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Megawatt Minute

August 22, 2018

The Affordable Clean Energy Rule

By Rose-Marie T. Carlisle, Bernard F. Hawkins, Jr., Wendy Wilkie Parker, Steven Shparber

The U.S. Environmental Protection Agency (“EPA”) has just issued its proposed rule to replace the Clean Power Plan (“CPP”).  The proposed rule, issued on August 21, 2018, seeks to replace the CPP with the Affordable Clean Energy (“ACE”) Rule.  The ACE Rule proposes to establish greenhouse gas (“GHG”) emission guidelines for coal-fired power plants and provides the following:  (1) a determination of the best system of emission reduction for GHG emissions from coal-fired power plants as “efficiency improvements” or “heat rate improvements,” (2) a new preliminary applicability test for determining whether a change made to a power plant may be a “major modification” that triggers New Source Review, and (3) new implementing regulations for emission guidelines under Clean Air Act section 111(d).

The Clean Power Plan

The EPA promulgated the CPP under the Obama administration in October of 2015.  The CPP required specified existing fossil fuel-fired electric utility steam generating units and fossil fuel-fired stationary combustion turbines to reduce GHG emissions by 32 percent from 2005 levels by 2030.  See 80 Fed. Reg. 64,661-65,120.  The CPP sought to implement Section 111(d) of the CAA with respect to emission guidelines for GHG emissions for utility sources, including existing coal and oil-fired power plants/gas-fired combined cycle plants.  The CPP provided for state plans with emission targets.  CAA Section 111(b) addresses GHG standards for new sources. 

In response to the CPP, some twenty-six states and various entities representing industrial sources challenged the CPP in the United States Court of Appeals for the District of Columbia Circuit (D.C. Circuit).  In February 2016, the United States Supreme Court stayed the effectiveness of the CPP pending the ongoing litigation in the D.C. Circuit. The D.C. Circuit has granted ongoing continuances to this litigation, giving the Trump administration time to repeal or replace the CPP. 

The Affordable Clean Energy Rule

The proposed ACE Rule is the next step in the Trump administration efforts to replace the CPP.  In March of 2017, President Trump issued Executive Order 13783 “Promoting Energy Independence and Economic Growth” issued on March 28, 2017.  In October of 2017, EPA proposed to repeal the CPP but did not simultaneously propose a replacement regulation.  82 Fed. Reg. 48,035.  In December of 2017, EPA requested comments on a possible replacement for the CPP and sought input on (1) an approach that would provide for a source-specific framework for addressing GHG emissions, (2)  the proper roles for the states in setting limitations, and (3) whether changes to the New Source Review (NSR) program may be necessary to facilitate implementation of efficiency improvement projects aimed at reducing GHG emissions.  82 Fed. Reg. 61,507. 

The ACE Rule proposes to use “efficiency improvements” or “heat rate improvements” as the “best system of emission reduction” (“BSER”) for existing plants coal-fired plants.  The ACE Rule proposes a number of “candidate technologies” for states to consider in establishing standards for existing plants under this BSER.  EPA proposes for states to have three (3) years in which to develop and submit state plans to EPA. 

The ACE Rule proposes new implementing regulations for emission guidelines under Clean Air Act section 111(d).  The stated goal of the new implementing regulations is to harmonize the regulations with the statute and to make it clear that states have broad discretion in establishing and applying the emissions standards consistent with BSER.   

The ACE Rule also proposes a new preliminary applicability test to determine whether a change to an existing plant is a “major modification” that would trigger New Source Review.  The current method requires a facility to assess the potential impact on overall air emissions and requires a permit for the change if the change is expected to result in a significant net increase in the facility’s actual annual emissions.  The ACE Rule would instead allow a facility to assess whether the change would result in a higher hourly emissions rate.  EPA proposes an hourly emissions test based on maximum achieved emissions or, in the alternative, based on maximum achievable emissions.  Each state would have the option to use the hourly emissions test in its state implementation plan.     

A public comment period will follow publication of the ACE Rule in the Federal Register.  Any replacement for the CPP is certain to result in additional challenges in the D.C. Circuit.

The ACE Rule and related documents are available on the EPA website here.

What this means?

The ACE represents another policy change from the Trump Administration aimed at supporting coal and unwinding previous energy and environmental policies supported by the Obama Administration. Along with ongoing efforts at FERC to support coal resources, the Administration’s ACE Rule is expected to be fiercely opposed by many segments of the energy industry, and injects additional regulatory uncertainty into a suddenly tumultuous industry.

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