Full of Hot Air? EPA Tries Again to Impose Greenhouse Gas Emission Standards on Fossil Fuel-Fired Power Plants
On 11 May 2023, the US Environmental Protection Agency (EPA) announced new standards for carbon dioxide (CO2) emissions from new and existing power plants (the Proposed Rule).1 EPA projects that the rule, if finalized, would cut 617 million metric tons of CO2 through 2042. EPA’s objective is to support President Biden’s goals to achieve a 50% reduction in greenhouse gas (GHG) pollution from 2005 levels by 2030 and reach net-zero GHG emissions by 2050.
The Proposed Rule has three primary components.
- First, the Proposed Rule sets new source performance standards for new fossil fuel-fired stationary combustion turbine power plants (primarily natural gas-fired units) and fossil-fuel fired steam generating units that undertake a major modification (primarily coal-fired units).
- Second, the Proposed Rule sets guidelines for GHG emissions from existing fossil fuel-fired steam generating power plants and the largest, most frequently operated existing stationary combustion turbines, and it solicits comment on approaches for setting guidelines for GHG emissions for the remainder of the combustion turbine category.
- Finally, the Proposed Rule repeals the Trump-era Affordable Clean Energy Rule.
In issuing the Proposed Rule, EPA relies on Section 111 of the Clean Air Act as its authority to regulate certain pollutants from new and existing sources that emit dangerous air pollutants. To do this, EPA must determine the “best system of emission reduction” (BSER) that, taking into account costs, energy requirements, and non-air quality health and environmental impacts, is “adequately demonstrated.” It must then determine the “degree of emission limitation” achievable by application of the BSER. For new sources, EPA may establish new source performance standards. For existing sources, EPA creates emission guidelines and directs the states to adopt state plans consistent with these guidelines. The Proposed Rule relies heavily on two newer technologies, (1) carbon capture and sequestration (CCS) and (2) low-GHG hydrogen, as components of the BSER to meet new emission limitations for new and existing sources.
The Proposed Rule is the latest attempt by EPA to regulate GHG emissions from power plants and is sure to result in significant litigation. Anticipating potential challenges, EPA explains in the Proposed Rule the Supreme Court in West Virginia v. EPA recognized and the EPA has determined the BSER to be “‘measures that improve the pollution performance of individual sources,’ including add-on controls and clean fuels.” The Proposed Rule states: “For present purposes, several of a BSER’s key features include that costs of controls must be reasonable, that the EPA may determine a control to be ‘adequately demonstrated’ even if it is new and not yet in widespread commercial use, and, further, that the EPA may reasonably project the development of a control system at a future time and establish requirements that take effect at that time.”
Carbon Capture and Sequestration
EPA includes CCS as a key component of the BSER for fossil fuel-fired power plants to reduce CO2 emissions. The Proposed Rule allows various technologies to capture CO2, including solvent-based methods, solid sorbent-based methods, membrane filtration, pressure-swing adsorption, and cryogenic methods. The details of technologies that may be used to capture CO2 are described in the GHG Mitigation Measures for Steam Generating Units Technical Support Document. Once captured, carbon must be sequestered in accordance with requirements under the Underground Injection Control Program and Greenhouse Gas Reporting Program.
EPA notes in the Proposed Rule that it intends to focus the use of CCS for emission reductions to coal-fired units first, while still offering CCS compliance pathways for gas-fired units. As reflected in the proposed emission guidelines for fossil fuel-fired steam generating units, summarized below, EPA recognizes that CCS will be most cost-effective for plants intending to operate longer. EPA cites technological advancements and new policies supporting CCS, including the expansion of the Internal Revenue Code (IRC) Section 45Q tax credit under the Inflation Reduction Act (IRA), as recent developments that reduce costs and increase feasibility for adoption of CCS.
In its pre-proposal outreach, EPA heard strongly held concerns from some environmental justice organizations and community representatives about potential health, environmental, and safety impacts of CCS. According to the Proposed Rule, EPA gave “close consideration” to these concerns but “believes that deployment of CCS can take place in a manner that is protective of public health, safety, and the environment.” In February 2022, the Council on Environmental Quality issued the Carbon Capture, Utilization, and Sequestration (CCUS) Guidance, which stated that “the successful widespread deployment of CCUS will require strong and effective permitting, efficient regulatory regimes, meaningful public engagement early in the review and deployment process, and measures to safeguard public health and the environment.” Consistent with that guidance, EPA commits in the Proposed Rule to “early and meaningful engagement with affected communities and the public” regarding deployment of CCS.
Low-GHG Hydrogen
The Proposed Rule also includes the use of low-GHG hydrogen as a key component of the BSER to reduce CO2 emissions from gas-fired power plants. The Proposed Rule includes a definition of low-GHG hydrogen: “hydrogen qualifies as low-GHG hydrogen if it is produced through a process that results in a GHG emission rate of less than 0.45 kilograms of CO2 equivalent per kilogram of hydrogen (kg CO2/kg H2) on a well-to-gate basis consistent with the system boundary” set forth in Section 45V of the Inflation Reduction Act (IRA), which is the clean hydrogen production tax credit established in IRC section 45V (Credit for Production of Clean Hydrogen) of the IRA. In the Proposed Rule, EPA also solicits comment on appropriate mechanisms to ensure that low-GHG hydrogen is actually low-GHG, such as the use of independent third-party verification. In addition to the IRA, the Proposed Rule cites the Infrastructure Investment and Jobs Act’s (IIJA) investment in low-GHG hydrogen infrastructure as support for the use of this tool as part of the BSER.
Proposed Standards and Emission Guidelines
The tables below summarize the four sources covered in the proposal. In addition to CCS and low-GHG hydrogen, EPA includes as components of the BSER: increases in efficiency, early shut-down, and, in the case of coal-fired power plants, co-firing natural gas with coal to reduce emissions.
The Proposed Rule regulates based on source type, not fuel type, but recognizes that fossil fuel-fired stationary combustion turbines are generally powered by natural gas and fossil fuel- fired steam generating units are generally powered by coal. The Proposed Rule thus emphasizes components of the BSER applicable to the most common fuel type for each source, as outlined below.
1. Proposed Standards for New and Reconstructed Stationary Combustion Turbines (Primary Natural Gas Units)
The proposed standards for new and reconstructed stationary combustion turbines include a low-GHG hydrogen pathway and a CCS pathway.
| BSER at Phase I (effective as of rule promulgation) | Phase II (beginning 2032) | Phase III (beginning 2038) | |
| Base load (combustion turbines that operate above the upper-bound threshold for intermediate load turbines) | “Highly efficient generation”: numeric standard of performance representative of the best performing units in the subcategory | 30% low-GHG hydrogen co-firing | 96% low-GHG hydrogen co-firing |
| Intermediate load (capacity factor that ranges between 20 percent and a source-specific upper bound that is based on the design efficiency of the combustion turbine) | “Highly efficient generation”: numeric standard of performance representative of the best performing units in the subcategory | 30% low-GHG hydrogen co-firing | N/A |
| Low load (combustion turbines with a capacity factor of less than 20 percent) | The use of lower emitting fuels (e.g. natural gas and distillate oil) | ||
| BSER at Phase I (effective as of rule promulgation) | Phase II (beginning 2032) | |
| Base load (combustion turbines that operate above the upper-bound threshold for intermediate load turbines) | “Highly efficient generation”: numeric standard of performance representative of the best performing units in the subcategory | Achieve 90% CCS by 2035 |
2. Proposed Emission Guidelines for Large and Frequently Used Existing Fossil Fuel-Fired Stationary Combustion Turbines (Primarily Existing Natural Gas Units)
The proposed emission guidelines for existing natural gas power plants apply to facilities with a 300 megawatt (MW) capacity or higher—this proposal does not address units with less than 300 MW capacity. As discussed above, hydrogen must be produced using methods with low carbon emissions (i.e., not from natural gas). Additionally, EPA solicits comment regarding BSERs for the remaining categories of combustion turbines, potentially to be addressed in a second rulemaking.
| Source | By 2032 | By 2038 |
| 300 megawatt capacity and run >50% of the time | Co-firing 30% low-GHG hydrogen | Co-firing 96% low-GHG hydrogen |
| 300 megawatt capacity and run <20–50% of the time | Require highly efficient designs and by 2032 require 30% hydrogen | N/A—taking comment |
| 300 megawatt capacity and run <20% of the time | Require latest, most efficient design only | N/A—taking comment |
| Source | By 2035 |
| 300 megawatts capacity + run 50%+ of the time | 90 percent capture |
| 300 megawatts capacity + run 20% - 50% of the time | N/A – taking comment |
| 300 megawatts capacity + run < 20% of the time | N/A – taking comment |
3. Proposed Standards for New, Modified, and Reconstructed Fossil Fuel-Fired Steam Generating Units (Primarily New Coal Units)
The Proposed Rule does not propose standards for new fossil fuel-fired steam generating units. Instead, EPA leaves the 2015 standards for new coal units in place and notes that no new coal-fired power plants are proposed. For modified units, the Proposed Rule imposes the standard applicable to existing coal-fired plants after 2040: 90% capture of CO2 using CCS.
4. Proposed Emission Guidelines for Existing Fossil Fuel-Fired Steam Generating Units (Primarily Existing Coal Units)
Industry stakeholder input during the early engagement process requested that EPA provide approaches that allow for retirement of existing steam power plants, instead of requiring investments in new technologies. For less-common natural gas- and oil-fired steam generating units, the Proposed Rule requires routine methods of operation and maintenance and no increases in emission rate.
The BSER and standards applicable to coal-fired sources are as follows:
| Closing by 2032* | Closing by 2035 | Closing by 2040 | Closing in 2040 and beyond |
| Routine methods of operation and maintenance | Routine methods of operation and maintenance if run <20% of the time | Co-firing 40% natural gas; 16% reduction in emission rate | 90% capture; 88.4% reduction in emission rate |
Changes in the Policy Landscape as Support for the Proposed Rule
EPA points to changes in the policy landscape since the Trump-era Affordable Clean Energy Rule and the Obama-era Clean Power Plan as support for the Proposed Rule. EPA credits the IRA and the IIJA, enacted in 2022 and 2021 respectively, with underwriting the development and reduction in costs of CCS and low-GHG hydrogen, presenting these policies as support for the use of CCS and low-GHG hydrogen as components of the BSER. EPA cites investments in other GHG reduction technologies and associated infrastructure made by the IRA, the IIJA, and the Creating Helpful Incentives to Produce Semiconductors and Science Act (CHIPS Act) (also enacted in 2022) as support for the Proposed Rule’s rapid decarbonization of the electric power sector. EPA notes recent commitments by utilities and power producers to reduce GHG emissions and change their generation mix to non-GHG emitting sources. EPA furthermore highlights that more than two-thirds of states require utilities to increase the share of electricity generated from non-GHG emitting sources, while others require decarbonization of utility fleets with tools like carbon markets, low-GHG emission standards, CCS mandates, utility planning, and mandatory retirement schedules. The policy landscape has changed dramatically since the Obama-era Clean Power Plan. EPA will rely on such changes when defending the Proposed Rule—and eventually the final rule—before the public and in court.
EPA will accept comments on the Proposed Rule for 60 days after it is published in the Federal Register. Comments identified by Docket ID No. EPA-HQ-OAR-2023-0072 may be submitted through regulations.gov; via email, fax, or standard mail; or in person. EPA will also hold a virtual public hearing on the Proposed Rule at a date to be announced.
K&L Gates Environment, Land and Natural Resources practice and Power practice are closely tracking this significant development and are well-positioned to work with clients to understand impacts from the proposal and draft comments on the Proposed Rule.
This publication/newsletter is for informational purposes and does not contain or convey legal advice. The information herein should not be used or relied upon in regard to any particular facts or circumstances without first consulting a lawyer. Any views expressed herein are those of the author(s) and not necessarily those of the law firm's clients.
