by Jacob Hollinger and Bethany Hatef

The U.S. Environmental Protection Agency (EPA) has issued a proposed rule concerning carbon dioxide (CO2) emissions from new coal-fired and natural gas-fired power plants. The September 20 proposal meets a deadline set by President Obama in a June 25 Presidential Memorandum and keeps EPA on track to meet the President’s June 2015 deadline for regulating emissions from existing power plants. Once the September 20 proposed rule is published in the Federal Register, interested parties will have 60 days to comment on it. 

Under EPA’s September 20 proposal, which replaces an earlier, April 2012 proposal, new coal plants would be limited to 1,100 pounds of CO2 emissions per megawatt-hour (lbs/MWh) of electricity produced, with compliance measured on a 12-operating month rolling average basis.  The proposed rule would also require new small natural gas plants to meet a 1,100 lbs/MWh emission limit, while requiring larger, more efficient natural gas units to meet a limit of 1,000 lbs/MWh. 

EPA is required to set emission limits for new plants at a level that reflects use of the “best system of emission reduction” (BSER) that it determines has been “adequately demonstrated.”  For coal, EPA has determined that the BSER is installation of carbon capture and sequestration (CCS) technology that captures some of the CO2 released by burning coal.  In essence, EPA is saying partial CCS is the BSER for new coal plants. But for gas, EPA is saying that the BSER is a modern, efficient, combined cycle plant.  Thus, CCS is not required for new gas plants.

An important feature of the proposed rule is the definition of a “new” plant. Under the pertinent section of the Clean Air Act (CAA), a “new” plant is one for which construction commences after publication of a proposed rule. EPA’s regulations, in turn, define “construction” as the “fabrication, erection, or installation of an affected facility,” and define “commenced” as undertaking “a continuous program of construction” or entering “into a contractual obligation to undertake and complete, within a reasonable time, a continuous program of construction.” 

EPA has concluded that its new proposal will have “negligible” benefits and costs – it won’t reduce CO2 emissions and it won’t raise the cost of electricity. This is based on EPA’s conclusion that even in the absence of the new proposed rule, all foreseeable new fossil fuel plants will be either modern, efficient combined cycle natural gas plants or coal plants that have CCS. In essence, EPA is proposing emission limits that it thinks would be met even in the absence of new regulations.

But if the rule won’t reduce CO2 emissions, why issue it?  First, EPA is of the view that it is required by the CAA to issue the rule; having already determined that CO2 emissions are endangering public health and welfare, EPA is required by § 111(b) of the CAA to publish regulations to address those emissions.  Second, EPA thinks the rule will provide regulatory certainty about what is expected of new plants.  Third, and perhaps most importantly, the rule [...]

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