable way of addressing the implementation of the backstop concern and why an unforeseen, ongoing reliability emergency but for required in your plan to be fully in emergency situation that threatens the affected EGU or EGUs to operate place within 18 months of the due date reliability requires the affected EGU or under an alternative emission standard of the report required in paragraph (b) EGUs to operate under modified than originally approved under the State of this section. In addition, the emission standards from those plan. After the initial 90-day period, any notification must describe the steps originally required in the State plan excess emissions beyond what is taken by the State to inform the affected including discussion of why the authorized in the original approved EGUs in its State that the backstop has flexibilities provided under the state’s State plan will count against the State’s been triggered. plan are insufficient to address the overall CO2 emission goal or emission (2) You must submit a notification in concern; performance rate for affected EGUs. the report required under paragraph (b) (ii) A description of how the State is of this section to the EPA if you trigger coordinating or will coordinate with § 60.5875 How do I submit information the backstop as described in relevant reliability coordinators and required by these Emission Guidelines to § 60.5740(a)(3)(i). This notification must planning authorities to alleviate the the EPA? detail the steps that will be taken by you problem in an expedited manner; (a) You must submit to the EPA the to implement the backstop so that it is (iii) An indication of the maximum information required by these emission fully in place within 18 months of the time that the State anticipates the guidelines following the procedures in due date of the report required in affected EGU or EGUs will need to paragraphs (b) through (e) of this paragraph (b) of this section. In operate in a manner inconsistent with section. addition, the notification must describe its or their obligations under the State’s (b) All negative declarations, State the steps taken by the State to inform approved plan; plan submittals, supporting materials the affected EGUs that the backstop has (iv) A written concurrence from the that are part of a State plan submittal, been triggered. relevant reliability coordinator and/or any plan revisions, and all State reports (f) You must include in your 2029 planning authority confirming the required to be submitted to the EPA by report (which is due by July 1, 2030) the existence of the imminent reliability the State plan must be reported through calculation of average CO2 emissions threat and supporting the temporary EPA’s State Plan Electronic Collection

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00298 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64959

System (SPeCS). SPeCS is a web (e) You must provide the EPA with determined by the physical design and accessible electronic system accessed at non-editable and editable copies of any characteristics of the EGU at ISO the EPA’s Central Data Exchange (CDX) submitted revision to existing approved conditions. For a stationary combustion (http://www.epa.gov/cdx/). States who federally enforceable plan components, turbine, base load rating includes the claim that a State plan submittal or including State plan backstop measures. heat input from duct burners. supporting documentation includes The editable copy of any such submitted Biomass means biologically based confidential business information (CBI) plan revision must indicate the changes material that is living or dead (e.g., must submit that information on a made at the State level, if any, to the trees, crops, grasses, tree litter, roots) compact disc, flash drive, or other existing approved federally enforceable above and below ground, and available commonly used electronic storage plan components, using a mechanism on a renewable or recurring basis. media to the EPA. The electronic media such as redline/strikethrough. These Materials that are biologically based must be clearly marked as CBI and changes are not part of the State plan include non-fossilized, biodegradable mailed to U.S. EPA/OAQPS/CORE CBI until formal approval by EPA. organic material originating from Office, Attention: State and Local Definitions modern or contemporarily grown plants, Programs Group, MD C539–01, 4930 animals, or microorganisms (including Old Page Rd., Durham, NC 27703. § 60.5880 What definitions apply to this plants, products, byproducts and (c) Only a submittal by the Governor subpart? residues from agriculture, forestry, and or the Governor’s designee by an As used in this subpart, all terms not related activities and industries, as well electronic submission through SPeCS defined herein will have the meaning as the non-fossilized and biodegradable shall be considered an official submittal given them in the Clean Air Act and in organic fractions of industrial and to the EPA under this subpart. If the subparts A, B, and TTTT, of this part. municipal wastes, including gases and Governor wishes to designate another Adjusted CO2 Emission Rate Means liquids recovered from the responsible official the authority to decomposition of non-fossilized and submit a State plan, the EPA must be (1) For an affected EGU, the reported biodegradable organic material). notified via letter from the Governor CO2 emission rate of an affected EGU, prior to the September 6, 2016, deadline adjusted as described in § 60.5790(c)(1) CO2 emission goal means a statewide for plan submittal so that the official to reflect any ERCs used by an affected rate-based CO2 emission goal or mass- will have the ability to submit the initial EGU to demonstrate compliance with its based CO2 emission goal specified in § 60.5855. or final plan submittal in the SPeCS. If CO2 emission standards; or the Governor has previously delegated (2) For a State (or states in a multi- Combined cycle unit means an authority to make CAA submittals on state plan) calculating a collective CO2 electric generating unit that uses a the Governor’s behalf, a State may emission rate achieved under the plan, stationary combustion turbine from submit documentation of the delegation the actual CO2 emission rate during a which the heat from the turbine exhaust in lieu of a letter from the Governor. The plan reporting period of the affected gases is recovered by a heat recovery letter or documentation must identify EGUs subject to the rate specified in the steam generating unit to generate the designee to whom authority is being plan, adjusted by the ERCs used for additional electricity. designated and must include the name compliance by those EGUs (total CO2 Combined heat and power unit or and contact information for the designee mass divided by the sum of the total CHP unit, (also known as and also identify the State plan MWh and ERCs). ‘‘cogeneration’’) means an electric preparers who will need access to Affected electric generating unit or generating unit that uses a steam- SPeCS. A State may also submit the Affected EGU means a steam generating generating unit or stationary combustion names of the State plan preparers via a unit, integrated gasification combined turbine to simultaneously produce both separate letter prior to the designation cycle (IGCC), or stationary combustion electric (or mechanical) and useful letter from the Governor in order to turbine that meets the relevant thermal output from the same primary expedite the State plan administrative applicability conditions in section energy source. process. Required contact information § 60.5845. Compliance period means a discrete for the designee and preparers includes Allowance means an authorization for time period for an affected EGU to the person’s title, organization and each specified unit of actual CO2 comply with either an emission email address. emitted from an affected EGU or a standard or State measure. (d) The submission of the information facility during a specified period. Demand-side energy efficiency project by the authorized official must be in a Allowance system means a control means an installed piece of equipment non-editable format. In addition to the program under which the owner or or system, a modification of an existing non-editable version all plan operator of each affected EGU is piece of equipment or system, or a components designated as federally required to hold an allowance for each strategy intended to affect consumer enforceable must also be submitted in specified unit of CO emitted from that 2 electricity-use behavior, that results in a an editable version. Following initial affected EGU or facility during a reduction in electricity use (in MWh) at plan approval, States must provide the specified period and which limits the an end-use facility, premises, or EPA with an editable copy of any total amount of such allowances for a equipment connected to the electricity submitted revision to existing approved specified period and allows the transfer grid. federally enforceable plan components, of such allowances. including State plan backstop measures. Annual capacity factor means the Derate means a decrease in the The editable copy of any such submitted ratio between the actual heat input to an available capacity of an electric plan revision must indicate the changes EGU during a calendar year and the generating unit, due to a system or made at the State level, if any, to the potential heat input to the EGU had it equipment modification or to existing approved federally enforceable been operated for 8,760 hours during a discounting a portion of a generating plan components, using a mechanism calendar year at the base load rating. unit’s capacity for planning purposes. such as redline/strikethrough. These Base load rating means the maximum Eligible resource means a resource changes are not part of the State plan amount of heat input (fuel) that an EGU that meets the requirements of until formal approval by EPA. can combust on a steady-state basis, as § 60.5800(a).

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00299 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64960 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

Emission Rate Credit or ERC means a 2022, to December 31, 2029. The interim fuels: Landfill gas, digester gas, refinery tradable compliance instrument that period is composed three interim steps, gas, sour gas, blast furnace gas, coal- meets the requirements of § 60.5790(c). interim step 1, interim step 2, and derived gas, producer gas, coke oven EM&V plan means a plan that meets interim step 3. gas, or any gaseous fuel produced in a the requirements of § 60.5830. Interim step means an increment of process which might result in highly ERC tracking system means a system plan performance within the interim variable sulfur content or heating value. for the issuance, surrender and period. Net allowance export/import means a retirement of ERCs that meets the Interim step 1 means the period of net transfer of CO2 allowances during an requirements of § 60.5810. three calendar years from January 1, interim step, the interim period, or a Final period means the period that 2022, to December 31, 2024. final reporting period which represents begins on January 1, 2030, and Interim step 2 means the period of the net number of CO2 allowances continues thereafter. The final period is three calendar years from January 1, (issued by a State) that are transferred comprised of final reporting periods, 2025, to December 31, 2027. from the compliance accounts of each of which may be no longer than Interim step 3 means the period of affected EGUs in that state to the two calendar years (with a calendar year two calendar years from January 1, compliance accounts of affected EGUs beginning on January 1 and ending on 2028, to December 31, 2029. in another State. This net transfer is December 31). ISO conditions means 288 Kelvin (15 determined based on compliance ° Final reporting period means an C), 60 percent relative humidity and account holdings at the end of the plan increment of plan performance within 101.3 kilopascals pressure. performance period. Compliance the final period, with each final M&V report means a report that meets account holdings, as used here, refer to the requirements of § 60.5835. reporting period being no longer than the number of CO2 allowances two calendar years (with a calendar year Mechanical output means the useful surrendered for compliance during a beginning on January 1 and ending on mechanical energy that is not used to plan performance period, as well as any operate the affected facility, generate December 31), with the first final remaining CO2 allowances held in a reporting period in the final period electricity and/or thermal output, or to compliance account as of the end of a beginning on January 1, 2030, and enhance the performance of the affected plan performance period. ending no later than December 31, 2031. facility. Mechanical energy measured in Net electric output means the amount Fossil fuel means natural gas, horsepower hour must be converted into of gross generation the generator(s) petroleum, coal, and any form of solid MWh by multiplying it by 745.7 then produce (including, but not limited to, fuel, liquid fuel, or gaseous fuel derived dividing by 1,000,000. output from steam turbine(s), from such material for the purpose of Nameplate capacity means, starting combustion turbine(s), and gas creating useful heat. from the initial installation, the expander(s)), as measured at the Heat recovery steam generating unit maximum electrical generating output generator terminals, less the electricity (HRSG) means a unit in which hot that a generator, prime mover, or other used to operate the plant (i.e., auxiliary exhaust gases from the combustion electric power production equipment loads); such uses include fuel handling turbine engine are routed in order to under specific conditions designated by equipment, pumps, fans, pollution extract heat from the gases and generate the manufacturer is capable of control equipment, other electricity useful output. Heat recovery steam producing (in MWe, rounded to the needs, and transformer losses as generating units can be used with or nearest tenth) on a steady-state basis measured at the transmission side of the without duct burners. and during continuous operation (when step up transformer (e.g., the point of Independent verifier means a person not restricted by seasonal or other sale). (including any individual, corporation, deratings) as of such installation as Net energy output means: partnership, or association) who has the specified by the manufacturer of the (1) The net electric or mechanical appropriate technical and other equipment, or starting from the output from the affected facility, plus qualifications to provide verification completion of any subsequent physical 100 percent of the useful thermal output reports. The independent verifier must change resulting in an increase in the measured relative to SATP conditions not have, or have had, any direct or maximum electrical generating output that is not used to generate additional indirect financial or other interest in the that the equipment is capable of electric or mechanical output or to subject of its verification report or ERCs producing on a steady-state basis and enhance the performance of the unit that could impact their impartiality in during continuous operation (when not (e.g., steam delivered to an industrial performing verification services. restricted by seasonal or other process for a heating application). Integrated gasification combined deratings), such increased maximum (2) For combined heat and power cycle facility or IGCC means a combined amount (in MWe, rounded to the nearest facilities where at least 20.0 percent of cycle facility that is designed to burn tenth) as of such completion as the total gross or net energy output fuels containing 50 percent (by heat specified by the person conducting the consists of electric or direct mechanical input) or more solid-derived fuel not physical change. output and at least 20.0 percent of the meeting the definition of natural gas Natural gas means a fluid mixture of total gross or net energy output consists plus any integrated equipment that hydrocarbons (e.g., methane, ethane, or of useful thermal output on a 12- provides electricity or useful thermal propane), composed of at least 70 operating month rolling average basis, output to either the affected facility or percent methane by volume or that has the net electric or mechanical output auxiliary equipment. The Administrator a gross calorific value between 35 and from the affected EGU divided by 0.95, may waive the 50 percent solid-derived 41 megajoules (MJ) per dry standard plus 100 percent of the useful thermal fuel requirement during periods of the cubic meter (950 and 1,100 Btu per dry output; (e.g., steam delivered to an gasification system construction, startup standard cubic foot), that maintains a industrial process for a heating and commissioning, shutdown, or gaseous State under ISO conditions. In application). repair. No solid fuel is directly burned addition, natural gas contains 20.0 Programmatic milestone means the in the unit during operation. grains or less of total sulfur per 100 implementation of measures necessary Interim period means the period of standard cubic feet. Finally, natural gas for plan progress, including specific eight calendar years from January 1, does not include the following gaseous dates associated with such

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00300 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64961

implementation. Prior to January 1, Stationary means that the combustion Affected EGU(s) with meaningful energy 2022, programmatic milestones are turbine is not self-propelled or intended in the condensate return (or other applicable to all state plan approaches to be propelled while performing its thermal energy input to the affected and measures. Subsequent to January 1, function. It may, however, be mounted EGU) must measure the energy in the 2022, programmatic milestones are on a vehicle for portability. If a condensate and subtract that energy applicable to state measures. stationary combustion turbine burns any relative to SATP conditions from the Qualified biomass means a biomass solid fuel directly it is considered a measured thermal output. feedstock that is demonstrated as a steam generating unit. Valid data means quality-assured data Steam generating unit means any method to control increases of CO2 generated by continuous monitoring furnace, boiler, or other device used for levels in the atmosphere. systems that are installed, operated, and Standard ambient temperature and combusting fuel and producing steam maintained according to part 75 of this pressure (SATP) conditions means (nuclear steam generators are not chapter. For CEMS, the initial 298.15 Kelvin (25 °C, 77 °F)) and 100.0 included) plus any integrated certification requirements in § 75.20 of kilopascals (14.504 psi, 0.987 atm) equipment that provides electricity or this chapter and appendix A to part 75 pressure. The enthalpy of water at SATP useful thermal output to the affected of this chapter must be met before conditions is 50 Btu/lb. facility or auxiliary equipment. State agent means an entity acting on Uprate means an increase in available quality-assured data are reported under behalf of the State, with the legal electric generating unit power capacity this subpart; for on-going quality authority of the State. due to a system or equipment assurance, the daily, quarterly, and State measures means measures that modification. semiannual/annual test requirements in are adopted, implemented, and enforced Useful thermal output means the sections 2.1, 2.2, and 2.3 of appendix B as a matter of State law. Such measures thermal energy made available for use in to part 75 of this chapter must be met are enforceable only per State law, and any heating application (e.g., steam and the data validation criteria in are not included in and codified as part delivered to an industrial process for a sections 2.1.5, 2.2.3, and 2.3.2 of of the federally enforceable State plan. heating application, including thermal appendix B to part 75 of this chapter Stationary combustion turbine means cooling applications) that is not used for apply. For fuel flow meters, the initial all equipment, including but not limited electric generation, mechanical output certification requirements in section to the turbine engine, the fuel, air, at the affected EGU, to directly enhance 2.1.5 of appendix D to part 75 of this lubrication and exhaust gas systems, the performance of the affected EGU chapter must be met before quality- control systems (except emissions (e.g., economizer output is not useful assured data are reported under this control equipment), heat recovery thermal output, but thermal energy used subpart (except for qualifying system, fuel compressor, heater, and/or to reduce fuel moisture is considered commercial billing meters under section pump, post-combustion emissions useful thermal output), or to supply 2.1.4.2 of appendix D), and for on-going control technology, and any ancillary energy to a pollution control device at quality assurance, the provisions in components and sub-components the affected EGU. Useful thermal output section 2.1.6 of appendix D to part 75 comprising any simple cycle stationary for affected EGU(s) with no condensate of this chapter apply (except for combustion turbine, any combined return (or other thermal energy input to qualifying commercial billing meters). cycle combustion turbine, and any the affected EGU(s)) or where measuring Waste-to-Energy means a process or combined heat and power combustion the energy in the condensate (or other unit (e.g., solid waste incineration unit) turbine based system plus any thermal energy input to the affected that recovers energy from the integrated equipment that provides EGU(s)) would not meaningfully impact conversion or combustion of waste electricity or useful thermal output to the emission rate calculation is stream materials, such as municipal the combustion turbine engine, heat measured against the energy in the solid waste, to generate electricity and/ recovery system or auxiliary equipment. thermal output at SATP conditions. or heat.

TABLE 1 TO SUBPART UUUU OF PART 60—CO2 EMISSION PERFORMANCE RATES

[Pounds of CO2 per net MWh]

Affected EGU Interim rate Final rate

Steam generating unit or integrated gasification combined cycle (IGCC) ...... 1,534 1,305 Stationary combustion turbine ...... 832 771

TABLE 2 TO SUBPART UUUU OF PART 60—STATEWIDE RATE-BASED CO2 EMISSION GOALS

[Pounds of CO2 per net MWh]

State Interim emission goal Final emission goal

Alabama ...... 1,157 1,018 Arizona ...... 1,173 1,031 Arkansas ...... 1,304 1,130 California ...... 907 828 Colorado ...... 1,362 1,174 Connecticut ...... 852 786 Delaware ...... 1,023 916 Florida ...... 1,026 919 Georgia ...... 1,198 1,049 Idaho ...... 832 771 Illinois ...... 1,456 1,245

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00301 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64962 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

TABLE 2 TO SUBPART UUUU OF PART 60—STATEWIDE RATE-BASED CO2 EMISSION GOALS—Continued

[Pounds of CO2 per net MWh]

State Interim emission goal Final emission goal

Indiana ...... 1,451 1,242 Iowa ...... 1,505 1,283 Kansas ...... 1,519 1,293 Kentucky ...... 1,509 1,286 Lands of the Fort Mojave Tribe ...... 832 771 Lands of the Navajo Nation ...... 1,534 1,305 Lands of the Uintah and Ouray Reservation ...... 1,534 1,305 Louisiana ...... 1,293 1,121 Maine ...... 842 779 Maryland ...... 1,510 1,287 Massachusetts ...... 902 824 Michigan ...... 1,355 1,169 Minnesota ...... 1,414 1,213 Mississippi ...... 1,061 945 Missouri ...... 1,490 1,272 Montana ...... 1,534 1,305 Nebraska ...... 1,522 1,296 Nevada ...... 942 855 New Hampshire ...... 947 858 New Jersey ...... 885 812 New Mexico ...... 1,325 1,146 New York ...... 1,025 918 North Carolina ...... 1,311 1,136 North Dakota ...... 1,534 1,305 Ohio ...... 1,383 1,190 Oklahoma ...... 1,223 1,068 Oregon ...... 964 871 Pennsylvania ...... 1,258 1,095 Rhode Island ...... 832 771 South Carolina ...... 1,338 1,156 South Dakota ...... 1,352 1,167 Tennessee ...... 1,411 1,211 Texas ...... 1,188 1,042 Utah ...... 1,368 1,179 Virginia ...... 1,047 934 Washington ...... 1,111 983 West Virginia ...... 1,534 1,305 Wisconsin ...... 1,364 1,176 Wyoming ...... 1,526 1,299

TABLE 3 TO SUBPART UUUU OF PART 60—STATEWIDE MASS-BASED CO2 EMISSION GOALS

[Short tons of CO2]

Final emission goals State Interim emission goal (2 year blocks starting (2022–2029) with 2030–2031)

Alabama ...... 497,682,304 113,760,948 Arizona ...... 264,495,976 60,341,500 Arkansas ...... 269,466,064 60,645,264 California ...... 408,216,600 96,820,240 Colorado ...... 267,103,064 59,800,794 Connecticut ...... 57,902,920 13,883,046 Delaware ...... 40,502,952 9,423,650 Florida ...... 903,877,832 210,189,408 Georgia ...... 407,408,672 92,693,692 Idaho ...... 12,401,136 2,985,712 Illinois ...... 598,407,008 132,954,314 Indiana ...... 684,936,520 152,227,670 Iowa ...... 226,035,288 50,036,272 Kansas ...... 198,874,664 43,981,652 Kentucky ...... 570,502,416 126,252,242 Lands of the Fort Mojave Tribe ...... 4,888,824 1,177,038 Lands of the Navajo Nation ...... 196,462,344 43,401,174 Lands of the Uintah and Ouray Reservation ...... 20,491,560 4,526,862 Louisiana ...... 314,482,512 70,854,046 Maine ...... 17,265,472 4,147,884 Maryland ...... 129,675,168 28,695,256 Massachusetts ...... 101,981,416 24,209,494 Michigan ...... 424,457,200 95,088,128

VerDate Sep<11>2014 20:52 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00302 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations 64963

TABLE 3 TO SUBPART UUUU OF PART 60—STATEWIDE MASS-BASED CO2 EMISSION GOALS—Continued

[Short tons of CO2]

Final emission goals State Interim emission goal (2 year blocks starting (2022–2029) with 2030–2031)

Minnesota ...... 203,468,736 45,356,736 Missouri ...... 500,555,464 110,925,768 Mississippi ...... 218,706,504 50,608,674 Montana ...... 102,330,640 22,606,214 Nebraska ...... 165,292,128 36,545,478 Nevada ...... 114,752,736 27,047,168 New Hampshire ...... 33,947,936 7,995,158 New Jersey ...... 139,411,048 33,199,490 New Mexico ...... 110,524,488 24,825,204 New York ...... 268,762,632 62,514,858 North Carolina ...... 455,888,200 102,532,468 North Dakota ...... 189,062,568 41,766,464 Ohio ...... 660,212,104 147,539,612 Oklahoma ...... 356,882,656 80,976,398 Oregon ...... 69,145,312 16,237,308 Pennsylvania ...... 794,646,616 179,644,616 Rhode Island ...... 29,259,080 7,044,450 South Carolina ...... 231,756,984 51,997,936 South Dakota ...... 31,591,600 7,078,962 Tennessee ...... 254,278,880 56,696,792 Texas ...... 1,664,726,728 379,177,684 Utah ...... 212,531,040 47,556,386 Virginia ...... 236,640,576 54,866,222 Washington ...... 93,437,656 21,478,344 West Virginia ...... 464,664,712 102,650,684 Wisconsin ...... 250,066,848 55,973,976 Wyoming ...... 286,240,416 63,268,824

TABLE 4 TO SUBPART UUUU OF PART 60— STATEWIDE MASS-BASED CO2 GOALS PLUS NEW SOURCE CO2 EMISSION COMPLEMENT

[Short tons of CO2]

Final emission goals State Interim emission goal (2 year blocks starting (2022–2029) with 2030–2031)

Alabama ...... 504,534,496 115,272,348 Arizona ...... 275,895,952 64,760,392 Arkansas ...... 272,756,576 61,371,058 California ...... 430,988,824 105,647,270 Colorado ...... 277,022,392 63,645,748 Connecticut ...... 58,986,192 14,121,986 Delaware ...... 41,133,688 9,562,772 Florida ...... 917,904,040 213,283,190 Georgia ...... 412,826,944 93,888,808 Idaho ...... 13,155,256 3,278,026 Illinois ...... 604,953,792 134,398,348 Indiana ...... 692,451,256 153,885,208 Iowa ...... 228,426,760 50,563,762 Kansas ...... 200,960,120 44,441,644 Kentucky ...... 576,522,048 127,580,002 Lands of the Fort Mojave Tribe ...... 5,186,112 1,292,276 Lands of the Navajo Nation ...... 202,938,832 45,911,608 Lands of the Uintah and Ouray Reservation ...... 21,167,080 4,788,708 Louisiana ...... 318,356,976 71,708,642 Maine ...... 17,592,128 4,219,936 Maryland ...... 131,042,600 28,996,872 Massachusetts ...... 103,782,424 24,606,744 Michigan ...... 429,446,408 96,188,604 Minnesota ...... 205,761,008 45,862,346 Mississippi ...... 221,990,024 51,332,926 Missouri ...... 505,904,560 112,105,626 Montana ...... 105,704,024 23,913,816 Nebraska ...... 167,021,320 36,926,888 Nevada ...... 120,916,064 29,436,214 New Hampshire ...... 34,519,280 8,121,182 New Jersey ...... 141,919,248 33,752,728 New Mexico ...... 114,741,592 26,459,850

VerDate Sep<11>2014 22:36 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00303 Fmt 4701 Sfmt 4700 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2 64964 Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations

TABLE 4 TO SUBPART UUUU OF PART 60— STATEWIDE MASS-BASED CO2 GOALS PLUS NEW SOURCE CO2 EMISSION COMPLEMENT—Continued

[Short tons of CO2]

Final emission goals State Interim emission goal (2 year blocks starting (2022–2029) with 2030–2031)

New York ...... 272,940,440 63,436,364 North Carolina ...... 461,424,928 103,753,712 North Dakota ...... 191,025,152 42,199,354 Ohio ...... 667,812,080 149,215,950 Oklahoma ...... 361,531,056 82,001,704 Oregon ...... 72,774,608 17,644,106 Pennsylvania ...... 804,705,296 181,863,274 Rhode Island ...... 29,819,360 7,168,032 South Carolina ...... 234,516,064 52,606,510 South Dakota ...... 31,963,696 7,161,036 Tennessee ...... 257,149,584 57,329,988 Texas ...... 1,707,356,792 396,210,498 Utah ...... 220,386,616 50,601,386 Virginia ...... 240,240,880 55,660,348 Washington ...... 97,691,736 23,127,324 West Virginia ...... 469,488,232 103,714,614 Wisconsin ...... 252,985,576 56,617,764 Wyoming ...... 295,724,848 66,945,204

[FR Doc. 2015–22842 Filed 10–22–15; 8:45 am] BILLING CODE 6560–50–P

VerDate Sep<11>2014 22:36 Oct 22, 2015 Jkt 238001 PO 00000 Frm 00304 Fmt 4701 Sfmt 9990 E:\FR\FM\23OCR3.SGM 23OCR3 tkelley on DSK3SPTVN1PROD with BOOK 2