US EPA proposes Affordable Clean Energy rule

The U.S. Environmental Protection Agency has proposed a new rule addressing greenhouse gas emissions from existing coal-fired electric utility generating units and power plants. EPA's proposed "Affordable Clean Energy Rule" is designed to replace the Clean Power Plan regulations adopted in 2015.

On August 21, 2018, EPA announced the Affordable Clean Energy or ACE Rule. As described by the agency, the rule encompasses four main actions to reduce greenhouse gas emissions:

• Defining the “best system of emission reduction” (BSER) for existing power plants as on-site, heat-rate efficiency improvements;
• Providing states a list of “candidate technologies” that can be used to establish standards of performance and be incorporated into their state plans;
• Updating the New Source Review (NSR) permitting program to further encourage efficiency improvements at existing power plants; and
• Aligning regulations under Clean Air Act section 111(d) to give states adequate time and flexibility to develop their state plans. 

According to EPA's regulatory impact analysis, replacing the Clean Power Plan with the ACE Rule would reduce CO2 emissions from their current level, and "could provide $400 million in annual net benefits," largely in the form of reduced compliance burden on covered power plants. While EPA adopted the Clean Power Plan in 2015, in 2016 the Supreme Court granted opponents stay of the regulations, and they never took full effect.

EPA will take comment on the ACE Rule proposal for 60 days after publication in the Federal Register and will hold a public hearing.

EPA proposes methane rules for oil and gas

The U.S. Environmental Protection Agency has proposed a suite of new and modified rules affecting the oil and natural gas industry.  Collectively, the proposed rules released on August 18 are designed to reduce methane emissions from oil and natural-gas drilling activities.

As the world tackles climate change and greenhouse gas emissions, methane plays a dual role.  As the key constituent of natural gas, methane offers society an abundant and efficient fuel that can displace reliance on costlier and more carbon-polluting fuels like coal and oil.  At the same time, methane in the atmosphere can act as a greenhouse gas itself, with a global warming potential more than 25 times greater than that of carbon dioxide.  According to EPA, methane is the second most prevalent greenhouse gas emitted in the United States from human activities, and nearly 30 percent of those emissions come from oil production and the production, transmission and distribution of natural gas.  At the same time, U.S. production of oil and natural gas has increased, giving the sector important economic and domestic security impacts.

To address this dynamic, yesterday EPA proposed a series of rules affecting the oil and natural gas sector.  EPA has described the new rules as a "key component" of the Obama administration's Climate Action Plan.  They follow a January announcement of a new goal to cut methane emissions from the oil and gas sector by 40 to 45 percent of 2012 levels by 2025.  Under the administration's view, a key tool supporting that goal is the implementation of standards for methane and volatile organic compound (VOC) emissions from new and modified oil and gas production sources, and natural gas processing and transmission sources.

The rules EPA proposed yesterday include such standards, along with supporting materials.  EPA has described its collective proposal as "a suite of commonsense requirements that together will help combat climate change, reduce air pollution that harms public health, and provide greater certainty about Clean Air Act permitting requirements for the oil and natural gas industry."

EPA's proposed package of rules includes:

• Updates to New Source Performance Standards (NSPS) (PDF, 591 pages) setting methane and VOC requirements for additional new and modified sources in the oil and gas industry. 
• Draft Control Techniques Guidelines (PDF, 310 pages) for reducing VOC emissions from existing oil and gas sources in certain ozone nonattainment areas and states in the Ozone Transport Region.
• A Source Determination Rule (PDF, 54 pages) to clarify EPA’s air permitting rules as they apply to the oil and natural gas industry.

According to EPA, the proposed rule will reduce methane emissions by between 340,000 and 400,000 short tons in 2025,  on top of reductions of 170,000 to 180,000 tons of other VOCs and 1,900 to 2,500 tons of hazardous air pollutants.  But industry trade group American Petroleum Institute has called additional regulation "unnecessary for reducing emissions."  Debate over EPA's proposal is likely to be vigorous, before EPA as it considers its proposed rulemaking, as well as before Congress and possibly even federal courts, before the dust settles.

EPA will take public comment on the proposals for 60 days after they are published in the Federal Register.  According to the January announcement, the administration expects the final rule will follow in 2016.  This action on oil and natural gas production follows closely on the heels of EPA's adoption of the Clean Power Plan rules, regulating carbon emissions associated with the electric power industry.

Resources on Clean Power Plan

Yesterday President Obama announced his administration's "Clean Power Plan," the U.S. Environmental Protection Agency's new regulations limiting power plant carbon emissions under Section 111(d) of the Clean Air Act.

EPA's final Clean Power Plan rule establishes emission guidelines for states to follow in developing plans to reduce greenhouse gas  emissions from existing fossil fuel-fired electric generating units. 

Here are some quick resources I've compiled as a guide to the Clean Power Plan and its release:

• Clean Power Plan Final Rule (PDF) (1560 pages)
• EPA's Regulatory Impact Analysis of the final rule 
• EPA's press release,  "Obama Administration Takes Historic Action on Climate Change/Clean Power Plan to protect public health, spur clean energy investments and strengthen U.S. leadership."
• EPA's overall Clean Power Plan website
• EPA's "key topics" handout
• EPA, DOE, FERC memorandum on coordination in implementing the Clean Power Plan
• EPA fact sheets:
• Overview of the Clean Power Plan: Cutting Carbon Pollution from Power Plants 
• Clean Power Plan: Key Changes and Improvements
• By the Numbers: Cutting Carbon Pollution from Power Plants
• Benefits of a Cleaner, More Efficient Power Sector
• Components of the Clean Power Plan: Setting State Goals to Cut Carbon Pollution
• The Role of States: States Decide How to Meet Their Goal
• Built on a Solid Legal and Scientific Foundation
• Clean Energy Now and in the Future
• Clean Energy Incentive Program
• Keeping Energy Affordable and Reliable
• Resources about the 2014 draft Clean Power Plan:
• A look at EPA's cost/benefit analysis
• Early questions about the Clean Power Plan
• FERC plans conferences about the Clean Power Plan
  

US Clean Power Plan adopted

President Obama will formally unveil the Clean Power Plan today, a set of regulations by the U.S. Environmental Protection Agency (EPA) to reduce carbon emissions associated with the electric power industry.  A blog post by EPA Administrator Gina McCarthy emphasizes the Clean Power Plan's protection of health and the environment, states' rights to choose their own implementation paths, reduction of future energy costs, and leadership on climate issues.  But some politicians, utilities and states have expressed concern about the regulations' impact, and could launch legal challenges -- or states might refuse to comply.  What's in store for the Clean Power Plan?

It has been just over a year since EPA first released its draft Clean Power Plan in June 2014.  These regulations under Section 111(d) of the Clean Air Act are designed to reduce the carbon intensity of the U.S. electric power sector -- essentially, how many pounds of carbon are emitted per megawatt-hour of electric energy produced.  Under the draft Clean Power Plan, EPA sets carbon intensity limits for each state, collectively designed to reduce carbon emissions by 30% below 2005 levels.  Each state then designs its own compliance plan using any combination of "building blocks": types of measures like improving the efficiency of fossil fuel power plants, switching out coal- and oil-fired power plants in favor of natural gas, and increasing low- and zero-carbon generation.

While the final Clean Power Plan's basic structure remains much the same, EPA has made some modifications in reaction to concerns about the greenhouse gas regulations' costs and impacts to grid reliability.

Changes from the 2014 draft include:

• Two extra years (until 2022) for states to meet their targets, and greater flexibility for states to form regional pacts to facilitate emissions-cutting projects across state lines, such as the Regional Greenhouse Gas Initiative.
• A new “safety valve” feature, to let states appeal for extensions and other relief if complying with the regulations causes disruptions to power supply.
• Increased social justice incentives for utilities to construct renewable energy projects in poorer neighborhoods, reducing pollution-related illness and eventually lowering electricity rates.
• Energy efficiency is still encouraged, but has been eliminated as one of the rule’s "building blocks” for states to use in building their own carbon-reduction plans.

How will the Clean Power Plan story continue to play out?  Will it be challenged in court?  Will states comply?  What impacts will it have on the U.S. electric power industry?

FERC and EPA's Clean Power Plan

Following the U.S. Environmental Protection Agency's 2014 proposal to regulate carbon emissions from electric power plants and other major sources, federal energy regulators have scheduled a series of public technical conferences on how the Clean Power Plan may affect electric reliability, wholesale electric markets and operations, and energy infrastructure.

On June 2, 2014, the U.S. Environmental Protection Agency announced the Clean Power Plan, its proposed rule under Section 111(d) of the Clean Air Act to reduce carbon emissions from the nation's power plants.  Designed to reduce carbon emissions 30 percent below 2005 levels by 2030, EPA's proposal would impose limits on each state's rate of carbon emissions per megawatt-hour of electric energy generated.

The Federal Energy Regulatory Commission regulates the transmission and wholesale sales of electricity in interstate commerce, monitors energy markets, and protects the reliability of the high voltage interstate transmission system.  Acting out of concern over the possible impacts of the EPA Clean Power Plan on its regulated sector, on December 9, 2014, the Commission scheduled a series of technical conferences to develop public comment on these issues.

First, the Commission will hold a National Overview technical conference on February 19, 2015, at its Washington, DC headquarters.  Earlier this month, the Commission issued a supplemental notice describing the agenda for the National Overview.  After an introduction by EPA, the Commission expects to discuss:

• Electric reliability considerations: How will the Clean Power Plan affect electric reliability?  How can the U.S. sustain reliability as states and regions develop their plans to comply with the proposed carbon rule?  How could state, regional, and federal plans for compliance affect grid operations?  What tools are available to identify potential reliability impacts?  How can reliability planning processes and compliance planning efforts  coordinated to address potential issues?  What is the Commission's role in this area?
• Identifying and addressing infrastructure needs: What potential infrastructure needs may arise from various state or regional compliance approaches?  How can any infrastructure needs met in a timely manner in order to ensure system reliability?  How can relevant planning entities, industry, and states coordinate reliability and infrastructure planning and siting processes with state and/or regional environmental compliance efforts to ensure the adequate and timely development of new infrastructure?  Are additional mechanisms needed to ensure timely development of new infrastructure? Are adaptations to current Commission policies needed to facilitate the infrastructure needed for compliance with the proposed Clean Power Plan?
• Potential implications for Commission-jurisdictional markets:  How could potential compliance approaches to the proposed Clean Power Plan impact Commission-jurisdictional electric and natural gas markets?  What aspects, if any, of the wholesale and interstate markets would facilitate implementation of state or regional compliance plans?  What tools are available to address market issues as they arise?  What opportunities are available to coordinate compliance approaches with Commission-jurisdictional markets to meet the requirements of the proposed Clean Power Plan rule?

Following the National Overview, the Commission has scheduled three regional conferences in February and March 2015.

EPA carbon rule: how it works

Last week, the U.S. Environmental Protection Agency issued a groundbreaking proposed rule to limit carbon emissions from power plants.  EPA's Clean Power Plan would require each state to develop a plan to limit the amount of carbon dioxide its power plants produce per unit of electricity generated.  By reducing the carbon intensity of electric generation, EPA projects that the Clean Power Plan would would achieve a 30 percent reduction in CO2 emission from the nation's power sector below CO2 emission levels in 2005, resulting in net climate and health benefits of $48 billion to $82 billion.  Importantly, the Clean Power Plan would rely on federal and state cooperation to achieve this goal.

Public Service of New Hampshire's Schiller Station, in Portsmouth, NH, can burn coal, oil, and wood chips.

EPA proposed the carbon rule pursuant to its authority under Section 111(d) of the Clean Air Act.  As with other Section 111(d) regulations, the Clean Power Plan relies on a combination of federal emission limits and state implementation plans.  First, EPA proposed state-specific carbon dioxide emission goals, stated as an emission rate of pounds of CO2 emitted per net megawatt-hour of electricity generated.  Second, EPA offered states guidelines for how to develop, submit, and implement their own plans to reach those emission goals.

At the federal level, EPA set a carbon emissions rate limit for each state based on the agency's evaluation of how much the state could feasibly reduce emissions by adopting the "best system of emission reduction", or BSER.  Effectively, EPA considered each state's portfolio of electricity generating resources as well as how hard it would be to reduce its carbon intensity.

At the state level, EPA expects each state to propose a plan based on a combination of four "building blocks" or types of measures:

• Reducing the carbon intensity of generation at individual affected fossil-fired electric generating units (or EGUs) through heat rate improvements
• Reducing emissions from the most carbon-intensive affected EGUs by substituting generation at those EGUs with generation from natural gas combined cycle power plants and other less carbon-intensive fossil-fired units
• Reducing emissions from affected EGUs by substituting generation at those EGUs with expanded low- or zero-carbon generation
• Reducing emissions from affected EGUs through demand-side energy efficiency measures 

State plans would be subject to EPA approval, based on their enforceability, ability to achieve emission performance, verifiability, and reporting process.  EPA suggested that states may develop collaborative multistate programs.  States may also incorporate existing CO2 emissions reduction programs such as the Regional Greenhouse Gas Initiative or California's carbon market into their plans.  Procedurally, EPA expects that states would submit their plans by June 30, 2016, for review and approval, with the possibility of a one-year extension of this deadline.

EPA is now taking public comment on its proposed Clean Power Plan rule for 120 days, and will hold public hearings on the proposal in July and August.  EPA projects that it would issue its final Clean Power Plan rule in June 2015.

EPA carbon rule: cost and benefit

Monday, the U.S. Environmental Protection Agency proposed a rule aimed at reducing carbon dioxide emissions from power plants.  Part of the EPA's "Clean Power Plan", the rule would rely on states developing and implementing their own plans to reduce the amount of carbon emitted by the electric power sector per unit of electricity generated.  EPA projects that if fully implemented, meeting this goal would reduce the power sector's carbon emissions to 30% below 2005 levels by 2030.  But what will this cost -- and what will the benefits be?

Steam rises from the Con Edison power plant at 14th Street and Avenue C, in New York City.  The plant can burn fuels including oil and natural gas.

Power plants represent the largest source of carbon dioxide emissions in the U.S., accounting for about one-third of the nation's greenhouse gas emissions.  Building on President Obama's 2013 Climate Action Plan and the May 2014 release of the third National Climate Assessment, the Clean Power Plan is premised upon the finding that greenhouse gas pollution "threatens the American public by leading to potentially rapid, damaging and long-lasting changes in our climate that can have a range of severe negative effects on human health and the environment."  The proposed rule targets carbon dioxide because is the most prevalent greenhouse gas, accounting for 82% of U.S. greenhouse gas emissions.

The Clean Power Plan requires states to develop plans to reduce the carbon intensity, or amount of carbon emitted per unit of useful energy, of their power plants.  Each state is allowed to select the measures it wishes to use to reach its carbon intensity goal.  This allows states flexibility to craft policies to reduce carbon pollution that:

1) continue to rely on a diverse set of energy resources, 2) ensure electric system reliability, 3) provide affordable electricity, 4) recognize investments that states and power companies are already making, and 5) can be tailored to meet the specific energy, environmental and economic needs and goals of each state .

The economic impacts of the Clean Power Plan will form a key theme in the debate over its implementation.  The flexibility afforded states makes projections of costs and benefits hard to quantify, even before consideration of the global social cost of carbon or economic concepts like the appropriate discount rate to apply to future costs and benefits.  With those caveats stated, EPA has analyzed two illustrative cases: a collaborative, regional compliance approach (perhaps along the lines of the Regional Greenhouse Gas Initiative) and a state-by-state approach.

Under EPA's analysis as stated in its proposed rule documents, the Clean Power Plan will produce economic benefits far in excess of its costs.  In 2020, EPA projects the regional compliance approach would have total costs of $5 billion, climate benefits of approximately $17 billion, and health co-benefits associated with reduced particulate matter and other emissions -- mostly in the form of reduced premature fatalities -- of between $16 billion and $37 billion.  In this scenario, the Clean Power Plan would yield net economic benefits of between $28 billion and $47 billion by 2020.  EPA's analysis of a state-by-state approach yields similar costs and benefits: a cost of $7.5 billion by 2020, climate benefits of approximately $18 billion, and health co-benefits of between $17 billion and $40 billion.  Under either case, net benefits continue to grow through 2030, reaching between $48 billion and $84 billion.

EPA also projects "job gains and losses relative to base case for the electric generation, coal and natural gas production, and demand side energy efficiency sectors."  In 2020, EPA projects job growth of 25,900 to 28,000 job-years in the power production and fuel extraction sectors, and an increase of 78,000 jobs in the demand-side energy efficiency sector.

What the ultimate costs and benefits of the Clean Power Plan will be remains uncertain, as does EPA's adoption of a final rule implementing the plan.  In the meantime, electric generators, consumers, and policymakers are taking close looks at the plan to ascertain its impacts.

US Supreme Court considers EPA greenhouse gas emissions regulations

May the U.S. Environmental Protection Agency regulate greenhouse gas emissions from power plants and industry under the Clean Air Act?

The Supreme Court of the United States heard oral argument on this issue yesterday, in the case Utility Air Regulatory Group v. Environmental Protection Agency, Docket No. 12-1146.  How the court rules on the case will shape federal regulation of carbon dioxide and other greenhouse gas emissions in the nation.

The case arises from EPA's decision in 2010 to regulate greenhouse gas emissions from power plants and industrial facilities.  That decision stemmed from a 2007 Supreme Court ruling, Massachusetts v. EPA, requiring EPA to regulate greenhouse gas emissions from motor vehicles under Title II of the Clean Air Act.  Since 1980, EPA has held that once it regulates one type of air pollution (e.g. greenhouse gases from motor vehicles), it may (or must) broaden its regulations to cover all such emissions (e.g. greenhouse gases from all sources).  Applying this precedent in 2010, EPA found that regulating motor vehicle greenhouse gas emission standards under Title II of the Clean Air Act also compelled EPA to regulate greenhouse gas emissions under the Clean Air Act's Title I "prevention of significant deterioration" or PSD program, as well as under its Title V stationary-source permitting program.

Building on its Title II regulation of greenhouse gas emissions from cars and trucks, EPA then promulgated its Title I and Title V regulatory programs for stationary sources.  These rules regulated stationary sources emitting 75,000 tons of carbon dioxide or more per year, but triggered challenges from several states, over 70 non-governmental advocacy groups, and business interests.  While challengers raised a host of objections, one of the key substantive issues raised was whether EPA may truly regulate carbon dioxide as a "pollutant."  Challengers also mounted attacks rooted in law, questioning whether EPA's 2010 decision to regulate motor vehicle greenhouse gas emissions could legally trigger permitting requirements for stationary sources.

After the U.S. Court of Appeals for the D.C. Circuit upheld EPA's rules, challengers appealed that decision to the Supreme Court.  While the Court declined to address most of the issues challengers raised, it decided to entertain argument on one point: "Whether EPA permissibly determined that its regulation of greenhouse gas emissions from new motor vehicles triggered permitting requirements under the Clean Air Act for stationary sources that emit greenhouse gases."

The Court's official docket for Utility Air Regulatory Group v. Environmental Protection Agency can be found here, and unofficial copies of many of the pleadings can be found on SCOTUSBlog.  While the Court has not indicated when it will rule on the case, energy and other industries are watching closely for the ultimate outcome.

Connecticut coal-fired power plant air permit issued

The U.S. Environmental Protection Agency has approved a five-year permit for the last coal-fired power plant operating in Connecticut.  The plant, PSEG Power LLC's Bridgeport Harbor Generating Station, can generate 529 megawatts of energy by combusting coal and oil.

While the plant has operated since 1961, its permit renewal was questioned for economic and environmental reasons.  Across the nation, operators of coal plants have announced plans to close or convert plants to other fuels such as natural gas and biomass.  Between the low cost of natural gas - projected to stay low for the foreseeable future - and tighter environmental regulations affecting the electric utility sector, many older and smaller coal-fired power plants are no longer economic to operate.  Additionally, environmental activists have targeted coal-burning plants as polluters, and had argued against the Bridgeport Harbor plant's new permit.

Under the federal Clean Air Act, existing major stationary sources (i.e. those capable of emitting 100 tons per year or more of any criteria air pollutant) must obtain a so-called Title V permit every five years.  Generally, Title V permits are issued by the state or local air pollution control agency, but EPA has 45 days to review any proposed permit and request changes.  In September, Connecticut recommended that EPA renew Bridgeport Harbor's permit.  After the 45-day review process, EPA approved the permit's issuance.

What does the Bridgeport Harbor air permit mean?  Most directly, it means PSEG may continue to operate its plant for another five years -- if it wants to. According to the Connecticut Post, by mid-summer the plant had only operated 24 days this year.  The Bridgeport Harbor plant can provide both baseload power and peaking power needed to satisfy peak consumer demand, but generally the fewer days an asset operates, the harder it is to recover the cost of ownership and operations.

Moreover, coal-fired power plants are declining in the U.S.  This is particularly true in New England, a region far from coal mining.  Will PSEG hold onto the Bridgeport Harbor station and seek another Title V permit in 2017?  For how long will the plant continue to burn coal?  Will PSEG or another owner seek to repurpose the plant to burn other fuels?

EPA regs and electric grid reliability

Debate is ongoing about the effect of new environmental regulations on the U.S. electric grid.  Some worry that tighter environmental controls will force certain electric generators to shut down, driving up the cost of electricity or putting electric reliability at risk.  Others believe that the grid's integrity can be maintained, and that the new regulations are necessary to protect human health and the environment.

Support for the concerned side of the equation comes from a recent report by the North American Electric Reliability Corporation.  NERC is the nation's electric reliability organization, charged with ensuring the reliability of the North American bulk power system.  In NERC's 2011 Long-Term Reliability Assessment (559 page PDF), NERC notes that recent and future environmental regulations may force the early retirement of a significant portion of the nation's coal-fired generating plants.  These regulations include the recently-finalized Cross-State Air Pollution Rule, plus rules under development governing utility plants' water intakes and air emissions.  According to NERC's report, EPA's new cooling water intake structures and mercury and air toxics standards rules "may significantly affect bulk power system reliability depending on the scope and timing of the rule implementation and the mechanisms in place to preserve reliability."

At the same time, others observe that NERC's report assumes multiple worst-case scenarios and ignored the health and environmental benefits of the rules.  After reviewing a near-final draft of the NERC report, EPA itself wrote NERC a letter (4 page PDF), stating "it appears likely your report may contain ... faulty characterizations of our rules."  EPA pointed to several flaws in NERC's analysis, including that NERC assumed generators would be forced to adopt the most expensive solutions immediately, rather than selecting the most cost-effective technologies for each facility.  EPA noted that the bulk of threatened plant retirements suggested in NERC's report would come from the cooling water intake regulations -- regulations which are still under development.  Finally, EPA pointed out that NERC's analysis appears to assume that no one tries to preserve grid reliability as the regulations begin to take effect, "an outcome that flies in the face of our 40 years of implementing the Clean Air Act and Clean Water Act."  Given the positive impacts of the regulations -- with the Cross-State Air Pollution Rule alone projected to prevent 34,000 premature deaths and 400,000 cases of aggravated asthma per year -- EPA defended their value and refuted NERC's analysis.

Reliability of the grid is important, enough so that the Federal Energy Regulatory Commission convened a technical conference yesterday and today to discuss grid reliability and policy.  While that proceeding may result in interim orders or changes to policy, it may take years for the environmental regulations to both take effect and to impact generating plants.  At the same time, generators are keeping a close watch on federal environmental regulation as it develops.