EPA Finalizes Affordable Clean Energy Rule and Repeal of Clean Power Plan

On June 19, 2019, the US Environmental Protection Agency (EPA) finalized the Affordable Clean Energy (ACE) Rule regulating greenhouse gas (GHG) emissions from existing coal-fired electric utility generating units (EGUs). The EPA simultaneously finalized two related rules repealing the 2015 Clean Power Plan (CPP) and regulating federal and state implementation of the ACE Rule and any future emission guidelines promulgated by the EPA under Section 111(d) of the Clean Air Act. The rules provide states three years to develop state plans to implement the new requirements and a further year for the EPA to evaluate the same. The EPA also notes that the states have “broad” discretion in establishing and applying applicable emission standards. However, several states and organizations already have stated that they intend to challenge the rules, which have not yet been published in the Federal Register (the rules will be effective 60 days after publication).

Both the ACE Rule and the CPP are predicated on Section 111(d) of the Clean Air Act, 42 U.S.C. Section 7411(d), which allows the EPA to require states to submit state implementation plan (SIP) amendments that adopt standards of performance for stationary sources as to air pollutants for which air quality criteria have not been issued. Under Section 111(d), SIP amendments must establish standards of performance that reflect the degree of emissions limitation achievable through the application of the “best system of emission reduction… adequately demonstrated” (BSER), taking into account the cost of achieving such reduction while also considering any non-air-quality health and environmental impacts and energy requirements.

In the repealed CPP, EPA had determined that BSER for existing fossil-fuel-fired EGUs is the combination of emission rate improvements and limitations on overall emissions at affected EGUs that can be accomplished through improving combustion efficiency (heat rate) and implementing two “outside-the-fenceline” measures—substituting increased generation from natural gas-fired combined cycle EGUs for reduced generation from coal-fired steam EGUs and substituting increased generation from new, zero-emitting renewable energy generating capacity for reduced generation from affected fossil fuel-fired EGUs. Applying these measures, the EPA had established specific emission rates reflecting BSER for fossil fuel-fired steam generating units and stationary combustion turbines of 1,305 pounds of carbon dioxide (CO2) per megawatt hour and 771 pounds of CO2 per megawatt hour, respectively. The CPP has never gone into effect due to challenges from multiple states and state agencies, as well as industry and trade groups. In February 2016, the Supreme Court stayed the rule pending resolution of these legal challenges. West Virginia v. EPA, No. 15A773 (S. Ct. Feb. 9, 2016).

The new ACE Rule, which replaces the CPP, specifies as BSER heat rate improvement (i.e., improved efficiency), eliminating the use of outside-the-fenceline control measures. The ACE Rule also omits specifying numerical emission rates. Instead, the ACE Rule lists six “candidate technologies:” neural network (computer model) control devices and intelligent sootblowers; boiler feed pumps; air heater and duct leakage control; variable frequency drives; blade path upgrades; and redesign or replacement of economizer. Under the ACE Rule, states will establish unit-specific standards of performance for existing coal-fired EGUs that reflect the emission limitation achievable through application of the BSER technologies, as well as improved operation and maintenance practices. As noted above, the rules provide for a four-year time frame for the states to develop, and the EPA to review, applicable SIP amendments.

This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Eric B. Rothenberg, an O’Melveny partner licensed to practice law in Missouri and New York, and John D. Renneisen, an O’Melveny senior counsel licensed to practice law in the District of Columbia, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.

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