The issuance by the US EPA of the proposed rule for existing power plants under Section 111(d) of the Clean Air Act arrived after much input from stakeholders, speculation as to its likely content, and a host of issues for which US EPA now seeks comment prior to issuing a final rule in June 2015. The much anticipated rule, which is part of President Obama’s Clean Power Plan, is a state-based approach to meet carbon reductions of 30 percent by 2030. Under the proposed rule, each state is required to include in its state implementation plan (SIP) measures to ensure that it will comply with the federal limits established by this rule. In the event a state does not do so, the US EPA can utilize a Federal Implementation Plan (FIP) to ensure compliance.
The proposal contains four main blocks for state compliance plans to consider:
- Heat rate improvement at the generating unit.
- Reduce carbon emissions by utilizing less carbon intensive fuels (e.g. replace coal with natural gas).
- Reduce carbon by replacing carbon-based sources with non-carbon-based energy generation (e.g. nuclear or renewables).
- Utilization of energy efficiency to reduce the demand for energy and thereby impact the amount of power needed.
States have been told that they were granted substantial flexibility to craft a solution that best reflects the conditions in their particular state.
As industry, non-governmental entities (NGOs), and state regulators review the proposal and begin crafting their comments and plans for implementation, a number of questions have been raised. The issues of inside the fence v. outside the fence compliance requirements, the cost-effectiveness of proposed solutions to be implemented, and impacts on system reliability have registered concerns already. Also, the question of base year (2005 v. 2012) does not appear clear in the proposed rule, but many now hold the view that 2012 is in fact the base year making compliance all the more challenging. We expect that question to be raised and hopefully addressed in the comment period and in the final rule. Additionally, there is a link between the proposed rule for 111(b) (New Source Performance Standards) and 111(d), and legal challenges are expected when the final rule for 111(b) is issued this fall.
The US EPA has asked for a substantial amount of comments in the proposed rule. Comments are due 120 days after publication of the proposed rule in the federal register. In addition, a series of public meetings will be held where interested parties and the public can comment about the proposed rule.
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