# Repeal of the Clean Power Plan; Emission Guidelines for Greenhouse Gas Emissions From Existing Electric Utility Generating Units; Revisions to Emission Guidelines Implementing Regulations > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/fr%3A2019-13507 ## Record - **Collection:** Federal Register - **Document type:** Rule - **Published:** July 8, 2019 - **Citation:** 84 FR 32520 ## Text 40 CFR Part 60 Repeal of the Clean Power Plan; Emission Guidelines for Greenhouse Gas Emissions From Existing Electric Utility Generating Units; Revisions to Emission Guidelines Implementing Regulations; Final Rule Federal Register / Vol. 84 , No. 130 / Monday, July 8, 2019 / Rules and Regulations [[Page 32520]] ----------------------------------------------------------------------- ENVIRONMENTAL PROTECTION AGENCY 40 CFR Part 60 [EPA-HQ-OAR-2017-0355: FRL-9995-70-OAR] RIN 2060-AT67 Repeal of the Clean Power Plan; Emission Guidelines for Greenhouse Gas Emissions From Existing Electric Utility Generating Units; Revisions to Emission Guidelines Implementing Regulations AGENCY: Environmental Protection Agency (EPA). ACTION: Final rule. ----------------------------------------------------------------------- SUMMARY: The U.S. Environmental Protection Agency (EPA) is finalizing three separate and distinct rulemakings. First, the EPA is repealing the Clean Power Plan (CPP) because the Agency has determined that the CPP exceeded the EPA's statutory authority under the Clean Air Act (CAA). Second, the EPA is finalizing the Affordable Clean Energy rule (ACE), consisting of Emission Guidelines for Greenhouse Gas (GHG) Emissions from Existing Electric Utility Generating Units (EGUs) under CAA section 111(d), that will inform states on the development, submittal, and implementation of state plans to establish performance standards for GHG emissions from certain fossil fuel-fired EGUs. In ACE, the Agency is finalizing its determination that heat rate improvement (HRI) is the best system of emission reduction (BSER) for reducing GHG--specifically carbon dioxide (CO2)--emissions from existing coal-fired EGUs. Third, the EPA is finalizing new regulations for the EPA and state implementation of ACE and any future emission guidelines issued under CAA section 111(d). DATES: Effective September 6, 2019. ADDRESSES: The EPA has established a docket for these actions under Docket ID No. EPA-HQ-OAR-2017-0355. All documents in the docket are listed on the https://www.regulations.gov/ website. Although listed, some information is not publicly available, e.g., confidential business information (CBI) or other information whose disclosure is restricted by statute. Certain other material, such as copyrighted material, is not placed on the internet and will be publicly available only in hard copy form. Publicly available docket materials are available electronically through https://www.regulations.gov/ or in hard copy at the EPA Docket Center, WJC West Building, Room 3334, 1301 Constitution Ave. NW, Washington, DC. The EPA's Public Reading Room hours of operation are 8:30 a.m. to 4:30 p.m. Eastern Standard Time (EST), Monday through Friday. The telephone number for the Public Reading Room is (202) 566-1744, and the telephone number for the EPA Docket Center is (202) 566-1742. FOR FURTHER INFORMATION CONTACT: For questions about these final actions, contact Mr. Nicholas Swanson, Sector Policies and Programs Division (Mail Code D205-01), Office of Air Quality Planning and Standards, U.S. Environmental Protection Agency, Research Triangle Park, North Carolina 27711; telephone number: (919) 541-4080; fax number: (919) 541-4991; and email address: [email protected]. SUPPLEMENTARY INFORMATION: Preamble acronyms and abbreviations. The EPA uses multiple acronyms and terms in this preamble. While this list may not be exhaustive, to ease the reading of this preamble and for reference purposes, the EPA defines the following terms and acronyms: ACE Affordable Clean Energy Rule AEO Annual Energy Outlook ANPRM Advance Notice of Proposed Rulemaking BACT Best Available Control Technology BSER Best System of Emission Reduction Btu British Thermal Unit CAA Clean Air Act CCS Carbon Capture and Storage (or Sequestration) CFR Code of Federal Regulation CO2 Carbon Dioxide CPP Clean Power Plan EGU Electric Utility Generating Unit EIA Energy Information Administration EPA Environmental Protection Agency FIP Federal Implementation Plan GHG Greenhouse Gas HRI Heat Rate Improvement IGCC Integrated Gasification Combined Cycle kW Kilowatt kWh Kilowatt-hour MW Megawatt MWh Megawatt-hour NAAQS National Ambient Air Quality Standards NGCC Natural Gas Combined Cycle NOX Nitrogen Oxides NSPS New Source Performance Standards NSR New Source Review OMB Office of Management and Budget PM2.5 Fine Particulate Matter PRA Paperwork Reduction Act PSD Prevention of Significant Deterioration RIA Regulatory Impact Analysis RTC Response to Comments SIP State Implementation Plan SO2 Sulfur Dioxide UMRA Unfunded Mandates Reform Act U.S. United States VFD Variable Frequency Drive Organization of this document. The information in this preamble is organized as follows: I. General Information A. Executive Summary B. Where can I get a copy of this document and other eelated information? C. Judicial Review and Administrative Reconsideration II. Repeal of the Clean Power Plan A. Background for the Repeal of the Clean Power Plan B. Basis for Repealing the Clean Power Plan C. Independence of Repeal of the Clean Power Plan III. The Affordable Clean Energy Rule A. The Affordable Clean Energy Rule Background B. Legal Authority To Regulate EGUs C. Designated Facilities for the Affordable Clean Energy Rule D. Regulated Pollutant E. Determination of the Best System of Emission Reduction F. State Plan Development G. Impacts of the Affordable Clean Energy Rule IV. Changes to the Implementing Regulations for CAA Section 111(d) Emission Guidelines A. Regulatory Background B. Provisions for Superseding Implementing Regulations C. Changes to the Definition of ``Emission Guidelines'' D. Updates to Timing Requirements E. Compliance Deadlines F. Completeness Criteria G. Standard of Performance H. Remaining Useful Life and Other Factors Provision V. Statutory and Executive Order Reviews A. Executive Order 12866: Regulatory Planning and Review and Executive Order 13563: Improving Regulation and Regulatory Review B. Executive Order 13771: Reducing Regulation and Controlling Regulatory Costs C. Paperwork Reduction Act (PRA) D. Regulatory Flexibility Act (RFA) E. Unfunded Mandates Reform Act (UMRA) F. Executive Order 13132: Federalism G. Executive Order 13175: Consultation and Coordination With Indian Tribal Governments H. Executive Order 13045: Protection of Children From Environmental Health Risks and Safety Risks I. Executive Order 13211: Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use J. National Technology Transfer and Advancement Act (NTTAA) K. Executive Order 12898: Federal Actions To Address Environmental Justice in Minority Populations and Low-Income Populations L. Congressional Review Act (CRA) VI. Statutory Authority [[Page 32521]] I. General Information A. Executive Summary With this document, the EPA is, after review and consideration of public comments, finalizing three separate and distinct rulemakings. First, the EPA is finalizing the repeal of the CPP which was proposed at 82 FR 48035 (Oct. 16, 2017) (``Proposed Repeal''). Second, the EPA is promulgating ACE, which consists of emission guidelines for states to develop and submit to the EPA plans that establish standards of performance for CO2 emissions from certain existing coal- fired EGUs within their jurisdictions. Third, the EPA is finalizing implementing regulations that provide direction to both the EPA and states on the implementation of ACE and any future emission guidelines issued under CAA section 111(d). This document does not include any final action concerning the New Source Review (NSR) reforms the EPA proposed in conjunction with the ACE proposal; the EPA intends to take final action on the proposed NSR reforms in a separate final action at a later date. First, the EPA is repealing the CPP. In proposing to repeal the CPP, the Agency proposed a change in the legal interpretation of CAA section 111, on which the CPP was based, to an interpretation of the CAA that ``is consistent with the CAA's text, context, structure, purpose, and legislative history, as well as with the Agency's historical understanding and exercise of its statutory authority.'' \1\ After further review of the EPA's statutory authority under CAA section 111 and in consideration of public comments, the Agency is finalizing the repeal of the CPP. The discussion of the repeal action, along with the EPA's explanation that it intends the repeal of the CPP to be independent from the other final actions in this document, can be found in section II below. --------------------------------------------------------------------------- \1\ Proposed Repeal, 82 FR 48036. --------------------------------------------------------------------------- Second, the EPA is finalizing ACE, which consists of emission guidelines to inform states in the development, submittal, and implementation of state plans that establish standards of performance for CO2 from certain existing coal-fired EGUs within their jurisdictions. In these emission guidelines, the EPA has determined that the BSER for existing EGUs is based on HRI measures that can be applied to a designated facility. ACE also clarifies the roles of the EPA and the states under CAA section 111(d). With the promulgation of this action, it is the states' responsibility to use the information and direction herein to develop standards of performance that reflect the application of the BSER. Per the CAA, states may also consider source-specific factors--including, among other factors, the remaining useful life of an existing source--in applying a standard of performance to that source. In this way, the state and federal roles complement each other as the EPA has the authority and responsibility to determine BSER at the national level, while the states have the authority and responsibility to establish and apply standards of performance for their existing sources, taking into consideration source-specific factors where appropriate. A full discussion of ACE can be found in section III of this preamble. Third, the EPA is finalizing new implementing regulations that apply to ACE and any future emission guidelines promulgated under CAA section 111(d). The purpose of the new implementing regulations is to harmonize aspects of our existing regulations with the statute, in a new 40 CFR part 60, subpart Ba, by making it clear that states have broad discretion in establishing and applying emissions standards consistent with the BSER. The new implementing regulations also provide changes to the timing requirements for the EPA and states to take action to more closely align with the CAA section 110 state implementation plan (SIP) and federal implementation plan (FIP) deadlines. The discussion of the final revisions to the implementing regulations is found in section IV below. The implementing regulations (and ACE which is promulgated consistent with those regulations) make clear that the EPA, states, and sources all have distinct roles, responsibilities, and flexibilities under CAA section 111(d). Specifically, the EPA identifies the BSER; states establish standards of performance for existing sources within their jurisdiction consistent with that BSER and also with the flexibility to consider source-specific factors, including remaining useful life; and sources then meet those standards using the technologies or techniques they believe is most appropriate. As this preamble explains, in the case of ACE, the EPA has identified the BSER as a set of heat rate improvement measures. States will establish standards of performance for existing sources based on application of those heat rate improvement measures (considering source-specific factors, including remaining useful life). Each regulated source then must meet those standards using the measures they believe is appropriate (e.g., via the heat rate improvement measures identified by the EPA as the BSER, other heat rate improvement measures, or other approaches such as CCS or natural gas co-firing). These three rules have been informed by more than 1.5 million public comments on the Proposed Repeal and 500,000 public comments on the proposals for ACE and the new implementing regulations. Per CAA section 307(d)(6)(B), the EPA is providing a response to the significant comments received for each of these actions in the docket. After careful consideration of the comments, the EPA is finalizing these three rules, with revisions to what it proposed where appropriate, to provide states guidance on how to address CO2 emissions from coal-fired power plants in a way that is consistent with the EPA's authority under the CAA. B. Where can I get a copy of this document and other related information? In addition to being available in the docket, an electronic copy of this document is available on the internet. Following signature by the EPA Administrator, the EPA will post a copy of this document at https://www.epa.gov/stationary-sources-air-pollution/electric-utility-generating-units-emission-guidelines-greenhouse. Following publication in the Federal Register, the EPA will post the Federal Register version of these final rules and key technical documents at this same website. C. Judicial Review and Administrative Reconsideration Under CAA section 307(b)(1), judicial review of these final actions is available only by filing a petition for review in the United States Court of Appeals for the District of Columbia Circuit (D.C. Circuit) by September 6, 2019. Under CAA section 307(b)(2), the requirements established by these final rules may not be challenged separately in any civil or criminal proceedings brought by the EPA to enforce the requirements. Section 307(d)(7)(B) of the CAA further provides that only an objection to a rule or procedure which was raised with reasonable specificity during the period for public comment (including any public hearing) may be raised during judicial review. This section also provides a mechanism for the EPA to reconsider a rule if the person raising an objection can demonstrate to the Administrator that it was impracticable to raise such objection within the period for public comment or if the grounds for such objection arose after the period for public comment (but within the time [[Page 32522]] specified for judicial review) and if such objection is of central relevance to the outcome of the rule. Any person seeking to make such a demonstration should submit a Petition for Reconsideration to the Office of the Administrator, U.S. EPA, Room 3000, WJC South Building, 1200 Pennsylvania Ave. NW, Washington, DC 20460, with a copy to both the person(s) listed in the preceding FOR FURTHER INFORMATION CONTACT section, and the Associate General Counsel for the Air and Radiation Law Office, Office of General Counsel (Mail Code 2344A), U.S. EPA, 1200 Pennsylvania Ave. NW, Washington, DC 20460. II. Repeal of the Clean Power Plan A. Background for the Repeal of the Clean Power Plan 1. The Clean Power Plan The EPA promulgated the CPP under section 111 of the CAA.\2\ Section 111(b) authorizes the EPA to issue nationally applicable new source performance standards (NSPS) limiting air pollution from ``new sources'' in source categories that cause or significantly contribute to air pollution that may reasonably be anticipated to endanger public health or welfare.\3\ In 2015, the EPA issued such a rule for GHG emissions--in particular, CO2--from certain new fossil fuel- fired power plants \4\ in light of the Agency's assessment ``that GHGs endanger public health, now and in the future.'' \5\ CAA section 111(d) provides that, under certain circumstances, when the EPA issues a CAA section 111(b) standard, the EPA must develop procedures requiring each state to submit a plan to the EPA that establishes performance standards for existing sources in the same category.\6\ The EPA relied on CAA section 111(d) to issue the CPP, which, for the first time, required states to submit plans specifically designed to limit CO2 emissions from certain existing fossil fuel-fired power plants. --------------------------------------------------------------------------- \2\ 42 U.S.C. 7411. \3\ Id. 7411(b)(1). \4\ The CPP identified ``[f]ossil fuel-fired EGUs'' as ``by far the largest emitters of GHGs among stationary sources in the U.S., primarily in the form of CO2.'' 80 FR 64510, 64522 (October 23, 2015). \5\ Standards of Performance for Greenhouse Gas Emissions from New, Modified, and Reconstructed Stationary Sources: Electric Generating Units, 80 FR 64510, 64518 (October 23, 2015); see also Endangerment and Cause or Contribute Findings for Greenhouse Gases Under section 202(a) of the CAA, 74 FR 66496 (December 15, 2009) (2009 Endangerment Finding). The substance of the 2009 Endangerment Finding, which addressed GHG emissions from mobile sources, is not at issue in this action. \6\ 42 U.S.C. 7411(d)(1) (emphasis added). --------------------------------------------------------------------------- The CPP established emission guidelines for states to follow in limiting CO2 emissions from those existing fossil fuel-fired power plants. Those emission guidelines included both state-specific ``goals'' and alternative, nationally uniform CO2 emission performance rates for two types of existing fossil fuel-fired power plants: Electric utility steam generating units and stationary combustion turbines.\7\ --------------------------------------------------------------------------- \7\ See 80 FR 64707. --------------------------------------------------------------------------- In the CPP, the EPA determined that the BSER for CO2 emissions from existing fossil fuel-fired power plants was the combination of: (1) Heat rate (e.g., efficiency) improvements to be conducted at individual power plants, in combination with (2, 3) two other sets of measures based on the shifting of generation at the fleet-wide level from one type of energy source to another. The EPA referred to these three sets of measures as ``building blocks'': \8\ --------------------------------------------------------------------------- \8\ Id. --------------------------------------------------------------------------- 1. Improving heat rate at affected coal-fired steam generating units; 2. Substituting increased generation from lower-emitting existing natural gas combined cycle units for decreased generation from higher- emitting affected steam generating units; and 3. Substituting increased generation from new zero-emitting renewable energy generating capacity for decreased generation from affected fossil fuel-fired generating units. While building block 1 relied on measures that could be applied directly to individual sources, building blocks 2 and 3 employed measures that were expressly designed to shift the balance of coal-, gas-, and renewable-generated power across the power grid. 2. Legal Challenges to the CPP, Executive Order 13783, and the EPA's Review of the CPP On October 23, 2015, 27 states and a number of other parties sought judicial review of the CPP in the U.S. Court of Appeals for the D.C. Circuit.\9\ After some preliminary briefing, the Supreme Court stayed implementation of the CPP, pending judicial review.\10\ The case was then referred to an en banc panel of the D.C. Circuit, which held oral argument on September 27, 2016. --------------------------------------------------------------------------- \9\ See West Virginia v. EPA, No. 15-1363 (and consolidated cases) (D.C. Cir. October 23, 2015). \10\ West Virginia v. EPA, 136 S. Ct. 1000 (2016). --------------------------------------------------------------------------- On March 28, 2017, President Trump issued Executive Order 13783, which affirms the ``national interest to promote clean and safe development of our Nation's vast energy resources, while at the same time avoiding regulatory burdens that unnecessarily encumber energy production, constrain economic growth, and prevent job creation.'' \11\ The Executive Order directs all executive departments and agencies, including the EPA, to ``immediately review existing regulations that potentially burden the development or use of domestically produced energy resources and appropriately suspend, revise, or rescind those that unduly burden the development of domestic energy resources beyond the degree necessary to protect the public interest or otherwise comply with the law.'' \12\ The Executive Order further affirms that it is ``the policy of the United States that necessary and appropriate environmental regulations comply with the law.'' \13\ Moreover, the Executive Order specifically directs the EPA to review and initiate reconsideration proceedings to ``suspend, revise, or rescind'' the CPP ``as appropriate and consistent with law.'' \14\ --------------------------------------------------------------------------- \11\ See Executive Order 13783, section 1(a). \12\ Id. section 1(c). \13\ Id. section 1(e). \14\ Id. section 4(a)-(c). --------------------------------------------------------------------------- In a document signed the same day as Executive Order 13783 and published in the Federal Register at 82 FR 16329 (April 4, 2017), the EPA announced that, consistent with the Executive Order, it was initiating its review of the CPP and providing notice of forthcoming proposed rulemakings consistent with the Executive Order. In light of Executive Order 13783, the EPA's initiation of a review of the CPP, and notice of the EPA's forthcoming rulemakings, the EPA asked the D.C. Circuit to hold the CPP litigation in abeyance, and, on April 28, 2017, the court (still sitting en banc) granted motions to hold the cases in abeyance for 60 days and directed the parties to file briefs addressing whether the cases should be remanded to the Agency rather than held in abeyance.\15\ Since then, the D.C. Circuit has issued a series of orders holding the cases in abeyance. While the case has been in abeyance, the EPA has been reviewing the CPP and providing status reports to the court describing the progress of its rulemaking. --------------------------------------------------------------------------- \15\ Order, Document No. 1673071 (per curiam). --------------------------------------------------------------------------- In the course of the EPA's review of the CPP, the Agency also reevaluated its interpretation of CAA section 111, and, on that basis, the Agency proposed to repeal the CPP.\16\ --------------------------------------------------------------------------- \16\ See Proposed Repeal, 82 FR 48035 (October 16, 2017). --------------------------------------------------------------------------- 3. Public Comment and Hearings on the Proposed Repeal Publication of the Proposed Repeal in the Federal Register opened comment on the proposal for an initial 60-day [[Page 32523]] public comment period. The EPA held public hearings on November 28 and 29, 2017, in Charleston, West Virginia, and then extended the public comment period until January 16, 2018. In response to requests for additional opportunities for oral testimony, the EPA held three listening sessions in Kansas City, Missouri; San Francisco, California; and Gillette, Wyoming. The EPA also reopened the public comment period until April 26, 2018, giving stakeholders 192 days to review and comment on the proposal. The EPA received more than 1.5 million comments on the Proposed Repeal. B. Basis for Repealing the Clean Power Plan 1. Authority To Revisit Existing Regulations The EPA's ability to revisit existing regulations is well-grounded in the law. Specifically, the EPA has inherent authority to reconsider, repeal, or revise past decisions to the extent permitted by law so long as the Agency provides a reasoned explanation. The authority to reconsider prior decisions exists in part because the EPA's interpretations of statutes it administers ``[are not] instantly carved in stone,'' but must be evaluated ``on a continuing basis.'' \17\ This is true when, as is the case here, review is undertaken ``in response to . . . a change in administrations.'' \18\ Indeed, ``[a]gencies obviously have broad discretion to reconsider a regulation at any time.'' \19\ --------------------------------------------------------------------------- \17\ Chevron U.S.A. Inc. v. NRDC, Inc., 467 U.S. 837, 863-64 (1984). \18\ National Cable & Telecommunications Ass'n v. Brand X internet Services, 545 U.S. 967, 981 (2005). \19\ Clean Air Council v. Pruitt, 862 F.3d 1, 8-9 (D.C. Cir. 2017). --------------------------------------------------------------------------- 2. Legal Basis for Repeal of the Clean Power Plan The CPP departed from the EPA's traditional understanding of its authority under section 111 of the CAA and promulgated a rule in excess of its statutory authority. Because the CPP significantly exceeded the Agency's authority, it must be repealed.\20\ Fundamentally, the CPP read the statutory term ``best system of emission reduction'' so broadly as to encompass measures the EPA had never before envisioned in promulgating performance standards under CAA section 111. In contrast to its traditional regulations that set performance standards based on the application of equipment and practices at the level of an individual facility, the EPA in the CPP set standards that could only be achieved by a shift in the energy generation mix at the grid level, requiring a shift from one type of fossil-fuel-fired generation to another, and from fossil-fuel-fired generation as a whole towards renewable sources of energy. The text of the CAA is inconsistent with that interpretation, and the context, structure, and legislative history confirm that the statutory interpretation underlying the CPP was not a permissible construction of the Act. --------------------------------------------------------------------------- \20\ As noted above, the EPA received more than 1.5 million comments on the Proposed Repeal. The Agency's consideration of and responses to significant comments are reflected in section II.B.2 of this preamble. --------------------------------------------------------------------------- a. CAA Requirements and Background In 1970, Congress enacted section 111(b) of the CAA, authorizing the EPA to promulgate ``standards of performance'' for new stationary sources in certain source categories.\21\ Congress also directed the EPA, under CAA section 111(d), to ``prescribe regulations which shall establish a procedure'' \22\ for states to establish standards \23\ for existing sources of certain air pollutants to which a standard of performance would apply if such existing source were a new source.\24\ --------------------------------------------------------------------------- \21\ CAA Amendments of 1970, Public Law 91-604, 84 Stat. at 1683-84 (Dec. 31, 1970); see also 42 U.S.C. 7411(b). \22\ See section IV (addressing changes to the implementing regulations). \23\ As originally enacted, CAA section 111 required states to establish ``emission standards'' for existing sources, but Congress replaced that term with ``standard of performance'' as part of the CAA Amendments of 1977. See Public Law 95-95, 91 Stat. at 699 (Aug. 7, 1977) (``Section 111(d)(1) . . . is amended by striking out `emissions standards' in each place it appears and inserting in lieu thereof `standards of performance' ''). \24\ CAA Amendments of 1970, 84 Stat. at 1684; see also 42 U.S.C. 7411(d). --------------------------------------------------------------------------- Since 1990, new- and existing-source CAA section 111 rulemakings have been governed by the same statutory definitions.\25\ The CAA defines the term ``standard of performance'' in two sections. CAA section 111(a)(1) defines it, for purposes of section 111 (which contains the new- and existing-source performance standard authority in, respectively, CAA section 111(b) and 111(d)), as: --------------------------------------------------------------------------- \25\ See infra n.51. a standard for emissions of air pollutants which reflects the degree of emission limitation achievable through the application of the best system of emission reduction which (taking into account the cost of achieving such reduction and any nonair quality health and environmental impact and energy requirements) the Administrator determines has been adequately demonstrated.\26\ --------------------------------------------------------------------------- \26\ 42 U.S.C. 7411(a)(1). And CAA section 302(l) defines ``standard of performance'' as ``a requirement of continuous emission reduction, including any requirement relating to the operation or maintenance of a source to assure continuous reduction.'' \27\ --------------------------------------------------------------------------- \27\ 42 U.S.C. 7602(l). --------------------------------------------------------------------------- EPA's role under CAA section 111(d) is narrow. Indeed, CAA section 111(d) tasks states with ``establish[ing] standards of performance for any existing source'' and ``provid[ing] for the implementation and enforcement of such standards of performance.'' It requires further that the regulations the EPA is directed to adopt must permit the state ``to take into consideration, among other factors, the remaining useful life of the existing source to which such standard [of performance] applies.'' \28\ After all, Congress found that ``air pollution prevention . . . and air pollution control at its source is the primary responsibility of States and local governments.'' \29\ --------------------------------------------------------------------------- \28\ 42 U.S.C. 7411(d)(1). \29\ 42 U.S.C. 7401(a)(3). --------------------------------------------------------------------------- In contrast to CAA section 111(b) (where the EPA may directly establish performance standards for emissions from new sources), the EPA implements CAA section 111(d) by issuing regulations that it calls ``emission guidelines'' \30\ These guidelines provide states with information to assist them in developing state plans establishing standards of performance for existing designated facilities within their jurisdiction that are submitted to the EPA for review. Such information includes the EPA's determination of the ``best system of emission reduction,'' which is commonly referred to as the BSER. --------------------------------------------------------------------------- \30\ See American Elec. Power Co. v. Connecticut, 564 U.S. 410, 424 (2011). See generally Section IV, infra (discussing the promulgation of revised implementing regulations governing the EPA's issuance of emission guidelines); 40 CFR part 60, subpart B. --------------------------------------------------------------------------- b. The Plain Meaning of CAA Sections 111(a)(1) and (d) CAA section 111(d) provides that ``each State shall submit to the Administrator a plan which (A) establishes standards of performance for any existing source for [certain air pollutants] . . . and (B) provides for the implementation and enforcement of such standards of performance.'' \31\ Given how Congress has defined the phrase ``standard of performance'' for purposes of CAA section 111, the plain meaning of CAA section 111(d), therefore is that states shall submit a plan which ``establishes [a standard for [[Page 32524]] emissions of air pollutants which reflects the degree of emission limitation achievable through the application of the [BSER] . . .] for any existing source.'' --------------------------------------------------------------------------- \31\ 42 U.S.C. 7411(d)(1) (emphasis added). --------------------------------------------------------------------------- While CAA section 111(a)(1) provides that the EPA determines the BSER upon which existing-source performance standards are based, Congress expressly limited the universe of systems of emission reduction from which the EPA may choose the BSER to those systems whose ``application'' to an ``existing source'' will yield an ``achievable'' ``degree of emission limitation.'' \32\ ``[W]here . . . the statute's language is plain,'' courts explain, our `` `sole function . . . is to enforce it according to its terms.' '' \33\ --------------------------------------------------------------------------- \32\ Id. \33\ Air Line Pilots Ass'n v. Chao, 167 F.3d 602, 791 (D.C. Cir. 2018) (quoting United States v. Ron Pair Enterprises, 489 U.S. 235, 241 (1989)). --------------------------------------------------------------------------- The EPA begins with the meaning of ``application,'' as it appears in CAA section 111(a)(1). In the absence of a statutory definition, the term must be construed in accordance with its ordinary or natural meaning.\34\ Here the ordinary meaning of ``application'' refers to the ``act of applying'' or the ``act of putting to use.'' \35\ Accordingly, a standard of performance must reflect the degree of emission limitation that can be achieved by putting the BSER into use. Furthermore, the ordinary and natural use of the term ``application,'' which is derived from the verb ``to apply,'' requires both a direct object and an indirect object. In other words, someone must apply something to something else (e.g., the application of general rules to particular cases). In the case of CAA section 111, the direct object is the BSER. CAA section 111(d) also provides that the indirect object is the ``existing source''--``each State shall submit to the Administrator a plan which (A) establishes standards of performance for any existing source'' (emphasis added). The Act further defines an ``existing source'' as ``any stationary source other than a new source,'' \36\ and in turn defines a ``stationary source'' as ``any building, structure, facility, or installation which emits or may emit any air pollutant.'' \37\ Consequently, CAA section 111 unambiguously limits the BSER to those systems that can be put into operation at a building, structure, facility, or installation. Such systems include, for example, add-on controls (e.g., scrubbers) and inherently lower-emitting processes/ practices/designs. --------------------------------------------------------------------------- \34\ See Leocal v. Ashcroft, 543 U.S. 1, 10 (2004). \35\ Merriam-Webster's Collegiate Dictionary (11th ed. 2003) (``1: an act of applying: a (1) : an act of putting to use (2) : a use to which something is put ''). Definitions are also provided from when CAA section 111(a)(1) was last amended, see The Oxford English Dictionary (2d ed. 1989) (``The action of applying; the thing applied. 1. a. The action of putting a thing to another, of bringing into material or effective contact''), and first enacted, see American Heritage Dictionary of the English Language (2d ed. 1969) (``1. The act of applying or putting something on. 2. Anything that is applied, such as a cosmetic or curative agent. 3. The act of putting something to a special use or purpose.''). \36\ 42 U.S.C. 7411(a)(6). \37\ 42 U.S.C. 7411(a)(3). --------------------------------------------------------------------------- Conversely, the plain language of CAA section 111 does not authorize the EPA to select as the BSER a system that is premised on application to the source category as a whole or to entities entirely outside the regulated source category. First, Congress specified that ``standards of performance'' are established ``for new sources within such category '' \38\ and ``for any existing source.'' \39\ CAA section 111, therefore, does not allow for the establishment of standards for the source category or for entities not within the source category. Instead, CAA section 111 standards must be established for individual sources. Second, because CAA section 111 standards reflect an ``achievable'' ``degree of emission limitation'' through application of the BSER, an owner or operator must be able to achieve an applicable standard by applying the BSER to the designated facility. Accordingly, the BSER--like standards of performance--cannot be premised on a system of emission reduction that is implementable only through the combined activities of sources or non-sources. Thus, the EPA is precluded from basing BSER on strategies like generation shifting and corresponding emissions offsets because these types of systems cannot be put into use at the regulated building, structure, facility, or installation.\40\ --------------------------------------------------------------------------- \38\ 42 U.S.C. 7411(b)(1)(B) (requiring the Administrator to establish performance standards ``for new sources within such category'' rather than for the category itself as a whole) (emphasis added) \39\ 42 U.S.C. 7411(d)(1)(A). \40\ The CPP's BSER was in part designed to consist of generation-shifting. See, e.g., 80 FR 64,776 (final rule) (describing `building blocks' 2 and 3 as ``processes of shifting dispatch from steam generators to existing NGCC units and from both steam generators and NGCC units to renewable generators.''). --------------------------------------------------------------------------- c. Statutory Structure and Purpose Confirm That a ``System of Emission Reduction'' Must Be Applied to an Individual Source and That CAA Section 111 is Intended to Best Design, Build, Equip, Operate, and Maintain Sources so as To Reduce Emissions While the plain meaning of CAA section 111 provides that the BSER must be applied to a building, structure, facility, or installation, Congress' intent is also manifest in the statutory structure and purpose. ``Statutory construction,'' the Supreme Court instructs, ``is a holistic endeavor.'' \41\ The interpretation of a phrase ``is often clarified by the remainder of the statutory scheme--because the same terminology is used elsewhere in a context that makes its meaning clear, or because only one of the permissible meanings produces a substantive effect that is compatible with the rest of the law.'' \42\ --------------------------------------------------------------------------- \41\ Czyzewski v. Jevic Holding Corp., 137 S. Ct. 973, 985 (2017) (citing United Savings Ass'n v. Timbers of Inwood Forest Associates, 484 U.S. 365, 371 (1988)). \42\ Utility Air Regulatory Group v. EPA, 573 U.S. 302, 321 (2014). --------------------------------------------------------------------------- (1) The Statutory Structure Limits a ``System of Emission Reduction'' to ``Systems'' That Have a Potential for Application to an Individual Source The conclusion that CAA section 111 standards are limited as described above is confirmed by considering the section's place in the overall statutory scheme. Congress tied CAA section 111 to the Best Available Control Technology (``BACT'') provisions in CAA section 165.\43\ Section 165 provides that ``[a]ny major stationary source or major modification subject to [preconstruction requirements] must conduct an analysis to ensure the application of [BACT].'' \44\ A permitting authority must ``conduct a BACT analysis on a case-by-case basis . . . and must evaluate the amount of emission reductions that each available emissions-reducing technology or technique would achieve, as well as the energy, environmental, economic and other costs . . . .'' \45\ The EPA has long recommended that permitting agencies conduct this analysis through a top-down assessment of the best available and feasible control technologies for the emissions subject to BACT.\46\ ``Based on [[Page 32525]] this [technology] assessment, the permitting authority must [then] establish a numeric emission limitation that reflects the maximum degree of reduction achievable. . . .'' \47\ --------------------------------------------------------------------------- \43\ 42 U.S.C. 7479(3) (``In no event shall application of `best available control technology' result in emissions of any pollutants which will exceed the emissions allowed by any applicable standard established pursuant to section 7411 or 7412 of this title.''). \44\ U.S. EPA, DRAFT New Source Review Workshop Manual: Prevention of Significant Deterioration and Nonattainment Area Permitting, B. 1 (October 1990) (``NSR Manual''), available at https://www.epa.gov/sites/production/files/2015-07/documents/1990wman.pdf. Though the EPA never finalized this draft, it continues to follow the analytical approach to the BACT analysis contained within the NSR Manual. See also U.S. EPA, PSD and Title V Permitting Guidance for Greenhouse Gases (March 2011) (``GHG Permitting Guidance''), available at https://www.epa.gov/sites/production/files/2015-07/documents/ghgguid.pdf. \45\ GHG Permitting Guidance at 17 (emphasis added). \46\ See id. at 17-44. \47\ Id. at 17, 44-46. --------------------------------------------------------------------------- In no event, Congress specified, can application of BACT result in greater emissions than allowed by ``any applicable standard established pursuant to section [1]11 or [1]12 . . . .'' \48\ To ensure such an exceedance does not occur, NSPS serve as the base upon which BACT determinations are made and are commonly viewed as the BACT ``floor.'' \49\ However, because Congress refers to ``any applicable standard established pursuant to section [1]11,'' without reference to either subsection (b) or (d), any applicable existing source standard would also function as a BACT ``floor.'' \50\ --------------------------------------------------------------------------- \48\ 42 U.S.C. 7479(3). \49\ GHG Permitting Guidance, 25 n.64 (``While this guidance is being issued at a time when no NSPS have been established for GHGs, permitting authorities must consider any applicable NSPS as a controlling floor in determining BACT once any such standards are final.''). \50\ Accordingly, certain commenters incorrectly argue that the scope of CAA section 169 is irrelevant to regulating existing sources under CAA section 111(d) because only CAA section 111(b) standards (i.e., NSPS), not CAA section 111(d) existing-source standards, apply to sources subject to BACT. However, both CAA section 111(b) and (d) rely on the same definition of ``standard of performance'' in CAA section 111(a), and the term's statutory history (that is, its evolution through repeated acts of Congress from 1970 to 1990) supports the conclusion that Congress intended for the term to have the same meaning under both programs. Between the 1970 and 1977 CAA Amendments, ``standards of performance'' applied only to the regulation of new sources under CAA section 111(b); existing sources, on the other hand, were required to meet ``emission standards,'' which was an undefined term. See Public Law 91-604, 84 Stat. at 1683-84. Between the 1977 and 1990 CAA Amendments, CAA section 111(a)(1) provided three context-specific definitions: One definition applied to all new stationary sources regulated under CAA section 111(b) (basing standards on the best technological system of continuous emission reduction (``TSCER'')); the second applied only to new fossil-fuel-fired sources regulated under CAA section 111(b) (basing standards on the TSCER and requiring a percent reduction in emissions); and a third applied to existing sources regulated under CAA section 111(d) (basing standards on the best system of continuous emission reduction). See Public Law 95-95, 91 Stat. at 699-700. In 1990, however, Congress replaced the three separate definitions with a singular definition of ``standard of performance'' under CAA section 111(a)(1), to apply throughout CAA section 111, based on application of the BSER. See Public Law 101-549, 104 Stat. at 2631. The legislative history of CAA section 111 demonstrates that Congress knew full well how to require either that the regulations applying to new and existing sources would be different in definition and scope (as in both the 1970 and 1977 versions of the Act) or that they would be the same and demonstrates that in 1990 they plainly chose the latter course. --------------------------------------------------------------------------- The EPA has consistently taken the position that BACT encompasses ``all `available' control options . . . that have the potential for practical application to the emissions unit and the regulated pollutant under evaluation.'' \51\ This is so because BACT reflects a level of control that the permitting agency ``determines is achievable for such facility through application of production processes and available methods, systems, and techniques, including fuel cleaning, clean fuels, or treatment or innovative fuel combustion techniques for control.'' \52\ Put simply, both the statutory text and the EPA's long-standing interpretation provide that BACT is limited to control options that can be applied to the source itself and does not include control options that go beyond the source. --------------------------------------------------------------------------- \51\ GHG Permitting Guidance, 24 (emphasis added). \52\ 42 U.S.C. 7479(3) (emphasis added). --------------------------------------------------------------------------- Because CAA section 111 operates as a floor to BACT, section 111 cannot be interpreted to offer a broader set of tools than are available under section 165. Also, because BACT is limited to control options that are applied to an individual source, so too with section 111. The explicit statutory link of CAA section 111 standards to BACT, the statutory definition of the latter, the Agency's consistent position that BACT must apply to and be achievable for a particular facility, and the text of CAA section 111(b) and 111(d), confirm the conclusion that the text of 111(a)(1) can only be read to mean that standards of performance (and the BSER on which they are predicated) are likewise measures applied to individual facilities. (2) The Purpose of CAA Section 111 is To Design, Build, Equip, Operate, and Maintain Individual Sources so as To Reduce Emissions Congress intended that CAA section 111 would set minimum requirements \53\ on individual sources to be designed, built, equipped, operated, and maintained to reduce emissions. This purpose is evidenced in the history of CAA section 111(a)(1)'s text and corroborated by legislative history. CAA section 111 was originally enacted as part of the 1970 CAA Amendments. In that enactment, state plans under CAA section 111(d) were to establish ``emission standards'' rather than ``standards of performance.'' The EPA's CAA section 111(d) implementing regulations, issued in 1975, provided that, in the case of existing sources, the EPA would issue ``emissions guidelines,'' that these guidelines would ``reflect the degree of emission reduction achievable through the application of the [BSER] which (taking into account the cost of such reduction) the Administrator has determined has been adequately demonstrated for designated facilities,'' and that state plans establishing standards of performance for existing sources would be developed in light of these guidelines.\54\ Then in 1977, Congress replaced the term ``emission standard'' under CAA section 111(d) with the phrase ``standard of performance''--a phrase defined for all of CAA section 111 in section 111(a)(1). Thus, the history behind CAA section 111(a)(1) is relevant to understanding EPA's authority for both sections 111(b) and (d). --------------------------------------------------------------------------- \53\ In a 1978 BACT guidance document, the EPA explained that performance standards reflect emission limits ``which can reasonably be met by all new or modified sources in an industrial category, even though some individual sources are capable of lower emissions. Additionally, because of resource limitations in the EPA, revision of new source standards must lag somewhat behind the evolution of new or improved technology. Accordingly, new or modified facilities in some source categories may be capable of achieving lower emission levels that [sic] NSPS without substantial economic impacts. The case-by-case BACT approach provides a mechanism for determining and applying the best technology in each individual situation. Hence, NSPS and NESHAP are Federal guidelines for BACT determinations and establish minimum acceptable control requirements for a BACT determination.'' U.S. EPA, Guidelines for Determining Best Available Control Technology, 3 (December 1978). Further, while some commenters suggest that the BSER must reflect the ``greatest degree of emission control,'' citing to section 113 of Senate bill 4358 (S. 4358, at 6, 1970 Legis. Hist. at 554-55), Congress imposed no such requirement. See Sierra Club, 657 F.2d at 330 (``we believe it is clear that this language is far different from the words Congress would have chosen to mandate that the EPA set standards at the maximum degree of pollution control technologically achievable.''). \54\ 40 FR 53346. --------------------------------------------------------------------------- The 1970 enactment of CAA section 111 represents a choice between two alternative approaches to direct federal regulation of stationary sources. Under the House bill, the Administrator would have been authorized to establish ``emission standards'' for new sources of pollutants that may contribute substantially to endangerment of the public health or welfare. These standards would have ``require[d] that new sources of such emissions be designed and equipped to maximize emission control insofar as technologically and economically feasible.'' \55\ The House bill did not contain any analogous provisions for existing sources. Nevertheless, the House bill contemplated that under CAA section 111, individual sources would be designed to emit less. --------------------------------------------------------------------------- \55\ H.R. Conf. Rep. No. 91-1783, 46 (December 17, 1970) (emphasis added). --------------------------------------------------------------------------- Under the Senate approach, the Administrator would have established [[Page 32526]] ``standards of performance'' for new sources based ``on the greatest emission control possible through application of [the] latest available control technology.'' \56\ This would have ensured ``that new stationary sources are designed, built, equipped, operated, and maintained so as to reduce emission[s] to a minimum.'' \57\ Accordingly, such standards would have reflected ``the degree of emission control which can be achieved through process changes, operation changes, direct emission control, or other methods.'' \58\ A separate provision governing emissions of ``selected agents'' authorized the Administrator to develop ``emission standards'' for both new and existing sources.\59\ However, the Senate ``recognize[d] that certain old facilities may use equipment and processes which are not suited to the application of control technology. The [Administrator] would be authorized therefore to waive the application of standards . . . .'' \60\ --------------------------------------------------------------------------- \56\ Id. (describing the approach under the Senate amendment). \57\ S. Rep. No. 91-1196, 15-16 (September 17, 1970) (emphasis added). \58\ Id. at 17. \59\ Id. at 18-19. \60\ Id. at 19. --------------------------------------------------------------------------- The conference substitute settled on the language largely reflected in the current wording of CAA section 111(a)(1); the differences between the 1970 enactment and the current version are not relevant to this discussion. As explained above, both the Senate and House bills contemplated only control measures that would lead to better design, construction, operation, and maintenance of an individual source \61\ and, in the case of existing sources under the Senate bill, the waiver of standards if certain sources could not apply new control technologies. Accordingly, recognizing that a ``system of emission reduction'' is limited to control technologies or techniques that can be integrated into an individual source's design or operation (i.e., add-on controls and lower-emitting processes/practices/designs) is the only interpretation compatible with the fundamental principle, reflected in the original competing drafts of the provision, that sources should be designed, built, equipped, operated, and maintained to reduce emissions.\62\ --------------------------------------------------------------------------- \61\ References to ``other alternatives,'' ``other means,'' or ``other methods'' in the Senate bill and accompanying report are not evidence that Congress intended to confer boundless discretion. In fact, these terms must be interpreted in light of the other specifically listed control techniques. For example, the Senate bill's reference to ``control technology,'' ``processes,'' and ``operating methods'' are properly read to denote measures that can be applied to individual sources--and ``other alternatives'' must be interpreted ejusdem generis: in the same fashion. \62\ To be sure, the Agency does not contend that a ``system of emission reduction'' is limited to technological improvements. Indeed, the CAA Amendments of 1990 make clear that CAA section 111 is not to be limited to ``technological systems.'' See supra n. 51 (discussing amendments to CAA section 111(a)(1)). But that does not mean CAA section 111 therefore authorizes basing BSER on generation shifting ``measures,'' such as substitute generation from lower- or non-polluting power plants, which cannot be applied to individual sources like add-on controls or inherently lower-emitting processes/ practices/designs. --------------------------------------------------------------------------- d. The CPP Unlawfully Exceeds the Scope of CAA Section 111(a)(1) and Must Be Repealed Before the CPP, the EPA had issued only six CAA section 111(d) rulemakings, in the form of a ``guideline document'' with corresponding ``emission guidelines.'' \63\ Conversely, the EPA has issued around seventy CAA section 111(b) rulemakings, including several for new fossil-fuel-fired steam-generating units.\64\ Every one of those rulemakings applied technologies, techniques, processes, practices, or design modifications directly to individual sources. --------------------------------------------------------------------------- \63\ (See 1) Phosphate Fertilizer Plants, Final Guideline Document Availability, 42 FR 12022 (March. 1, 1977) [Final Guideline Document: Control of Fluoride Emissions from Existing Phosphate Fertilizer Plants, March 1977, Doc. No. EPA-450/2-77-005]; 2) Emission Guideline for Sulfuric Acid Mist, 42 FR 55796 (October 18, 1977); 3) Kraft Pulp Mills; Final Guideline Document; Availability, 44 FR 29828 (May 22, 1979) [Kraft Pulping, ``Control of Emissions from Existing Mills,'' March 1979, Doc. No. EPA-450/2-78-003b]; 4) Primary Aluminum Plants; Availability of Final Guideline Document, 45 FR 26294 (Apr. 17, 1980) [Primary Aluminum: Guidelines for Control of Fluoride Emissions from Existing Primary Aluminum Plants, December 1979, Doc. No. EPA-450/2-78-049b]; 5) Standards of Performance for New Stationary Sources and Guidelines for Control of Existing Sources: Municipal Solid Waste Landfills, 61 FR 9905 (March 12, 1996); and 6) Standards of Performance for New and Existing Stationary Sources: Electric Utility Steam Generating Units, 70 FR 28606 (May 18, 2005) (hereafter, the Clean Air Mercury Rule or CAMR) (vacated in New Jersey v. EPA, 517 F.3d 574 (D.C. Cir. 2007) (reviewing an action that sought to shift regulation of certain emissions from power plants from the CAA section 112 hazardous air pollutants regime to the section 111 standards regime and holding that the EPA failed to comply with the delisting requirements of section 112(c)(9) and thus vacating the corresponding section 111 standards for electric utility steam generating units). This list of six CAA section 111(d) rulemakings does not include any guideline documents mandated by and carried out in compliance with CAA section 129 (governing solid waste incinerator units). \64\ See generally 40 CFR part 60, subparts D-TTTT. In fact, steam-generating units were among the first sources regulated under section 111(b). See 36 FR 24876 (December 23, 1971) (promulgating standards for steam generators, portland cement plants, incinerators, nitric acid plants, and sulfuric acid plants). --------------------------------------------------------------------------- In the CPP, the EPA determined that the BSER for reducing CO2 emissions from existing fossil fuel-fired power plants was the combination of three ``building blocks'': 1. Improving heat rate at individual affected coal-fired steam generating units; 2. Substituting increased generation from lower-emitting existing natural gas combined cycle units for decreased generation from higher- emitting affected steam generating units; and 3. Substituting increased generation from new zero-emitting renewable energy generating capacity for decreased generation from affected fossil fuel-fired generating units. This was the first time the EPA interpreted the BSER to authorize measures wholly outside a particular source.\65\ The EPA reached this determination by interpreting the statutory term ``application'' as if it instead read ``implementation'' (without pointing to any legal basis for equating those terms), and interpreting the phrase ``system of emission reduction'' broadly as ``a set of measures that work together to reduce emissions and that are implementable by the sources themselves.'' \66\ ``As a practical matter,'' the Agency continued, ``the `source' includes the `owner or operator' of any building, structure, facility, or installation for which a standard of performance is applicable.'' \67\ The EPA then concluded that the breadth of a dictionary definition of the word ``system'' established the bounds of its statutory authority, finding that the phrase `` `system of emission reduction' . . . means a set of measures that source owners or operators can implement to [[Page 32527]] achieve an emission limitation applicable to their existing source.'' \68\ --------------------------------------------------------------------------- \65\ CAMR, which relied in part on a cap-and-trade mechanism, was still ultimately ``based on control technology available in the relevant timeframe,'' an approach fundamentally different than the CPP's second and third ``building blocks,'' which were not based on systems that could be applied to or at individual sources. Indeed, the rule explained that the BSER refers to ``the combination of the cap-and-trade mechanism and the technology needed to achieve the chosen cap level.'' 70 FR 28620 (emphasis added). Accordingly, the Agency concluded that it would be ``reasonable to establish a cap on [the basis of using a particular technology] and require compliance with that cap at a later point in time when the necessary technology becomes widely available.'' Id. To the extent that CAMR's BSER (i.e., the combined control technology and cap-and-trade program) is premised on application to the source category (as opposed to an individual source), however, CAMR would be unlawful. Trading as a compliance mechanism under CAA section 111 is discussed in section III.F.2.a of this preamble. \66\ 80 FR 64762 (citing the Oxford Dictionary of English (3rd ed.) (2010), among others). The EPA reached this interpretation in part on the assumption that ``the terms `implement' and `apply' are used interchangeably.'' See Legal Memorandum Accompanying Clean Power Plan for Certain Issues at 84 n.175. \67\ 80 FR 64762. \68\ Id. The EPA acknowledged, nonetheless, that ``regulatory requirements'' in the CPP would be based ``on measures the affected EGUs can implement to assure that electricity is generated with lower emissions'' and that ``do not require reductions in the total amount of electricity produced.'' Id. at 64778. But the EPA did not exclude such ``measures'' (i.e., reduced utilization and demand-side energy efficiency) as being outside the scope of the dictionary definition of ``system.'' Indeed, the EPA believed they would play an important compliance role under the CPP. See id. at 64753-657 (discussing reduced utilization and demand-side energy efficiency measures under rate-based and mass-based state plans). See also n. 83, infra. --------------------------------------------------------------------------- In reviewing the CPP, the EPA concludes that the interpretation relied upon in the CPP ignored or misinterpreted critical statutory elements and rules of statutory construction. After reconsidering the relevant statutory text, structure, and purpose, the Agency now recognizes that Congress ``spoke to the precise question'' of the scope of CAA section 111(a)(1) and clearly precluded the unsupportable reading of that provision asserted in the CPP. Accordingly, this action repeals the CPP.\69\ --------------------------------------------------------------------------- \69\ One commenter asserted that, rather than repeal the CPP, the EPA should retain building block 1. As explained in the Proposed Repeal, however, while heat rate improvement measures may be considered in a CAA section 111 standard, ``building block 1, as analyzed, cannot stand on its own. 80 FR 64758 n. 444; see also id. at 64658 (discussing severability of the building blocks).'' 82 FR 48039 n.5. Accordingly, today's action repeals the whole of the CPP and does not retain building block 1 as the BSER. In any case, as discussed in the ACE proposal, ``building block 1, as constructed in [the] CPP, does not represent an appropriate BSER, and ACE better reflects important changes in the formulation and application of the BSER in accordance with the CAA.'' 83 FR 44756 (discussing the EPA's change in approach to analyzing heat rate improvement measures). See section III for the EPA's evaluation of heat rate improvement measures under ACE. --------------------------------------------------------------------------- (1) The CPP Is Impermissibly Based on ``Implementation'' Rather Than ``Application'' of the BSER CAA section 111(a)(1) provides that standards of performance reflect an emission limitation achievable ``through the application of the [BSER] . . . .'' In the Legal Memorandum accompanying the CPP, the Agency stated in a footnote that ``the terms `implement' and `apply' are used interchangeably.'' \70\ Thus, the Agency decided, ``the system must be limited to measures that can be implemented--``appl[ied]''--by the sources themselves . . . .'' \71\ But Congress does not in fact use these terms interchangeably in the Act, and in CAA section 111(a)(1), as in other source-focused standard-setting provisions in the Act, used a term (``application'') meaningfully different than the one CPP read into that section (``implementation'')--and the term that Congress actually used is one that reflects the CAA's other source-focused standard-setting provisions.\72\ --------------------------------------------------------------------------- \70\ Legal Memorandum Accompanying Clean Power Plan for Certain Issues at 84 n.175. \71\ 80 FR 64720. \72\ See, e.g., 42 U.S.C. 7412(d)(2) (describing MACT as ``through application of measures, processes, methods, systems or techniques including, but not limited to, measures which--(A) reduce the volume of, or eliminate emissions of, such pollutants through process changes, substitution of materials or other modifications, (B) enclose systems or processes to eliminate emissions, (C) collect, capture or treat such pollutants when released from a process, stack, storage or fugitive emissions point, (D) are design, equipment, work practice, or operational standards . . . , or (E) are a combination of the above;''); id. at 7479(3) (describing BACT as ``achievable for such facility through application of production processes and available methods, systems, and techniques, including fuel cleaning, clean fuels, or treatment or innovative fuel combustion techniques for control''). --------------------------------------------------------------------------- The Act is replete with provisions calling for the ``implementation'' of ``a system,'' \73\ ``control measures,'' \74\ ``emission reduction measures,'' \75\ and even ``steps, by owners or operators of stationary sources,'' \76\ but CAA section 111(a)(1) is not among them. Congress defines ``implementing'' under CAA section 105(a)(1)(A) as ``any activity related to the planning, developing, establishing, carrying-out, improving, or maintaining of such programs [for the prevention and control of air pollution or implementation of national primary and secondary ambient air quality standards].'' \77\ But again, ``applying'' is not included in this list defining ``implementing.'' In the case of the Act's standard-setting provisions, on the other hand, BACT and maximum achievable control technology (MACT) requirements--like CAA section 111--are based on ``application of'' control measures to individual sources. --------------------------------------------------------------------------- \73\ 42 U.S.C. 7412(r)(7)(H)(vii) (``the Administrator . . . shall develop and implement a system for providing off-site consequence analysis information''). \74\ Id. 7511a(b)(2) (``Such plan provisions shall provide for the implementation of all reasonably available control measures''). \75\ Id. 7412(i)(5)(C) (``prior to implementation of emissions reduction measures''). \76\ Id. 7410(a)(2)(F) (emphasis added) (``require, as may be prescribed by the Administrator--(i) the installation, maintenance, and replacement of equipment, and the implementation of other necessary steps, by owners or operators of stationary sources''). \77\ 42 U.S.C. 7405(a)(1)(A). --------------------------------------------------------------------------- Functionally, the two terms send different signals. ``Implementation'' requires a subject and direct object (I implement the plan), whereas ``application'' requires a subject, direct object, and indirect object (I apply the protocol to the subject). That is, an owner or operator can implement a system (without anything more and without any particular object of the system being implied), but an owner/operator must apply a system to another object (i.e., the source). CAA section 111 illustrates this distinction. Congress provided, in CAA section 111(d)(1), that state plans must provide ``for the implementation and enforcement of such standards of performance,'' but that EPA's regulations must also permit a state ``in applying a standard of performance to any particular source'' to take into consideration, among other factors, the remaining useful life of the existing source to which such standard applies. Thus, whereas state plans more broadly ``implement'' the CAA section 111(d) program, states ``appl[y]'' standards to individual sources. Congress could have defined a standard of performance as reflecting the ``implementation of the BSER by the owner or operator of a stationary source,'' but Congress did not. Simply put, equating the terms ``implement'' and ``apply'' conflicts with the plain language of CAA section 111(a)(1) and their use throughout the Act; this conflict is compounded by the conflation of the source with its owner, different concepts that are separately defined, see CAA section 111(a)(3), (5). Now take generation shifting, the basis for the second and third ``building blocks'' of the CPP's BSER. The CPP recognized that an owner or operator of a regulated source can ``shift'' power-producing operations to a different facility, such as a nuclear power plant, through bilateral contracts for capacity or by reducing utilization. But just because generation shifting is ``implementable'' by an owner or operator (i.e., just because an owner or operator of a given source can subsidize generation elsewhere that will reduce demand for generation from that) does not mean that generation shifting can be ``applied'' to the source.\78\ And indeed, the CPP shifted generation from one regulated source category to another and from both those regulated source categories together to other forms of electricity generation outside any regulated source category. Because the CPP is premised on ``implementation of the BSER by a source's owner or operator'' and not ``application of the [BSER]'' to an individual source, the rule contravenes the plain language of CAA section 111(a)(1) and must be repealed. --------------------------------------------------------------------------- \78\ A contract, for example, is neither a ``system'' nor ``applied to'' a source. --------------------------------------------------------------------------- [[Page 32528]] (2) Dictionary Definitions Cannot Confer an ``Infinitude'' of Possibilities Although the word ``system'' is not defined in the CAA, ``[t]he meaning--or ambiguity--of certain words or phrases may only become evident when placed in context.'' \79\ Thus, the issue is not whether the dictionary provides a broad definition of the word ``system,'' but what are the permissible bounds of the legal meaning of the word ``system.'' The precise question in this case is whether the word ``system'' as used in CAA section 111 encompasses any ``set of measures'' \80\ to reduce emissions, or whether it is limited to lower- emitting processes, practices, designs, and add-on controls that are applied at the level of the individual facility. --------------------------------------------------------------------------- \79\ King v. Burwell, 135 S. Ct. 2480, 2489 (2015) (quoting FDA v. Brown & Williamson Corp., 529 U.S. 120, 132 (2000)). \80\ 80 FR 64762. --------------------------------------------------------------------------- ``System,'' as used in CAA section 111, cannot be read to encompass any ``set of measures'' that would--through some chain of causation-- lead to a reduction in emissions. As an initial matter, Congress did not use the phrase ``set of measures'' in CAA section 111. On its own, this phrase could create unbounded discretion in the Agency. Moreover, even when the term ``measures'' is used elsewhere in the Act, it is intended to be limited. For example, CAA section 112 emission standards are derived ``through application of measures, processes, methods, systems or techniques.'' ``Measures,'' are further defined to include measures which: Reduce the volume of, or eliminate emissions of, such pollutants through process changes, substitution of materials or other modifications, enclose systems or processes to eliminate emissions, collect, capture or treat such pollutants when released from a process, stack, storage or fugitive emissions point, are design, equipment, work practice, or operational standards (including requirements for operator training or certification) as provided in subsection (h) of CAA section 111, or are a combination of the above.\81\ --------------------------------------------------------------------------- \81\ 42 U.S.C. 7412(d)(2). --------------------------------------------------------------------------- ``Measures,'' as Congress provides, are limited to control measures that can be integrated into an individual source's design or operation. ``Measures'' do not include shifting production away from the regulated source. The CPP read ``system'' in CAA section 111(a)(1) to mean any ``set of measures,'' relying on the dictionary, and then determined that there was no limitation on those ``set of measures'' so long as they were measures that could be implemented through obligations placed on the owner or operator of a source.\82\ At both steps, the CPP relied on an absence of an express textual commandment forbidding these open- ended interpretations. That methodology is untenable. --------------------------------------------------------------------------- \82\ The CPP identified purported limitations to the underlying legal interpretation (e.g., ``system'' does not extend to measures that directly target consumer behavior), see 80 FR 64776-779, but those purported limitations still led to an interpretation that far exceeded the bounds of the authority actually conferred by Congress on the EPA. --------------------------------------------------------------------------- Construing ``system'' to offer such an ``infinitude'' \83\ of possibilities would have significant implications. The fact is, fossil fuel-fired EGUs operate within an interconnected ``system.'' Thus, any action that would affect electricity rates will have generation- shifting and potentially emission-reduction consequences. By the very nature of the interconnected grid, EPA's authority to determine the BSER under CAA section 111 is, under the Agency's prior interpretation, stretched to every aspect of the entire power sector. This cannot have been the intent of the Congress that enacted CAA section 111. --------------------------------------------------------------------------- \83\ See Cal. Indep. Sys. Operator Corp. v. FERC, 372 F.3d 395, 401 (D.C. Cir. 2004) (``Cal ISO''). --------------------------------------------------------------------------- The D.C. Circuit has previously disapproved of a federal agency's expansive reading of its authority in analogous circumstances. In Cal ISO, the D.C. Circuit vacated the Federal Energy Regulatory Commission's (``FERC'') attempt to reform a utility's governing structure on the theory that FERC's statutory authority over ``practice[s] . . . affecting [a] rate'' gave FERC ``authority to regulate anything done by or connected with a regulated utility, as any act or aspect of such an entity's corporate existence could affect, in some sense, the rates.'' \84\ --------------------------------------------------------------------------- \84\ Id. --------------------------------------------------------------------------- Upholding FERC's interpretation of ``practice'' to include replacing the governing board of California's Independent System Operator Corporation, the Court warned, could authorize FERC to ``dictate the choice of CEO, COO, and the method of contracting for services, labor, office space, or whatever one might imagine . . . .'' \85\ But where ``the text and reasonable inferences from it give a clear answer . . . that . . . is `the end of the matter.' '' \86\ There is no need, therefore, to consider ``such parade of horribles.'' \87\ --------------------------------------------------------------------------- \85\ Id. at 403. \86\ Id. at 401 (citing Brown v. Gardiner, 513 U.S. 115, 120 (1994)) (emphasis in original). \87\ Id. at 403. --------------------------------------------------------------------------- The Court explained that, ``no matter how important the principle of ISO independence is to the Commission, `[the FERC Order] is merely a regulation,' and cannot be the basis to override the limitations of `statutes enacted by both houses of Congress and signed into law by the president.'' \88\ The court reasoned that both ``the history of the application of this and similar statutes and by the implications of FERC's amorphous defining of the term'' firmly barred FERC's attempt to stretch its authority.\89\ On this point, Congress's intent is ``crystal clear''--FERC had no authority to ``reform and regulate the governing body of a public utility under the theory that corporate governance constitutes a `practice' for ratemaking authority purposes.'' \90\ --------------------------------------------------------------------------- \88\ Id. at 404. \89\ Id. at 402. \90\ Id. --------------------------------------------------------------------------- The EPA's prior interpretation underlying the CPP is untenable for the same reasons. The EPA began, like FERC, with an ordinary statutory term (``system'') and then read into it maximally broad authority to shift generation away from coal-fired and gas-fired power plants to other electricity producers on the basis that generation shifting would cause those regulated sources to be displaced and therefore not be a source of emissions. But for nearly 45 years prior to the CPP, this Agency had never understood CAA section 111 to confer upon it the implicit power to restructure the utility industry through generation- shifting measures. Indeed, the EPA has issued many rules under CAA section 111 (both the limited set of existing-source rules under CAA section 111(d) and the much larger set of new-source rules under CAA section 111(b)). In all those rules, the EPA determined that the BSER consisted of add-on controls or lower-emitting processes/practices/ designs that can be applied to individual sources.\91\ --------------------------------------------------------------------------- \91\ See supra n. 66 (discussing CAMR). --------------------------------------------------------------------------- The CPP deviated from this settled understanding of CAA section 111. By embracing an expansive dictionary definition of ``system,'' \92\ the EPA ignored that the text and structure of the Act expressly limited the scope of the term ``system'' in a way that foreclosed the CPP's expansive definition. The Agency concluded that actions that would cause generation to shift from higher-emitting to lower- or non- [[Page 32529]] emitting power generators represent a means of reducing CO2 emissions from existing fossil fuel-fired electric generating units-- and thus constituted a ``system'' within the meaning of CAA section 111. Taken to its logical end, however, any action affecting a generator's operating costs could impact its order of dispatch and lead to generation shifting. This could include, for example, minimum wage requirements or production caps. It is axiomatic that ``Congress . . . does not alter the fundamental details of a regulatory scheme in vague terms or ancillary provisions--it does not, one might say, hide elephants in mouseholes.'' \93\ Because Congress clearly did not authorize CAA section 111 standards to be based on any ``set of measures,'' the EPA need not address the potential consequences of deviating from our historical practice under CAA section 111 when determining whether the CPP's interpretation was a permissible reading of the statute. Like the D.C. Circuit in Cal ISO, the EPA concludes that the text and reasonable inferences from it give a clear answer: ``system'' does not embody any conceivable ``set of measures'' that might lead to a reduction in emissions, but is limited to measures that can be applied to and at the level of the individual source --------------------------------------------------------------------------- \92\ 80 FR at 64720 (defined by the Oxford Dictionary of English as ``a set of things or parts forming a complex whole; a set of principles or procedures according to which something is done; an organized scheme or method; and a group of interacting, interrelated, or independent elements''). \93\ Whitman v. American Trucking, 531 US 457, 466 (2001). See also Letter from Neil Chatterjee, Chairman, Fed. Energy Reg. Comm'n, to Andrew Wheeler, Administrator, EPA at 5 (Oct. 31, 2018) (Docket ID# EPA-HQ-OAR-2017-0355-24053) (``The Supreme Court has explained several times that Congress `does not alter the fundamental details of a regulatory scheme in vague terms or ancillary provisions--it does not, one might say, hide elephants in mouseholes.' The challenges posed by global climate change present `question[s] of deep `economic and political significance' that [are] central to [the] statutory scheme[s]' administered by both the Agency and the Commission.'') (internal citation omitted). --------------------------------------------------------------------------- (3) Basing BSER on Generation Shifting Is Not Authorized by Congress On the question of whether basing BSER on generation shifting is precluded by the statute, the major question doctrine instructs that an agency may issue a major rule only if Congress has clearly authorized the agency to do so. As the Supreme Court has stated, ``We expect Congress to speak clearly if it wishes to assign to an agency decisions of vast `economic and political significance.' '' \94\ Although the Court has not articulated a bright-line test, its cases indicate that a number of factors are relevant in distinguishing major rules from ordinary rules: ``the amount of money involved for regulated and affected parties, the overall impact on the economy, the number of people affected, and the degree of congressional and public attention to the issue.'' \95\ --------------------------------------------------------------------------- \94\ Utility Air Regulatory Group v. EPA, 573 U.S. 302, 324 (2014) (quoting Brown & Williamson, 529 U.S. at 159). \95\ U.S. Telecom Ass'n v. FCC, 855 F.3d 381, 422-23 (D.C. Cir. 2017) (internal citations omitted). --------------------------------------------------------------------------- While the EPA believes that today's action is based on the only permissible reading of the statute and would reach that conclusion even without consideration of the major question doctrine, the EPA believes that that doctrine should apply here and that its application confirms the unambiguously expressed intent of CAA section 111. The CPP is a major rule. At the time the CPP was promulgated, its generation- shifting scheme was projected to have billions of dollars of impact on regulated parties and the economy, would have affected every electricity customer (i.e., all Americans), was subject to litigation involving almost every State in the Union, and, as discussed in the following section, would have disturbed the state-federal and intra- federal jurisdictional scheme. Building blocks 2 and 3 are far afield from the core activity of CAA section 111--indeed, no section 111 rule of the scores issued has ever been based on generation shifting since the enactment of CAA section 111 in 1970. Because the CPP is a major rule, the interpretative question raised in CAA section 111(a)(1) (i.e., whether a ``system of emission reduction'' can consist of generation-shifting measures) must be supported by a clear-statement from Congress.\96\ As explained above, however, it is not--indeed, Congress has directly spoken to this precise question and precluded the interpretation of CAA section 111 advanced by the EPA in the CPP. --------------------------------------------------------------------------- \96\ The EPA acknowledges that for the reasons noted above, its position on this major rule issue has evolved since the EPA addressed it in the CPP, 80 FR 64,783. See FCC v. Fox Television Stations, Inc., 556 U.S. 502 (2009). --------------------------------------------------------------------------- Further evidence comes from the notable absence of a valid limiting principle to basing a CAA section 111 rule on generation shifting. In the CPP, the EPA explained that the Agency ``has generally taken the approach of basing regulatory requirements on controls and measures designed to reduce air pollutants from the production process without limiting the aggregate amount of production.'' \97\ But by shifting focus to the entire grid (which includes regulated sources and non- sources), the Agency could empower itself to order the wholesale restructuring of any industrial sector (whether or not it has authority to even regulate all the actors within that sector--so long, in keeping with the interpretation underlying the CPP, as it can place obligations on the owners and operators over whom it does have authority to carry out a ``system'' that goes beyond the EPA's actual direct reach). Appealing to such factors as ``cost'' and ``feasibility'' \98\ as putative constraints on EPA's authority, furthermore, does not provide any assurance--indeed, the D.C. Circuit traditionally ``grant[s] the [A]gency a great degree of discretion in balancing them.'' \99\ Thus, it is not reasonable to find in this statutory scheme Congressional intent to endow the Agency with discretion of this breadth to regulate a fundamental sector of the economy. --------------------------------------------------------------------------- \97\ 80 FR 64762. \98\ See Legal Memorandum Accompanying Clean Power Plan for Certain Issues at 117-20. \99\ Lignite Energy Council v. EPA, 198 F.3d 930, 933 (D.C. Cir. 1999). --------------------------------------------------------------------------- As a final point, the CPP not only advanced a broad reading of CAA section 111(a)(1), the rule applied that interpretation to ``the source category as a whole'' \100\ to cause a reduction in coal-fired generation.\101\ To do so, the CPP relied on ``emission reduction approaches that focus on the machine as a whole--that is, the overall source category--by shifting generation from dirtier to cleaner sources in addition to emission reduction approaches that focus on improving the emission rates of individual sources.'' \102\ Consequently, it was designed as ``an emission guideline for an entire category of existing sources . . . .'' \103\ However, by acting as a guideline for an entire category, the CPP ignored the statutory directive to establish standards for sources and overextended federal authority into matters traditionally reserved for states: ``administration of integrated resource planning and . . . utility generation and resource portfolios.'' \104\ --------------------------------------------------------------------------- \100\ 80 FR 64727. \101\ Id. at 64665. \102\ 80 FR 64725-726; see also id. at 64726 (noting ``consideration of emission reduction measures at the source- category level''). \103\ CPP RTC Chapter 1A, 170-72. \104\ New York v. FERC, 535 US 1, 24 (2002). --------------------------------------------------------------------------- (4) Basing BSER on Generation Shifting Encroaches on FERC and State Authorities The Federal Power Act (FPA) establishes the dichotomy between federal and state regulation in the electricity sector by drawing ``a bright line easily ascertained, between state and federal jurisdiction.'' \105\ The Supreme Court recently observed that, under the FPA, FERC has ``exclusive jurisdiction over wholesale sales of electricity in the interstate market'' and [[Page 32530]] establishing the associated just and reasonable rates and charges.\106\ However, ``the law places beyond FERC and leaves to the States alone, the regulation of `any other sale'--most notably, any retail sale--of electricity.'' \107\ Therefore, under the FPA, Congress limited the jurisdiction of FERC ``to those matters which are not subject to regulation by the States,'' including ``over facilities used for the generation of electric energy.'' \108\ Indeed, ``the States retain their traditional responsibility in the field of regulating electrical utilities for determining questions of need, reliability, cost, and other related state concerns.'' \109\ ``Such responsibilities include ``authority over the need for additional generating capacity [and] the type of generating facilities to be licensed.'' \110\ Thus, the FPA ``not only establishes an affirmative grant of authority to the federal government to regulate wholesale sales and transmission of electricity in interstate commerce, but also draws a line where that exclusive authority ends and the state's exclusive authority to regulate other matters . . . begins.'' \111\ --------------------------------------------------------------------------- \105\ Fed. Power Comm'n v. S. Cal. Edison Co., 376 U.S. 205, 215 (1964). \106\ Hughes v. Talen Energy Marketing, LLC, 136 S.Ct. 1288, 1291-92 (2016) (citing 16 U.S.C. 824(b)(1), 824d(a) and 824e(a)). \107\ Id. at 1292 (quoting FERC v. Electric Power Supply Assn., 136 S.Ct. 760, 766 (2016) (EPSA) (quoting 824(b)). The States' reserved authority includes control over in-state ``facilities used for the generation of electric energy.'' 824(b)(1); see Pacific Gas & Elec. Co. v. State Energy Resources Conservation and Development Comm'n, 461 U.S. 190, 205 (1983) (``Need for new power facilities, their economic feasibility, and rates and services, are areas that have been characteristically governed by the States.''). \108\ 16 U.S.C. 824(a), 824(b)(1); see also id. 824o(i)(2) (``This section does not authorize . . . [FERC] to order the construction of additional generation or transmission capacity''). There are other jurisdictional limitations under the FPA. For example, publicly-owned and many cooperatively owned utilities are subject to only some elements of the FPA. Id. 824(f), 824(b)(2). And entities not operating in interstate commerce, i.e., entities in Alaska, Hawaii, and the Electric Reliability Council of Texas portion of Texas, are also subject to only limited FERC jurisdiction. \109\ Pacific Gas & Elec. Co. v. State Energy Resources Conservation and Development Comm'n, 461 U.S. 190, 205 (1983). \110\ Id. at 212. \111\ Dennis, Jeffrey S., et al., Federal/State Jurisdictional Split: Implications for Emerging Electricity Technologies, 3 (December 2016), available at https://www.energy.gov/sites/prod/files/2017/01/f34/Federal%20State%20Jurisdictional%20Split-Implications%20for%20Emerging%20Electricity%20Technologies.pdf; see also 16 U.S.C. 824o(i)(2) (``This section does not authorize . . . [FERC] to order the construction of additional generation or transmission capacity''). --------------------------------------------------------------------------- Courts have observed that regulation of other areas may incidentally affect areas within these exclusive domains, but there is no room for direct regulation by States in areas of FERC domain or vice-versa, and such regulation that would achieve indirectly what could not be done directly is also prohibited.\112\ Just as ``FERC has no authority to direct or encourage generation'' \113\ absent clear authority from Congress, neither does (indeed, a fortiori so much the less does) the EPA.\114\ The EPA has no more ability to ``do indirectly what it could not do directly'' than FERC would with respect to matters that the FPA left to the states. Historically, any traditional environmental regulation of the power sector may have incidentally affected these domains without indirectly or directly regulating within them. For example, an on-site control, such as a scrubber, may affect rate determinations as it is factored into potentially recovered costs. The CPP, however, included a BSER that was based largely on measures and subjects exclusively left to FERC and the states, rather than inflicting only permissible, incidental effects on those domains. --------------------------------------------------------------------------- \112\ Hughes, 136 S. Ct. at 1297-98. See also EPSA, 753 F.3d at 221, 224 (``the Federal Power Act unambiguously restricts FERC from regulating the retail market'' and quoting Altamont Gas Transmission Co. v. FERC, 92 F.3d 1239, 1248 (D.C. Cir. 1996)) (noting that ``FERC cannot `do indirectly what it could not do directly' ''). \113\ CRS, The Federal Power Act (FPA) and Electricity Markets, 9 (March 10, 2017), available at https://www.everycrsreport.com/files/20170310_R44783_dd3f5c7c0c852b78f3ea62166ac5ebdbd1586e12.pdf. \114\ See 80 FR 64745 (explaining that ``the BSER also reflects other CO2 reduction strategies that encourage increases in generation from lower- or zero-carbon EGUs'') (emphasis added); cf. 42 U.S.C. 7651(b) (providing that one purpose of Title IV (but not the CAA overall) is to encourage the ``use of renewable and clean alternative technologies''). --------------------------------------------------------------------------- The CPP identified as part of the BSER generation-shifting measures. Increased renewable generation capacity, building block 3, falls within a state's authority to determine its generation mix and to direct the planning and resource decisions of utilities under its jurisdiction.\115\ Additionally, increased utilization of natural gas combined cycle (NGCC) plants, building block 2, falls within that state authority and within FERC's authority to determine just and reasonable rates by requiring a conclusion that the associated costs of increased utilization rates are reasonable, and, further ignores these areas of exclusive regulation by neglecting to consider changes to regional transmission organization (RTO) and ISO dispatch procedures necessary to achieve the increased utilization rates. By including generation- shifting measures within the states' and FERC's purview in the BSER, rather than relying on traditional controls within the EPA's purview, the EPA established a rule predicated largely upon actions in the power sector outside of the scope of the Agency's authority to compel. Some generation shifting may be an incidental effect of implementing a properly established BSER (e.g., due to higher operation costs), but basing the BSER itself on generation shifting improperly encroaches on FERC and state authorities. --------------------------------------------------------------------------- \115\ See S.Cal. Edison Co., 71 FERC 61,269 (June 2, 1995); see also Pacific Gas & Elec. Co. v. State Energy Resources Conservation and Development Comm'n, 461 U.S. 190, 205, 212 (1983). --------------------------------------------------------------------------- Further, the actual effect of the CPP as anticipated by the EPA was that the states would impose standards of performance based on the EPA's BSER, and sources would largely rely on generation-shifting measures to comply with those standards. In its analysis of potential energy impacts associated with the rule, the CPP modeling ``presume[d] policies that lead to generation shifts and growing use of demand-side [energy efficiency] and renewable electricity generation out to 2029.'' \116\ In this manner, the CPP could directly shape the generation mix of a complying state. It is clear from the FPA that Congress intended the states to have that authority, not the relevant federal agency, FERC. Given that even FERC would not have such authority, the only reasonable inference is that Congress did not intend to give the EPA that authority via CAA section 111.\117\ Federal law ``may not be interpreted to reach into areas of state sovereignty unless the language of the federal law compels the intrusion,'' \118\ and, as discussed above, basing BSER on generation shifting is not authorized by Congress here. Such an interpretation is also consistent with the cooperative-federalism framework of the CAA.\119\ While the EPA has previously asserted that the CPP only provides emissions guidelines, leaving the states with the flexibility to create their own compliance measures,\120\ the guidelines are based on actions outside of the EPA's authority to directly or indirectly compel and the practical effect of [[Page 32531]] implementing the guidelines is that many of those actions likely must be taken. --------------------------------------------------------------------------- \116\ 80 FR 64927. \117\ See Solid Waste Agency of Northern Cook County v. U.S. Army Corps of Engineers, 531 U.S. 159, 172 (2001) (citing Edward J. DeBartolo Corp. v. Florida Gulf Coast Building & Constr. Trades Council, 485 U.S. 568, 575 (1988)). \118\ Am. Bar Ass'n v. FTC, 430 F.3d 457 (D.C. Cir. 2005). \119\ See, e.g., 42 U.S.C. 7401(b)(3) and (4), 7402(a) and (b), and 7416. \120\ 80 FR 64762 (``States will have the flexibility to choose from a range of plan approaches and measures, including numerous measures beyond those considered in setting the CO2 emission performance rates''). --------------------------------------------------------------------------- (5) Commenters' Attempt To Recharacterize the BSER in the CPP as Applying to Sources By Pointing to ``Reduced Utilization'' Is Unavailing and Clearly Precluded by the CAA (a) The CPP Rejected ``Reduced Utilization'' as a ``System'' for Purposes of CAA Section 111. Some commenters claim reduced utilization can be ``applied to'' a source as an ``operational method'' for reducing emissions. In the CPP, however, the EPA was clear that reduced utilization on its own ``does not fit within our historical and current interpretation of the BSER.'' \121\ The EPA explained: ``Specifically, reduced generation by itself is about changing the amount of product produced rather than producing the same product with a process that has fewer emissions,'' \122\ and the EPA has historically based pollution control on ``methods that allow the same amount of production but with a lower-emitting process.'' \123\ In proposing to repeal the CPP, the EPA noted that, ``[w]hereas some emission reduction measures (such as a scrubber) may have an incidental impact on a source's production levels, reduced utilization is directly correlated with a source's output.'' \124\ Accordingly, ``predicating a section 111 standard on a source's non- performance would inappropriately inject the Agency into an owner/ operator's production decisions.'' \125\ The EPA is finalizing our proposal that reduced utilization cannot be considered a ``best system of emission reduction'' under CAA section 111(a)(1) because, as the EPA said in the CPP, the EPA has never identified reduced utilization as the BSER and the EPA interprets CAA section 111 to authorize emission limits based on controls that reduce emissions without restricting production. In addition, because the CPP was not premised on ``reduced utilization''--indeed, the EPA expressly renounced that as a basis for the CPP--commenters' attempt to justify the CPP on that basis is unavailing. --------------------------------------------------------------------------- \121\ 80 FR 64780. \122\ Id. \123\ 80 FR 64782 n.602. \124\ 83 FR 44752. \125\ Id. --------------------------------------------------------------------------- (b) Standards of Performance Cannot Be Based on Reduced Utilization Even if the CPP could be reframed as employing reduced utilization, it would fail to satisfy statutory criteria. CAA section 302(l) provides that a ``standard of performance'' means ``a requirement of continuous emission reduction, including any requirement relating to the operation or maintenance of a source to assure continuous reduction.'' Previously, the Agency has argued that the definitions in CAA section 111(a)(1) ``are more specific'' and therefore controlling,\126\ but, to the extent that section 302(l) applies, that definition is met when a standard ``applies continuously in that the source is under a continuous obligation to meet its emission rate . . . .'' \127\ --------------------------------------------------------------------------- \126\ See Brief of Respondent at 129-30, New Jersey v. EPA, No. 05-1097 (consolidated) (D.C. Cir. May 4, 2007). \127\ 80 FR 64841. See also 70 FR 28617 (``Even if the 302(l) definition applied to the term `standard of performance' as used in section 111(d)(1), [the] EPA believes that a cap-and-trade program meets the definition. . . . That is, there is never a time when sources may emit without needing allowances to cover those emissions.''). --------------------------------------------------------------------------- Here, the Agency concludes that CAA section 302(l) is relevant to interpreting CAA section 111.\128\ Statutes should be construed ``so as to avoid rendering superfluous'' any statutory language: ``a statute should be construed so that effect is given to all its provisions, so that no part will be inoperative or superfluous, void or insignificant. . . .'' \129\ Under the CAA, only section 111 requires the establishment of ``standards of performance.'' Thus, ignoring the generally applicable definition in CAA section 302(l) in interpreting CAA section 111 would read it out of the statute. Nor is this a situation where Congress provided that the provision-specific definition in CAA section 111 was to supplant the general definition in CAA section 302(l). First, the opening phrase of CAA section 302 indicates that the section 302 definitions apply ``[w]hen used in this chapter.'' By contrast, the definitions provisions in some statutes begins with text that expressly provides that the general statutory definitions are supplanted by provision-specific definitions. See, e.g., Clean Water Act (CWA) section 502 (33 U.S.C. 1362) (which begins ``Except as otherwise specifically provided . . . .''). Second, one of the CAA section 302 definitions expressly states that it is supplanted by provision-specific definitions.\130\ --------------------------------------------------------------------------- \128\ Indeed, the provisions of CAA section 302 are supplanted by provision-specific definitions only to the extent that those specific provisions ``expressly'' do so. See, e.g., Alabama Power v. Costle, 636 F.2d 323, 370 (D.C. Cir. 1979) (holding that CAA section 169(1) is controlled by the general definition in CAA section 302(j) with respect to the ``rule requirement'' in CAA section 302(j) that is not expressly supplanted by CAA section 169(1)). \129\ Hibbs v. Winn, 542 U.S. 88, 101 (2004). Cf. Brief of Respondent at 129, New Jersey v. EPA (``[s]pecific terms prevail over the general in the same or another statute which might otherwise be controlling.'' (citation and quotation marks omitted)). \130\ See CAA section 302(j) (which defines ``major stationary source'' and ``major emitting facility'' and begins ``Except as otherwise expressly provided, . . . .''). --------------------------------------------------------------------------- However, the Agency was wrong to conclude that ``a requirement of continuous emission reduction'' means only that a standard of performance need apply ``on a continuous basis.'' In fact, Congress used such phrasing in the preceding definition under CAA section 302(k). The terms ``emission limitation'' and ``emission standard'' mean ``a requirement . . . which limits the quantity, rate, or concentration of emissions of air pollutants on a continuous basis, including any requirement relating to the operation or maintenance of a source to assure continuous emission reduction. . . .'' \131\ Whereas emission limitations and emission standards apply ``on a continuous basis, including any requirement . . . to assure continuous emission reduction,'' standards of performance must impose a ``requirement of continuous emission reduction.'' --------------------------------------------------------------------------- \131\ 42 U.S.C. 7602(k) (emphasis added). See H.R. 6161, Rep. No. 95-294, 92 (May 12, 1977) (``Without an enforceable emission limitation which will be complied with at all times, there can be no assurance that ambient standards will be attained and maintained. Any emission limitation under the [CAA], therefore must be met on a constant basis. . . .'') (emphasis added). --------------------------------------------------------------------------- When Congress made explicit the requirement for ``continuous emission reduction,'' it was to ``affirm the decisions of four U.S. courts of appeals cases that the [A]ct requires continuous emission reductions to be applied.'' \132\ Thus, as scholar David Currie observed, [[Page 32532]] Congress ``intended to forbid reliance on intermittent control strategies, such as temporary use of low-sulfur fuels or reductions in plant output . . . .'' \133\ Because standards of performance cannot be based on intermittent control strategies, basing BSER on reduced utilization is statutorily precluded for purposes of CAA section 111. --------------------------------------------------------------------------- \132\ H.R. Conf. Rep. No. 95-564, 514 (Aug. 3, 1977); see also H.R. No. 95-294, 190 (May 12, 1977) (``To make clear the committee's intent that intermittent or supplemental control measures are not appropriate technological systems for new sources (and to prevent the litigation which has been conducted with respect to use of intermittent or supplemental systems at existing sources), the committee adopted language clearly stating that continuous emission reduction technology would be required to meet the requirements of this section.''); and id. at 92 (``By defining the terms `emission limitation,' `emmission [sic] standard,' and `standard of performance,' the committee has made clear that constant or continuous means of reducing emissions must be used to meet these requirements.''). For example, ``The Sixth Circuit has agreed with the Fifth, upholding the EPA's rejection of a provision that would have allowed `intermittent' controls when necessary to meet ambient standards, adding on the basis of a stray remark of the Supreme Court in Train that `emission standards' were only those limiting the `composition' of an emission, not restrictions on operation or on the content of fuels.'' David P. Currie, Federal Air-Quality Standards and Their Implementation, 365 American Bar Foundation Research Journal, 376 n.58 (1976). \133\ David P. Currie, Direct Federal Regulation of Stationary Sources Under the Clean Air Act, 128 U. Pa. L. Rev. 1389, 1431 (1980) (emphasis added). Professor Curie also suggests that ``the requirement of continuous controls . . . may even have been implicit in the original section 111.'' Id. --------------------------------------------------------------------------- Finally, basing the BSER on reduced utilization contravenes the plain meaning of a ``standard of performance.'' As the Supreme Court held most recently in Weyerhaeuser v. FWS, 139 S. Ct. 361 (2018),\134\ and previously in Solid Waste Agency of Northern Cook County, courts must give statutory terms meaning, even where they are part of a larger statutorily defined phrase.\135\ In the phrase ``standard of performance,'' the term ``performance'' is defined as ``[t]he accomplishment, execution, carrying out, . . . [or] doing of any action or work,'' \136\ and thus refers to the source's manufacturing or production of product. Reduced utilization does not involve improvements to a source's emissions during ``performance;'' instead it calls for non-performance--the cessation or limitation of manufacturing or production --of a source. Accordingly, reduced utilization cannot form the basis of a ``standard of performance'' under CAA section 111. --------------------------------------------------------------------------- \134\ 139 S.Ct. at 368-69 (rejecting environmental group's contention that statutory definition of ``critical habitat'' is complete and does not require independent inquiry into meaning of the term ``habitat,'' which the statute left undefined). \135\ 531 U.S. at 172 (requiring that the word ``navigable'' in the Clean Water Act's statutorily defined term ``navigable waters'' be given ``effect''). \136\ The Oxford English Dictionary (2d ed. 1989) (1. The carrying out of a command, duty, purpose, promise, etc.; execution, discharge, fulfilment. 2. a. The accomplishment, execution, carrying out, working out of anything ordered or undertaken; the doing of any action or work; working, action (personal or mechanical'') and American Heritage Dictionary of the English Language (2d ed. 1969) (``1. The act of performing, or the state of being performed.'' [perform 1. To begin and carry through to completion]). --------------------------------------------------------------------------- The definition of ``standard of performance,'' and the scope of the ``best system of emission reduction'' contained within, confers considerable discretion on the EPA to interpret the statute and make reasonable policy choices pursuant to Chevron step two as to what is the best system to reduce emissions of a particular pollutant from a particular type of source. However, by making clear that the ``application'' of the BSER must be to the source, Congress spoke directly in Chevron step one terms to the question of whether the BSER may contain measures other than those that can be put into operation at a particular source: It may not. The approach to BSER in the CPP is thus unlawful and the CPP must be repealed. C. Independence of the Repeal of the Clean Power Plan Although this action appears in the same document as the ACE rule and the revisions to the emission guidelines implementing regulations, the repeal of the CPP is a distinct final agency action that is not contingent upon the promulgation of ACE or the new implementing regulations. As explained above, Congress spoke directly to the question of whether CAA section 111 authorizes the EPA to issue regulations pursuant to CAA section 111(d) that call for the establishment of standards of performance based on the types of measures that comprised the second and third building blocks of the CPP's BSER permits the Agency's to consider generation-shifting as a potential system of emission reduction in developing emission guidelines. The answer to that question is no. The CPP described itself as a ``significant step forward in reducing [GHG] emissions in the U.S.'' and relied ``in large part on already clearly emerging growth in clean energy innovation, development and deployment . . . .'' 80 FR 64663. Market-based forces have already led to significant generation shifting in the power sector. However, the fact that those market forces have had that result does not confer authority on the EPA beyond what Congress conferred in the CAA. The EPA does not deny that, if it were validly within the Agency's authority under the statute, regulations that can only be complied with through widespread implementation of generation shifting might be a workable policy for achieving sector-wide carbon-intensity reduction goals. But what is not legal cannot be workable. The CPP's reliance on generation shifting as the basis of the BSER is simply not within the grant of statutory authority to the Agency. The text of CAA section 111 is clear, leaving no interpretive room on which the EPA could seek deference for the CPP's grid-wide management approach. Accordingly, EPA is obliged to repeal the CPP to avoid acting unlawfully. Because the EPA exceeded its statutory authority when it promulgated the CPP, the EPA's repeal of that rule will remain valid even if a future reviewing court were to find fault with the separate and distinct legal interpretations and record-based findings underpinning the ACE rule (see Section III) or the new implementing regulations (see Section IV). The EPA today repeals the CPP as a separate action, distinct from its promulgation of the ACE rule and of revisions to its regulations implementing section 111(d). The EPA would repeal the CPP today even if it were not yet prepared to promulgate these other regulations, or indeed if it knew that those other regulations would not survive judicial review. III. The Affordable Clean Energy Rule A. The Affordable Clean Energy Rule Background 1. Regulatory Background In December 2017, the EPA published an Advanced Notice of Proposed Rule Making (ANPRM) to solicit comment on what the Agency should include in CAA section 111(d) emission guidelines, including soliciting comment on the respective roles of the states and the EPA; what systems of emission reduction might be available and appropriate for reducing GHG emissions from existing coal-fired EGUs; and potential flexibilities that could be afforded under the NSR program to improve the implementation of a future rule.\137\ The EPA received more than 270,000 comments on the ANPRM. --------------------------------------------------------------------------- \137\ See 82 FR 61507 (December 28, 2017). --------------------------------------------------------------------------- Informed by the ANPRM, the EPA then published the ACE proposal, which consisted of three distinct actions: (1) Emission guidelines for GHG emissions from existing coal-fired EGUs, based on application of HRI measures as the BSER; (2) new emission guideline implementation regulations; and (3) revisions to the NSR program to facilitate the implementation of efficiency projects at EGUs.\138\ --------------------------------------------------------------------------- \138\ See 83 FR 44746 (August 31, 2018). --------------------------------------------------------------------------- In this final action, the EPA has determined that the BSER for CO2 emissions from existing coal-fired EGUs is HRI, in the form of a specific set of technologies and operating and maintenance practices that can be applied at and to certain existing coal-fired EGUs, which is consistent with the legal interpretation adopted in the repeal of the CPP (see above section II). Also, in this action, the EPA has provided information for state plan development. The state plan development discussion is consistent with the new implementing regulations for CAA section 111(d) emission guidelines discussed separately in section IV of this preamble. [[Page 32533]] As noted above, the EPA also proposed revisions to the NSR program in parallel with the ACE rule and the new implementing regulations. The EPA is not finalizing NSR revisions at this time; instead, the EPA intends to take final action on the proposed revisions at a later date in a separate notification of final action. 2. Public Comment and Hearing on the ACE Proposal The Administrator signed the ACE proposal on August 21, 2018, and, on the same day, the EPA made this version available to the public at https://www.epa.gov/stationary-sources-air-pollution/proposal-affordable-clean-energy-ace-rule. The 60-day public comment period on the proposal began on August 31, 2018, the day of publication in the Federal Register. The EPA held a public hearing on October 1, 2018, in Chicago, Illinois, and extended the public comment period until October 31, 2018, to allow for 30 days of public comment following the public hearing. The EPA received nearly 500,000 comments on the ACE proposal. B. Legal Authority To Regulate EGUs In the CPP, the EPA stated that the Agency's then-concurrent promulgation of standards of performance under CAA section 111(b) regulating CO2 emissions from new, modified, and reconstructed EGUs triggered the need to regulate existing sources under CAA section 111(d).\139\ In ACE, the EPA is not re-opening any issues related to this conclusion, but for the convenience of stakeholders and the public, the EPA summarizes the explanation provided in the CPP here. --------------------------------------------------------------------------- \139\ See 80 FR 64715. --------------------------------------------------------------------------- CAA section 111(d)(1) requires the Agency to promulgate regulations under which the states must submit state plans regulating ``any existing source'' of certain pollutants ``to which a standard of performance would apply if such existing source were a new source.'' Under CAA section 111(a)(2) and 40 CFR 60.15(a), a ``new source'' is defined as any stationary source, the construction, modification, or reconstruction of which is commenced after the publication of proposed regulations prescribing a standard of performance under CAA section 111(b) applicable to such source. In the CPP, the EPA noted that, at that time, the Agency was concurrently finalizing a rulemaking under CAA section 111(b) for CO2 emissions from new sources, which provided the requisite predicate for applicability of CAA section 111(d).\140\ --------------------------------------------------------------------------- \140\ Id. --------------------------------------------------------------------------- The EPA explained in the CAA section 111(b) rule (80 FR 64529) that ``section 111(b)(1)(A) requires the Administrator to establish a list of source categories to be regulated under section 111. A category of sources is to be included on the list `if in [the Administrator's] judgment it causes, or contributes significantly to, air pollution which may reasonably be anticipated to endanger public health and welfare.' '' Then, for the source categories listed under CAA section 111(b)(1)(A), the Administrator promulgates, under CAA section 111(b)(1)(B), ``standards of performance for new sources within such category.'' The EPA further took the position that, because EGUs had previously been listed, it was unnecessary to make an additional finding as a prerequisite for regulating CO2. The Agency expressed the view that, under CAA section 111(b)(1)(A), findings are category-specific and not pollutant-specific, so a new finding is not needed with regard to a new pollutant. The Agency further asserted that, even if it were required to make a pollutant-specific finding, given the large amount of CO2 emitted from this source category (the largest single stationary source category of emissions of CO2 by far) that EGUs would easily meet the standard for making such a listing. The Agency further took the position that, given the large amount of emissions from the source category, it was not necessary in that rule ``for the EPA to decide whether it must identify a specific threshold for the amount of emissions from a source category that constitutes a significant contribution.'' \141\ --------------------------------------------------------------------------- \141\ See 80 FR 64531. --------------------------------------------------------------------------- That CAA section 111(b) rulemaking remains in effect, although the EPA has proposed to revise it.\142\ That rule continues to provide the requisite predicate for applicability of CAA section 111(d). --------------------------------------------------------------------------- \142\ See 83 FR 65424. --------------------------------------------------------------------------- C. Designated Facilities for the Affordable Clean Energy Rule The EPA is finalizing that a designated facility \143\ subject to this regulation is any coal-fired electric utility steam generating unit that: (1) Is not an integrated gasification combined cycle (IGCC) unit (i.e., utility boilers, but not IGCC units); (2) was in operation or had commenced construction on or before January 8, 2014; \144\ (3) serves a generator capable of selling greater than 25 megawatts (MW) to a utility power distribution system; and (4) has a base load rating greater than 260 gigajoules per hour (GJ/h) (250 million British thermal units per hour (MMBtu/h)) heat input of coal fuel (either alone or in combination with any other fuel). Consistent with the new implementing regulations, the term ``designated facility'' is used throughout this preamble to refer to the sources affected by these emission guidelines.\145\ For this action, consistent with prior CAA section 111 rulemakings concerning EGUs, the term ``designated facility'' refers to a single EGU that is affected by these emission guidelines. --------------------------------------------------------------------------- \143\ The term ``designated facility'' means ``any existing facility which emits a designated pollutant and which would be subject to a standard of performance for that pollutant if the existing facility were an affected facility.'' See 40 CFR 60.21a(b). \144\ Under CAA section 111, the determination of whether a source is a new source or an existing source (and thus potentially a designated facility) is based on the date that the EPA proposes to establish standards of performance for new sources. January 8, 2014, is the date the proposed GHG standards of performance for new fossil fuel-fired EGUs were published in the Federal Register (79 FR 1430). \145\ The EPA recognizes, however, that the word ``facility'' is often understood colloquially to refer to a single power plant, which may have one or more EGUs co-located within the plan [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2019-13507. Public record. Not legal advice.