The Third Piece of EPA’s Clean Power Plan: GHG Emission Limits for Modified and Reconstructed Power Plants

The U.S. Environmental Protection Agency’s proposed greenhouse gas (GHG) regulations for “new” and “existing” power plants have received substantial media attention, but regulated parties should also be aware of the third piece of EPA’s self-styled “Clean Power Plan”:  Proposed carbon dioxide (CO₂) emission limits for “modified” and “reconstructed” electricity generating units (EGUs).

EPA proposed CO₂ limits for “modified” and “reconstructed” EGUs on June 2, 2014, the same day it issued its proposed regulations for existing power plants, but it did not release its proposed regulatory text for those limits until several days later.  The proposed regulatory text is now available on EPA’s website, and power plant owners and operators should scrutinize it carefully – it amends the proposed regulatory text that EPA released in January 2014 in connection with its proposed limits for “new” power plants.

As defined in EPA’s regulations, “modified” units are existing units that undergo a physical or operational change that results in an increase in their hourly rate of air emissions, while “reconstructed” units are existing units where components have been replaced to such an extent that the fixed capital cost of the new components exceeds 50 percent of the fixed capital cost that would be required to construct a comparable entirely new facility, and it is technologically and economically feasible to meet the emission standards set by EPA.

Under EPA’s June 2 proposal, neither modified nor reconstructed steam units would have to install carbon capture and storage technology or meet the more stringent CO₂ emission standards that EPA has proposed for newly constructed units.  Instead, those units would be required to meet an emission standard based on a combination of best operating practices and equipment upgrades (to improve the unit’s efficiency).  Modified gas turbines would be required to meet the corresponding emission limits for new gas turbines.

More specifically, the proposal would set different standards of performance for different types of units, as follows:

• Modified fossil fuel-fired EGUs (i.e., utility boilers and integrated gasification combined cycle (IGCC) units):  the source must meet a EGU-specific emission limit (a) determined by the EGU’s best historical annual CO₂ emission rate from 2002 to the date of modification, plus an additional 2 percent emission reduction, or (b) determined depending on whether the modification occurs before or after the EGU becoming subject to a Clean Air Act Section 111(d) state plan.  For option (a), the limit must be at least 1,900 pounds of CO₂ per net megawatt-hour (lb/MWh-net) for sources with a heat input exceeding 2,000 million British thermal units per hour (MMBtu/h), or 2,100 lb/MWh-net for sources with a heat input of 2,000 MMBtu/h or less.
• Reconstructed fossil fuel-fired EGUs:  sources with a heat input exceeding 2,000 MMBtu/h must meet a limit of 1,900 lb/MWh-net, and sources with a heat input of 2,000 MMBtu/h or less must meet a limit of 2,100 lb/MWh-net.
• Modified or reconstructed natural gas-fired stationary combustion turbines:  sources with a heat input exceeding 850 MMBtu/h must meet a limit of 1,000 pounds of CO₂ per gross megawatt-hour (lb/MWh-gross), and sources with a heat input of 850 MMBtu/h or less must meet a limit of 1,100 lb/MWh-gross.

Importantly, modified and reconstructed units that are modified or reconstructed after they become subject to a state plan for existing power plants would remain subject to that plan (in addition to being subject to the limits set forth above) even after their modification or reconstruction.

EPA estimates that few EGUs would be affected by the rulemaking, and estimates compliance costs of $0.78 million to $4.5 million (in 2011) and CO₂ reductions of 133,000 to 266,000 tons in 2025.  EPA estimates combined climate benefits from CO₂ reductions (and health co-benefits from SO₂, NO_x and PM_2.5 reductions) of $18 million to $33 million at a 3 percent discount rate for emission reductions in 2025 for the lowest emission reduction scenario, and $35 million to $65 million at a 3 percent discount rate for emission reductions in 2025 for the highest emission reduction scenario.

The proposed standards would apply at all times, including during startup, shutdown and malfunction periods.  The proposal articulates the same continuous monitoring requirements, emissions performance testing requirements, continuous compliance requirements, and notification, recordkeeping and reporting requirements as those proposed for newly constructed sources in EPA’s January 2014 proposal.

Once the full proposed rule concerning modified and reconstructed plants is published in the Federal Register, interested parties will have 120 days to comment.  EPA will hold joint public hearings for this proposal and the proposal concerning CO₂ emissions from existing power plants.