On January 8, 2014, the proposed Standards of Performance for Greenhouse Gas Emissions From New Stationary Sources: Electric Utility Generating Units; Proposed Rule (the "Proposed Rule"), which would limit carbon dioxide ("CO2") emissions from new power plants, was published in the Federal Register by the U.S. Environmental Protection Agency ("EPA"). 79 Fed. Reg. 1430. The Proposed Rule would require new natural gas-fired power plants to be modern combined cycle facilities, and require new coal-fired power plants to implement carbon capture and storage ("CCS") technology.
The Proposed Rule represents the first national new source performance standard ("NSPS") under the Clean Air Act ("CAA") for CO2 emissions from the power sector. Under a June 2013 directive from President Obama, EPA is also developing a proposed NSPS rule to limit carbon from existing power plants, which is scheduled to be released in June 2014.
The Proposed Rule would apply to new fossil fuel-fired electric generating units ("EGUs") in two categories: (1) coal-fired utility boilers or integrated gasification combined cycle ("IGCC") units, and (2) natural gas-fired combustion turbine EGUs. Although NSPS also typically apply to major modifications and reconstructions, EPA excluded such sources from regulation under the Proposed Rule. Affected EGUs will include new sources with a heat input greater than 250 million Btu per hour that combust fossil fuels and supply more than one-third electric output for sale to the grid.
One NSPS emission limit is proposed for coal-fired EGUs and IGCC units, and a separate NSPS limit is proposed for natural gas-fired EGUs. For coal-fired EGUs and IGCC units, facilities will be required to comply with a twelve-month rolling average of 1,100 pounds of CO2 per megawatt-hour ("lb CO2/MWh"). Alternatively, facilities can opt to phase-in CCS technology and comply with a limit of 1,050 lb CO2/MWh over 84 months.
For natural gas combustion turbines, the emission limit will depend on the size of the EGU. For EGUs rated greater than 850 mmBtu/hr, the limit will be 1,000 lb CO2/MWh. For EGUs less than or equal to 850 mmBtu/hr, the proposed limit is 1,100 lb CO2/MWh.
To set an NSPS, EPA is required to determine the Best System of Emission Reduction ("BSER"); the emission limits that can be accomplished with the BSER is the NSPS. The BSER must be "adequately demonstrated" and take into account factors such as technical feasibility, cost, size of emission reductions, and whether further development and technology would be promoted. The NSPS does not prescribe a particular technology, but requires that emission limits can be met using the BSER. The BSER determined by EPA for natural gas-fired EGUs is modern combined cycle technology, and partial CCS (carbon capture below 90 percent) for coal-fired EGUs.
The EPA's determination that partial CCS is an "adequately demonstrated" BSER for coal-fired units has come under fire. The Energy Policy Act of 2005 expressly states that technology used by facilities that receive assistance under the Act cannot be deemed adequately demonstrated for purposes of setting an NSPS. In a November 2013 letter to the EPA, the Chairman of the House Energy and Commerce Committee, Fred Upton, questioned the selection of CCS as the BSER because it was based on projects that received governmental funding under the Department of Energy's Clean Coal Power Initiative.
While the Proposed Rule represents the first national CO2 emission standards for power plants, New York promulgated regulations for CO2 emissions from new and modified EGUs in 2012. Under 6 NYCRR Part 251, new EGUs and existing EGUs that increase capacity by 25 MW or more are required to limit CO2 emissions to 925 lb CO2/MWh. Because the New York rule is more stringent than the Proposed Rule, Part 251 will likely continue to be applicable in New York.
A public hearing on the Proposed Rule is scheduled for February 6, 2014 in Washington, DC. The 60-day public comment period, which will end on March 10, 2014, is currently underway.
The 2011 PSD Tailoring Rule for greenhouse gases will continue to apply to new and modified power plants. The proposed NSPS that will govern existing, modified, and reconstructed EGUs is scheduled to be released by EPA in June 2014. So far, EPA has indicated that existing coal-fired plants will not be required to use CCS.
If you require further information regarding the information presented in this Legal Alert and its impact on your organization, please contact Richard Capozza, Chair of the Energy Practice Area at (315) 425-2710 or rcapozza@hblaw.com, or Frank Bifera, Chair of the Environmental Practice Area at (518) 429-4224 or fbifera@hblaw.com.