EPA proposes model federal plan for states opting out of Clean Power Plan process

The U.S. Environmental Protection Agency’s final Clean Power Plan will be published in the Oct.23 Federal Register, along with a companion proposed rule that outlines how states can do greenhouse gas emissions trading under the Clean Power Plan.

EPA is proposing a federal plan to implement the greenhouse gas (GHG) emission guidelines (EGs) for existing fossil fuel-fired electric generating units (EGUs) under the Clean Air Act (CAA). The EGs were proposed in June 2014 and finalized on Aug. 3 as the Carbon Pollution Emission Guidelines for Existing Stationary Sources: Electric Utility Generating Units (also known as the Clean Power Plan).

The Oct. 23 proposal, which is 754 pages in length, presents two approaches to a federal plan for states and other jurisdictions that do not submit an approvable plan to the EPA under the Clean Power Plan: a rate-based emission trading program and a mass-based emission trading program. These proposals also constitute proposed model trading rules that states can adopt or tailor for implementation of the final EGs.

The proposed federal plan is related to but separate from the final EGs. The final EGs establish the best system of emission reduction (BSER) for applicable fossil fuel-fired EGUs in the form of a carbon dioxide (CO2) emission performance rate for steam-fired EGUs and a CO2 emission performance rate for natural gas-fired combined cycle (NGCC) units, and provide guidance and criteria for the development of approvable state plans.

The purpose of the proposed federal plan is to establish requirements directly applicable to a state’s affected EGUs that meet these emission performance levels, or the equivalent statewide goal, in order to achieve reductions in CO2 emissions in the case where a state or other jurisdiction does not submit an approvable plan. The stringency of the emission performance levels established in the final EGs will be the same whether implemented through a state plan or a federal plan. The EPA is also proposing enhancements to the CAA section 111(d) framework regulations related to the process and timing for state plan submissions and EPA actions. The EPA intends to finalize both the rate-based and mass-based model trading rules in summer 2016.

Comments on the proosed rule must be received within 90 days after the Oct. 23 publication in the Federal Register. The EPA will hold public hearings on the proposal. Details of those will be announced in a separate Federal Register document.

While states may impose the new emission rates directly on their affected EGUs, states also have the option of submitting more tailored plans that meet state-specific emissions goals. The EGs also provide flexibility by allowing for emissions trading and multi-state compliance options.

States don’t have to submit a plan, but they lose some control if they don’t

“While it has been the EPA’s longstanding view that the statute identifies states as the preferred implementers of CAA programs, the agency makes clear in the EGs that states cannot and will not be penalized for failing to participate in this program,” the notice said. “However, if a state does not submit an approvable plan under section 111(d) of the CAA, the EPA will develop, implement, and enforce a federal plan to reduce CO2 from the fossil fuel-fired power plants in that state. This is wholly consistent with the ‘cooperative federalism’ structure of the CAA and many of our nation’s other environmental laws. In addition, we have heard from states and other stakeholders that it would be helpful for the agency to present model designs for state plans, and a federal plan would be an appropriate means of doing that.

“Accordingly, the EPA proposes a federal plan under section 111(d) of the CAA for the control of CO2, a GHG pollutant, from certain emitting fossil fuel-fired power plants, in the event that some states do not adopt their own plans. Specifically, the EPA is proposing approaches in the form of mass- and rate-based trading options that provide flexibility in implementing emission standards for a state’s affected EGUs. Both proposed approaches to the federal plan would require affected EGUs to meet emission standards set using the CO2 emission performance rates in the EGs. The federal plan will achieve the same levels of emissions performance as required of state plans under the EGs.

“The EPA will promulgate a final federal plan for only the affected EGUs in states that the EPA determines did not submit an approvable plan. At the same time, these two proposed options offer states model trading rules that the states can follow in developing their own plans in order to capitalize on the flexibility built into the final EGs. Thus, this document proposes four discrete actions: (1) A rate-based federal plan for each state with affected EGUs; (2) a mass-based federal plan for each state with affected EGUs; (3) a rate-based model trading rule for potential use by any state; and (4) a mass-based model trading rule for potential use by any state. The regulatory text of each federal plan and corresponding model trading rule is identical, except as indicated otherwise within the text of the model rule (for instance, the EPA is providing model rule text for states to use related to the crediting of a broader set of clean energy resources than is being proposed in the federal plan).

“The EPA intends to finalize both the rate-based and mass-based model trading rules in summer 2016. The EPA will finalize a federal plan for only a given state in the event that the state does not submit an approvable plan by the deadlines specified in the final EGs and the EPA takes action finding that the state has failed to submit a plan, or disapproving a submitted plan because it does not meet the requirements of the EGs.

“Indeed, states may simply choose to accept a federal plan for their sources rather than undertake the development of a plan of their own by not submitting a state plan. Under this proposed rule, a federal plan promulgated for a particular state would take the form of either the mass-based model trading rule or the rate-based model trading rule. The EPA currently intends to finalize a single approach (i.e., either the mass-based or rate-based approach) for every state in which it promulgates a federal plan, given the benefits of a broad trading program. We invite comment on which approach, i.e., either mass-based or rate-based trading, should be selected if we opt to finalize a single approach.”

How many states won’t submit a state implementation plan under the Clean Power Plan, triggering the need for a state-specific plan from EPA, is anybody’s guess. Senate Majority Leader Mitch McConnell, R-Ky., suggested a few months ago that all 50 states simply refuse to comply with the Clean Power Plan. A number of states, mostly with Republican governors, are looking to appeal the Clean Power Plan in court (the Oct. 23 publication of the final plan will allow the lawsuits to commence), and some of those states may not submit a plan.

Notable is that some Republican governors are against the Clean Power Plan, but will submit a state plan anyway. For example, if Michigan must reduce CO2 emissions from its power sector, then Republican Gov. Rick Snyder said Sept. 1 that he wants to ensure that the implementation strategy is drafted in Michigan.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.