By Julian Harrell and Olivia Lucas
Most of us can recall when our caretakers made different parenting choices to achieve similar outcomes. Some embraced “tough love” where discipline and strictness set expectations. Others used gentler encouragement and allowed broader autonomy. Those parenting styles — the “tough” versus the “flexible” parent — are apt frameworks for comparing the Obama-era Clean Power Plan (CPP) and the Trump-era Affordable Clean Energy rule (ACE) approaches to carbon dioxide emissions limits for electric utility steam generating units (EGUs).
Many in the industry viewed the 2015 CPP’s methods to address CO2 as burdensome and exceeding the Clean Air Act’s statutory authority, especially where the EPA set each state’s CO2 emission rate and where the rule sought CO2 reductions by substituting “cleaner” technologies for coal. Proponents of ACE claim the rule allows states more autonomy to create emission standards within federal guidelines and a more targeted approach to CO2 reductions within the fence line of coal-fired plants.
This article provides a brief timeline of events leading up to the EPA’s proposal of ACE; an overview of the CPP’s requirements; an outline of ACE’s requirements and how those requirements differ from the CPP; and an analysis of ACE’s potential impact in Indiana.
Leading up to ACE
EPA published the final rule governing “Carbon Pollution Emissions Guidelines for Existing Stationary Sources: Electric Utility Generating Units,” more commonly known as the CPP, on Oct. 23, 2015. Although this rule was finalized, it was never implemented. Opponents of the CPP, including Indiana, promptly filed lawsuits seeking various forms of relief and a stay of the rule. On Feb. 9, 2016, the United States Supreme Court voted 5-4 to stay implementation of the CPP. On March 28, 2017, while states, industry groups and the EPA continued litigating to strike down the CPP, President Donald Trump filed Executive Order 13783 (the Order). The Order sought to “avoid regulatory burdens that unnecessarily encumber energy production,” foreshadowing ACE’s regulatory tone and signaling the April 3, 2017 repeal of the CPP.
While there was some initial question as to whether the Trump administration’s EPA would regulate CO2 from EGUs at all, ACE was proposed on Aug. 21, 2018. To better understand ACE’s approach, it is helpful to contrast it with the CPP’s requirements.
CPP: EPA-mandated statestandards moving from coal
The CPP’s approach resembled “tough love” for coal-fired generation, whereby EPA set state-specific emission reduction standards and proposed methods to meet those standards that emphasized use of renewable energy to replace coal-fired generation. This style was reflected by the CPP’s major provisions, including: (i) basing the determination of Best System of Emission Reduction (BSER) on “building blocks” emphasizing renewable energy; (ii) source-category-specific CO2 performance rates; and (iii) ambitious, EPA-mandated statewide CO2 emission guidelines.
BSER standard: Acting under Clean Air Act § 111(d), EPA proposed CO2 emission guidelines for each state based on the application of BSER. Instead of basing its statewide CO2 goal on emissions rates achievable by the application of particular emission controls, EPA determined BSER was made of “building blocks.” These building blocks reflected the Obama-era EPA’s position that there were “numerous other measures available to reduce CO2,” and included:
• Improved heat rates for coal-fired EGUs;
• More reliance on natural gas units and less reliance on steam generating units; and
• More use of zero-emission renewable technology and less power generation from fossil-fuel EGUs.
States could determine what combination of “building blocks” would work best to meet the required emissions standard.
Statewide CO2 reduction goals: State-specific goals, listed separately in the CPP, were quantitatively equivalent to the technology-specific goals noted above. States were required to submit a plan with emissions standards that complied with the CPP and could choose to implement technology-specific performance rates, set rate-based goals or set mass-based goals that ensured all affected EGUs in the state achieved interim and final performance rates by 2030. Rate-based CO2 goals represented the weighted total of emissions performance rates for a state’s EGUs, while mass-based goals equaled total tons of CO2 per year from all EGUs. States could also work together to develop multi-state compliance plans.
ACE: Emphasis on state controland status quo energy generation
While ACE shares similarities with its predecessor, its approach to reducing CO2 — its “parenting style” — is considerably different. For example, ACE allows states to set their own standards based on federal guidelines. Also, ACE focuses on more efficient use of existing coal plants, rather than shifting to different energy sources.
Structurally, ACE has three main components: revised BSER determination based only on heat rate improvements (HRIs) for individual EGUs; new implementation regulations designed to reinforce states’ autonomy to establish and enforce emissions standards; and allowing HRI improvements without triggering New Source Review (NSR) permit requirements. This article focuses primarily on ACE’s proposal to revise BSER and NSR regulations.
Revised BSER: President Trump’s EPA nixed the CPP’s “building blocks” and subcategory-based emissions standards. Instead, ACE describes BSER as HRI at power plants. Conceptually, EGUs with lower heat rate consume less fuel per kilowatt hour generated and emit less CO2. Thus, heat rate reduction equals increased operational efficiency and fewer emissions.
Using this new approach, EPA is proposing a list of HRI “candidate technologies” for states to choose from, including new neural networks/sootblowers, boiler feed pumps, leakage control, variable frequency drives, blade path upgrades, economizers and improved operation and maintenance. States must then evaluate candidate technologies when establishing standards for EGUs. In fashioning performance standards, states are also allowed to consider the “remaining useful life” of the EGU.
NSR relief: ACE also proposes to encourage companies’ energy efficiency improvement projects, such as HRIs, by decreasing the risk that the HRI project would trigger NSR permit review, which can increase the overall costs of the project. According to ACE, HRI efforts would increase energy efficiency and reduce operating costs, thereby making the EGU more available for use due to its lower operational cost. Without the proposed NSR changes, this type of increased availability could trigger federal permitting requirements because of the resulting overall emissions increase. However, the promoted efficiencies would lower output-based emissions and potentially help create systemwide emissions reductions. Accordingly, the final version of ACE is expected to include revisions to NSR regulations to promote efficiencies that support reduced CO2 emissions.
ACE’s impact on Indiana
Although ACE is not finalized, the proposed rule offers grace to coal-fired power generators. In contrast to the “tougher” CPP, ACE’s proposed standards do not require phasing out coal or implementing “post-coal” technologies. Instead, ACE signals friendlier “parenting” for coal-fired EGUs — especially considering potentially relaxed NSR standards — that will support continued operation of existing plants into the future.
Although Indiana is inching toward a more balanced mix of power generation, including increased reliance on gas-powered generation, it is among the top coal-producing states. Indiana also still relies heavily on coal, producing upwards of an estimated net 5,500 MWh of electricity from coal-fired power generation. This is welcome news for coal-fired EGUs, including those in Indiana, as ACE’s focus on HRI could extend their “life expectancy” compared to the CPP’s intent to move away from coal.•
• Julian Harrell is an associate and Olivia Lucas is counsel at Faegre Baker Daniels LLP. Opinions expressed are those of the authors.