1 

### Table of C ontents 1.6 Implications for Tribes and U.S. Territories

................................ ................................ ........ 2 1.7 Endangerment finding

................................ ................................ ................................ .......... 39 1.8 Building blocks 2, 3, and 4: Intra

- state and inter

- state compliance

................................ . 45 1.9 Potential combinations of the building blocks as compo nents of the BSER

................... 50 1.9.1 Proposed BSER

- combination of all four building blocks as the BSER

...................... 50 1.9.2 Alternate approach to the Best System of Emission Reduction

................................ .... 63 1.9.3 Evaluati on of Building Block 1, heat rate improvements, against the BSER criteria

. 81 1.9.4 Evaluation of Building Block 2, re

- dispatch, a gainst the BSER criteria

...................... 97 1.9.5 Evaluation of Building Block 4, increased demand

- side energy efficiency, against the BSER criteria

................................ ................................ ................................ ................ 123 1.9.6 Other

................................ ................................ ................................ ................................ . 131 1.10 Determination of the BSER

................................ ................................ .............................. 132 1.10.1 Statutory and regulatory provisions related to determination and application of the BSER

................................ ................................ ................................ .............................. 132 1.10.2 The interconnected nature of the U.S. electricity sector

................................ ............ 145 1.10.3 Additional considerations related to inclusion of building blocks 2, 3, and 4 as part of the basis supporting the BSER: "system of emission reduction"

............................ 152 1.10.4 Additional considerations related to inclusion of building blocks 2, 3, and 4 as part of the basis supporting the BSER: "best" system that is "adequately demonstrated"

................................ ................................ ................................ ................................ ......... 165 1.10.5 The EPA's discretion in applying the criteria for the best system of emission reduction

................................ ................................ ................................ ........................ 189 1.10.6 State

- wide Application of the BSER; Appropriateness of Standards of Performance

................................ ................................ ................................ ................................ ......... 202 1.10.7 Severability

................................ ................................ ................................ ..................... 229 1.10.8 Achievability

................................ ................................ ................................ ................... 236 1.10.9 BSER based on emissions trading

................................ ................................ ................ 256 1.10.10 BSER based on emissions averaging

................................ ................................ .......... 264 1.10.11 Other

................................ ................................ ................................ ............................. 2642 1.6 IMPLICATIONS FOR TRIBES AND U.S. TERR ITORIES

Comment 1: Commenters state d they agree with EPA's decision to exclude existing electric generating units ("EGUs") located on tribal lands from the Carbon Pollution Emission Guidelines for Existing Stationary Sources: Electric Generating Units; Proposed Rule published for the states on Ju ne 18, 2014 ("Proposed Rule for the States")

. See 79 Fed. Reg. 34844 ("Although affected EGUs located in Indian country operate as part of the interconnected system of electricity production and distribution, those EGUs would not be encompassed within
a st ate's CAA section 111(d) plan. Instead, commenters stated, a tribe that has one or more affected EGUs located in its area of Indian country would have the opportunity, but not the obligation, to establish a plan that establishes standards of performance fo r CO2 emissions from affected EGUs for its tribal lands.") ) Commenters agree d that the correct approach was for EPA to promulgate a supplemental rule for tribes and U.S. territories.

Commenters state d EPA proposes to set interim and final carbon dioxi de "goals" for the reservation using the same building block methodology that EPA used in its main Section 111(d) proposal. C ommenter s explain ed that as set forth in Commenters' Prior Comments and the comments of numerous other organizations, notably those of the National Rural Electric Cooperative Association (NRECA), EPA does not have authority to regulate EGUs under Section 111(d) and, in any event, EPA's proposed approach to regulation, including its building block methodology, is fundamentally flawed. Commenters stated that f or those reasons, EPA's Supplemental Proposal is similarly flawed.
Response 1: The EPA agrees with the commenters that it was the best approach to issue a supplemental proposal addressing EGU located in areas of Indian country and U .S. territories

. With regard to commenters’ contention that EPA lacks the necessary legal authority to regulate EGU under section 111(d) of the Clean Air Act, as explained in detail in section IV.A of the preamble to the final rule, EPA strongly disagrees.

Comment 2: Commenters state d EPA has proposed using the same four building block approach to set emission reduction targets for power plants in Indian Country and U.S. Territories. Commenters agree d that EPA should use the same approach to setting target s in these areas as it follows in states.
Response 2: The EPA agrees with the commenters that it should generally be consistent in its approach to setting emission reduction targets particularly with regard to EGU that operate as part of the interconnected system of electricity production and distribution. Consistent with this approach, in this final rulemaking EPA is finalizing three building blocks as part of the best system of emission reductions (BSER) for EGU be they located in states, Indian country or U.S. Territories. For more information on how the EPA has defined BSER in this final rule, please see section V of the preamble to the final rule.3 Comment 3: Commenters state d Indian Tribes are affected much differently than the rest of the nation as their cultures are integrated into the ecosystems of North America; and many Tribal economies are heavily dependent on the use of fish, wildlife, and native plants. Commenters explain ed even where Tribal economies are integrated into the national economy, Tribal cultural identities continue to be deeply rooted in the natural environment. Commenters stated a s climate change disrupts biological communities, the survival of some Tribes as distinct cultures may be at risk. Commenters conclude d the loss of tradi tional cultural practices, due to climate

- driven die

- off or range shift of culturally significant plant and animal species, may prove to be too much for some Tribal cultures to withstand on top of other external pressures that they face.

Commenters state d that climate

- driven disruption of biological communities is having a considerable effect on the treaty rights of Indian Tribes. Commenters stated m any such treaties preserve hunting, fishing, and gathering rights for Tribes on their lands and in the usual and accustomed areas. Commenters stated s ome Tribes are finding that the animals and/or plants on which they depend for their cultural practices and identity have either migrated to lands not under their control or have disappeared altogether. Commenters a sk ed "how does one begin to value this type of loss for a Tribe" Further, c ommenters state d CO2 emitted today can remain in the atmosphere up to 100 years, meaning that the full impacts of these emissions on Tribes and their culture may not be seen until m any years into the future. Commenters stated t he TEPC recognizes that the Proposed Rule is a positive action towards reducing uncontrolled CO2 emissions. Commenters stated t he emission of CO2 and other GHGs must stop in order to protect Indian Tribes and t heir cultures, not only for current generations, but also for future generations
to come.

Response 3: The EPA agrees with the commenters that because of their unique circumstances tribes are likely to be impacted differently by climate change when compared to the general population. However, as noted in section IX of the preamble to this final rule, the EPA believes that the final rule will benefit all communities, including indigenous populations, by reducing not only CO2 emissions, but also emissions of c onventional pollutants. For more detailed information on the benefits of the final rule, see sections IX, XII.F and XII.J of the preamble.

Comment 4: Commenters state d that in the event that Fort Mojave does not develop its own plan, EPA should find that it is not necessary or appropriate to develop a federal plan unless such a plan provided the same flexibilities afforded to states by the CPP. Commenters explain ed that the TAR provides significant discretion to EPA to determine whether promulgating such a Federal Implementation Plan ("FIP") is necessary or appropriate to protect air quality.(Arizona Pub. Serv. Co. v. EPA, 562 F.3d 1116, 1125 (10th Cir. 2009) (stating that 40 CFR section 49.11(a) "provides the EPA discretion to determine what rulemaking is necessary or appropriate to protect air quality and requires the EPA to promulgate such rulemaking")) In this case, commenters stated EPA should find that the broader goals of the Clean Power Plan will be achieved without imposing specific emission perfor mance goals on Fort Mojave because South Point will be optimally dispatched to decrease power

- sector GHG emissions pursuant to surrounding states' implementation of the Clean Power Plan without imposing any specific requirements on South Point via a FIP. C ommenters offer ed , for example, a significant portion of South Point's power is currently delivered to California, where it is subject to a compliance4 obligation under California's Cap

- and

- Trade Regulation. Commenters stated o ther states served by South Po int might similarly be expected to implement mass

- based programs as a result of implementation of the Clean Power Plan. Commenters stated a s a consequence, a significant portion, if not all, of South Point's GHG emissions will appropriately be priced into dispatch decisions, obviating any source

- specific controls that might be applied through a FIP imposed by EPA upon Fort Mojave and South Point alone. Commenters sum med , EPA should not impose federal requirements on Fort Mojave unless the flexibility otherw ise built into the Clean Power Plan for states and affected EGUs could somehow be made available to Fort Mojave and South Point. Commenters stated South Point is the only facility with affected EGUs on Fort Mojave tribal lands and, as a consequence, there are no opportunities to achieve reductions through re

dispatch of a larger existing fleet. Commenters f urther stated, imposition of RE and EE targets for Fort Mojave would be unreasonable, given the small electricity demand that Fort Mojave represents rela tive to the capacity of South Point. Thus, commenters added, there are little to no opportunities for reductions to be achieved by Fort Mojave alone. Indeed, c ommenters assert ed
, the total required reduction from the 2012 baseline rate to the final goal for Fort Mojave amounts to less than 1%, in comparison to the 52% and 23% reductions required of its neighbors, Arizona and California (respectively). Commenters stated that f or E PA to impose a FIP on Fort Mojave in pursuit of such negligible reductions would represent an unnecessary administrative burden, with no emissions reduction benefit to justify such an intrusion into tribal sovereignty.

Commenters agree d with EPA's determin ation that tribes which have EGUs located on their lands, like the Navajo Nation, should have the opportunity, but not the obligation, to establish their own Clean Air Act Section 111(d) plans ("111(d) plan") if they so choose.(79 Fed.Reg. 34844).

Response 4: The EPA agrees that the language in the tribal air rule (TAR) requiring EPA to promulgate such federal implementation plans (FIP) as it determines are necessary or appropriate to protect air quality in areas of Indian country provides it with considera ble discretion. The EPA also agrees with commenters that tribes with EGU on their land should have the opportunity, but not the obligation, to establish their own Clean Air Act section 111(d) plans if they so choose. EPA notes that a tribe wishing to est ablish such a plan would also need to apply to EPA for treatment

- in

- the

- same

- manner

- as

- a

- state status for that purpose under EPA’s regulations at 40 CFR part 49. For a more detailed discussion of this issue, please see section II.H and XII.F of the preamb le to the final rule.

Comment 5: Commenters believe d the Clean Power Plan should allow Tribal 111(d) plans. Commenters state d that the Navajo Nation reserves its right to implement a tribal 111(d) plan. (79 FR 65495), and the Navajo Nation also reserves its right to request approval of reasonably severable partial program elements (Id.). Commenters continue d , stating that although EPA did not make any finding as to whether individual tribes with affected EGUs have the legal authority to implement a tribal 111(d) plan, the Navajo Nation believes it may have the legal authority to do so. Commenters stated i f for whatever reason the Navajo Nation does not implement a tribal 111(d) plan, the Navajo Nation will request that EPA should implement a federal 111(d) plan for the Navajo Nation. Either way, c ommenters remark ed , there should be a plan, and EPA should not allow the two plants located on the Navajo Nation to be unregulated.5 Commenters also note d that if the Navajo Nation decides not to develop its own 111 (d) plan, the Navajo Nation believes that EPA should adopt a 111(d) plan for the Navajo Nation, explaining that a federal plan would ensure that air quality on the Navajo Nation is protected by regulating CO2 emissions from the power plants located on the Navajo Nation. Commenters stated i t would also better position the Navajo Nation government to participate in any carbon trading program that is eventually established, whether in the United States or internationally. Commenters state d that the Navajo Nati on is a uniquely disadvantaged people, and any revenue generated from a carbon trading program would significantly benefit the Navajo Nation's economy.

Commenters state d that specifically, tribes with designated facilities must have the choice of "tribe a s State" status: and indeed EPA proposes that and offers geographically

- limited, rate

based, emissions goals for the U.S territories and tribal lands with designated facilities: Puerto Rico and Guam, and tribal lands of the Navajo Nation (located within Ar izona and New Mexico), of the Ute Tribe of the Uintah and Ouray Reservation (located within Utah) and lands of the Fort Mojave Tribe (located within Arizona).[14 SNPRM, 79 Fed. Reg. at 65,484] Commenters support ed the flexibility of CAA Section 111(d) for states and tribes to use their discretion to develop plans to achieve the emission reductions, whereby the EPA reviews plans to ensure they are meeting the relevant statutory criteria. Commenters provided the following recommendations: 1 ) that the EPA work closely with local, state and tribal governments to identify innovative state, local and tribal programs which achieve these reductions ; 2 ) that the EPA share these approaches for other programs to potentially adopt. At the state and local level we learn from each other and this will provide a means to access this information readily ; and, 3 ) that the EPA work closely with the states and tribes to engage with local governments to employ innovative collaborations with their public utilities and the private sector to promote these reductions.
Response 5: In the final rule, the EPA is finalizing emission performance rates for the EGU located in Indian country and mass

- and rated

- based performance goals for each of the three affected areas of Indian country tha t were derived using the same methodology (the application of BSER) as was used to derive goals for EGU located outside of Indian country. Commenters are correct that under 40 CFR 49.3, 49.6 and 49.7, collectively, tribes with EGU located in their

areas o f Indian country may seek treatment in the same manner as a state eligibility for purposes of developing a tribal implementation plan (TIP) implementing the final Emission Guidelines. The EPA would evaluate any such request consistent with the criteria in 40 CFR 49.6 and 49.7, taking into consideration all relevant information. If EPA approves the request, the tribe would be free to submit a TIP to EPA for approval. In determining whether to approve any such TIP, EPA would evaluate it against the final E mission Guidelines, considering all relevant information. While the EPA has the authority under CAA §§301(a) and 301(d)(4) and 40 CFR 49.11 to establish a federal implementation plan (FIP) implementing the Emission Guidelines in areas of Indian country wi th EGU, the exercise of this authority is conditioned on EPA first proposing and then finalizing a determination that a FIP is “necessary or appropriate”. The EPA did not propose such a finding in conjunction with the supplemental proposal and, therefore, is not finalizing such a finding in conjunction with the final rule. For further discussion of tribes’ with EGU located in their areas of Indian country opportunity, but not obligation, to develop their own section 111(d) plans, please see sections II.H and XII.F of the preamble to the final rule.6 Comment 6: Commenters support ed EPA's recognition of a tribe's right to seek "treatment as a state" (TAS) to implement its own 111(d) plan and to apply for EPA approval of that plan. CAA section 30l(d)(2) required EPA to specify those provisions of the CAA for which it is appropriate
to treat tribes as states, which EPA did in the Tribal Authority Rule (TAR). 40 C.F.R. Part 49. Commenters continue d , stating that in the TAR, at 40 C.F.R. Section 49), EPA found that TAS is appropriate for all provisions of the CAA except those specifically listed in section 49.4 as being excluded; the only exclusions are program deadlines and accompanying sanctions for failures to meet those deadlines (since it is not mandatory for a tribe to seek TAS), criminal authority requirements (due to limits on trib al criminal jurisdiction), and certain grant provisions. Commenters stated t he Navajo Nation may therefore seek TAS to implement its own 111(d) plan. At the same time, c ommenters remark ed , CAA section 301(a) and (d)(4) provide EPA with ample authority to d evelop and implement a 111(d) plan for the Navajo Nation in the event that the Navajo Nation does not implement its own plan, and the federal plan may differ from a state plan if necessary or appropriate. Commenters stated CAA section 301(a) authorizes the EPA Administrator to prescribe "such regulations as are necessary" to carry out her functions under the CAA, and CAA section 301(d)(4) states: "In any case in which the Administrator determines that the treatment of Indian tribes as identical to States is inappropriate or administratively infeasible, the Administrator may provide, by regulation, other means by which the Administrator will directly administer such provisions so as to achieve the appropriate purpose'' (emphasis added). Commenters stated that p ursuant to this statutory authority EPA promulgated section 49.11(a) of the TAR, which requires the promulgation of a federal plan whenever "necessary or appropriate to protect air quality" if a tribe fails to submit a tribal plan or submits an inadequat e tribal plan. Commenters add ed that section 49.5 of the TAR allows a tribe to request a finding from EPA that it would be inappropriate to treat tribes as states for particular provisions of the CAA. Commenters stated t he "other means" referenced in CAA section 301(d)(4) could include a federal 111(d) plan, and such a plan could differ from state plans. Commenters state d EPA has the power and flexibility to develop a 111(d) plan for the Navajo Nation that is specific to the Navajo Nation's needs, consiste nt with the framework described in Section II of these comments, regardless of the approach taken by any state developing a 111(d) plan. Commenters stated EPA's authority to treat tribes differently than states is rooted in principles of federal Indian Law , is reflected in CAA section 301(d), and was recognized by EPA in its development of the TAR. Commenters stated u nder federal Indian law, "[t]he federal government has substantial trust responsibilities toward Native Americans." Commenters stated t he legi slative history of CAA section 301(d) indicates that this provision incorporates federal responsibilities toward tribes. Commenters stated EPA recognized its obligations to tribes when it developed the TAR. Further, c ommenters add ed , EPA already provides s tates flexibility in the development of state 111(d) plans, and structuring the Navajo Nation's plan to reflect unique circumstances on the Nation would take the same approach.
Response 6: The EPA agrees with the commenters that it has the necessary autho rity under CAA §§301(a) and 301(d)(4) and 40 CFR 49.11 to promulgate a federal implementation plan (FIP) implementing the final Emission Guidelines in areas of Indian country with EGU if it determines that it is “necessary or appropriate” to do so. The EP A also agrees that it has considerable discretion in determining the timing of adopting a FIP. While the EPA has flexibility in determining the “necessary or appropriate” elements of such a plan, any such plan would be7 consistent with the requirements of the final Emission Guidelines. EPA notes that the Agency could determine that some plan elements are severable and that it is not “necessary or appropriate” to initially address those elements in the FIP. For a further discussion of some of these issues, please see section II.H and XII.F of the preamble to the final rule.

Comment 7: Commenters state d that because the areas that will be subjected to this proposal had no utility

- scale, non

- hydroelectric renewable energy (RE) in 2012, U.S. EPA is proposing multiple options to address RE generation under Building Block 3. [79 FR 65491] Commenters continue d (verbatim) , t he first option follows the methodology of the June 18, 2014 proposal which results in goals with zero RE requirements under Building Block 3 ; o ption two assumes there is RE potential in U.S. Territories. [79 FR 65491] Commenters stated f or U.S. Territories, U.S. EPA assumes RE in 2017 to be 0.37% which is consistent with the lowest amount among the 50 states in 2012 (Kentucky). Commenters stat ed U.S. EPA did not make this same assumption for Indian Country because it would have resulted in a significant portion of the area's electricity demand being met by renewables only. U.S. EPA is also proposing an alternative for Puerto Rico based on a sim ilar methodology from the June 18, 2014 proposal for the alternative RE approach that relies on technical potential within the states. However, commenters added, U.S. EPA acknowledges they have very limited information on Puerto Rico's technical potential. Commenters stated U.S. EPA did not provide this alternative for Guam because U.S. EPA does not have any technical potential data for Guam. Commenters stated

w hen using a methodology similar to the June 18, 2014 proposal, U.S. EPA found similar problems wh en applying Building Block 4 in these areas. [79 FR 65492] Commenters added
t here is no projected retail electric sales growth available from the 2012 Annual Energy Outlook (AEO) for U.S. Territories and therefore, is using 0%. Commenters also stated i n In dian County, sales of electricity is small compared to the total generation and therefore, application of Building Block 4 yields very little emission reductions.
Response 7: The commenter s question the EPA’s decision to include RE in building block three

. The EPA is not requiring Guam or Puerto Rico to submit compliance plans because the emission guidelines do not apply to these territories. Accordingly, comments relating to building block 3 are moot wi th respect to these territories . In addition, the com menter s state that the application of Building Block 4 yields very little emission reductions. As noted, in the section V of the preamble for this final rulemaking, the EPA is not including Building Block 4 in the determination of BSER.

Comment 8: Commenters state d that the Navajo Nation agrees that the emission reduction rate set by EPA should be for the Navajo Nation, and not the individual power plants located on the Navajo Nation. Commenters explain ed that such an approach is consistent with th e state

- specific rate set by EPA under the Proposed Rule and with states being required to develop state

- specific plans (rather than plans for individual sources) under CAA section 111(d), and that setting an emissions rate for the Navajo Nation, and not t he power plants, is also permissible given the flexibility afforded to EPA through CAA section 301(d) and the TAR.8 Commenters state d Section 49.11 of the TAR authorizes EPA to promulgate a FIP when EPA determines such regulations are "necessary or appropri ate" to protect air quality. 40 CFR 49.11(a) . . . The Court of Appeals for the Tenth Circuit considered the regulatory language in 40 CFR 49.11(a) and concluded that "[i]t provides the EPA discretion to determine what rulemaking is necessary or appropriat e to protect air quality and requires the EPA to promulgate such rulemaking." Commenters state d that the Navajo Nation has given up its ability to regulate NGS including air emission and was illegal to be part of the Technical Work Group (TWG). Commenters stated Navajo Nation is not eligible for TAR according to 40 CFR section 49. Commenters added Tribal eligibility requirements which is part of the Navajo Nation lease agreement with SRP.

Response 8: In the final rule, EPA is establishing emission performan ce rates for each individual EGU, including the four EGU located in Indian country, as well as mass

- and rate

- based performance goals for each state or other relevant geographic area. The EPA agrees that section 49.11 of the TAR authorizes it to promulgat e a FIP, including a FIP implementing the final Emission Guidelines, if it determines that this is “necessary or appropriate” to protect air quality. The EPA did not propose such a finding in conjunction with the supplemental proposal and, therefore, is n ot finalizing one in conjunction with the final rule. Thus, the question of what such a FIP might entail is outside of the scope of this rulemaking. Please see sections VI and VII of the final rule preamble for a response to this comment.

Comment 9: Com menters state d that the Four Corners Power Plant owners' lease with the Navajo Nation provides that the Navajo Nation "will not directly or indirectly regulate or attempt to regulate the Company or the construction, maintenance or operation of the power pl ant and transmission system by the Company, or its rates, charges, operating practices, procedures, safety rules, or other policies or practices. . . ." Commenters explain ed that because the Navajo Nation is contractually foreclosed from regulating carbon emissions from the plant, it lacks the requisite authority and capability for TAS under the TAR.[See 49 C.F.R. section 49.7(a)(3), (4) (requiring as a prerequisite for CAA program approval a showing by the applicant tribe that it has the "authority to regu late air quality" and a "statement describing the capability of the applicant to administer effectively any Clean Air Act program for which the tribe is seeking approval") (emphasis added).] Commenters stated that a ccordingly, provided EPA determines it is necessary or appropriate to establish a CAA Section 111(d) plan establishing standards of performance for CO2 emissions from the Four Corners Power Plant, EPA itself must develop and implement such a plan and cannot utilize the TAS provisions. Commenters stated they fully support Navajo Nation involvement in the program and encourage EPA to closely coordinate with the Navajo Nation (with the participation of APS and SRP) to develop the federal CAA Section 111(d) plan for the Four Corners Power Plant and Na vajo Generating Station. Commenters add ed that EPA's support of active tribal involvement and recognition of the tribe's desires and concerns as they relate to the implementation of a CAA Section 111(d) plan on the Navajo Nation would be consistent with th e federal government's obligations as set forth in Executive Order 13175. [O. 13175, 65 Fed. Reg. 67249, 67249 (Nov. 6, 2000) (recognizing federal government's "unique legal relationship with Indian tribal governments" and right of Indian tribes to self

- go vernment and tribal sovereignty and self

- determination).]9 Response 9: To date, the Navajo Nation has not expressed a clear intent to seek TAS approval for purposes of administering a tribal implementation plan implementing the final Emission Guidelines, mu ch less submitted an application seeking such approval. As a result, the
commenter s ’ comment concerning any potential limitations on the tribe’s ability to obtain TAS are premature and thus outside the scope of the final rule. The EPA agrees that it has the authority to establish a federal plan implementing the final Emission Guidelines on the Navajo Nation if it determines that such a plan is “necessary or appropriate” to protect air quality. The EPA did not propose such a finding in conjunction with th e supplemental proposal and, therefore, is not finalizing one in conjunction with the final rule. The EPA will fully comply with Executive Order 13175 in conjunction with proposing any such finding, as well as in the development of any federal implementat ion plan following the finalization of any such finding should it make one in the future.

Comment 10: Commenters believe d EPA's identification of "Best System of Emission Reduction" for the coal plants located on the Navajo Nation is inadequate, arbitrary , and capricious. Commenters elaborate d (verbatim)

1 ) Building Block 1: EPA must mandate a 6% heat rate improvement at each operating unit at Four Corners Power Plant and NGS. Under building block 1 of the CPP, EPA has generally assumed that under coal pl ants can achieve a 6% heat rate improvement. At a minimum, EPA should stringently apply this requirement to all operating units at FCPP and NGS. EPA should also give full consideration to whether greater heat rate improvements can and should be achieved at the plants. EPA has already determined that implementation of all operational and maintenance best practices ("O&M") together with equipment upgrades identified in a 2009 study by the engineering firm Sargent & Lundy, can provide total heat rate improvem ents at coal

- fired power plants of up to 12%.[EPA, Carbon Pollution Emission Guidelines for Existing Stationary Sources: Electric Utility Generating Units, Proposed Rule, 79 Fed Reg. 34830, 34859 (June 18, 2014).] These best practices and equipment upgrade s include common

- sense measures such as turning off unneeded pumps at reduced loads, installation of digital control systems, more frequent tuning of existing control systems, and earlier like

- kind replacement of worn components. EPA also determined a high and sustained correlation between the implementation of equipment upgrades and actual heat rate performance data. [Id. at 34860] While [Commenters] understand that not all O&M best practices and equipment upgrades can be implemented at every plant, halvin g of the achievable emissions target is not justified or sufficiently explained. Requiring efficiency improvements through best maintenance practices and equipment replacements and upgrades at established intervals, rather than relying on spotty, infrequen t and voluntary implementation of such practices, yields consistent and sustained results and is cost effective, and EPA should include each of these measures in BSER. [Commenters] also hereby incorporate d the Sierra Club's comments concerning the appropri ate BSER target for heat rate improvements to power plants. Those comments demonstrate that a 6% heat rate improvement is adequately demonstrated based on better O&M practices alone. Further, the Sierra Club comments show that plant upgrades can reduce emi ssion rates by an additional 4%.[As the Sierra Club comments point out, EPA agreed with the assessment by the National Energy Technology Laboratory that equipment upgrades yielding 4% emission reductions are adequately demonstrated. EPA, however, discounte d this rate by half because of claimed10 uncertainty about how many plants had already performed the upgrades. As the Sierra Club points out, however, its own 50

- unit study and published industry reports demonstrate the relative infrequency of such upgrades to date.] These comments support and amplify the result of the Sargent & Lundy study and provide robust support for a 10% emission reduction target based on best O&M practices and equipment upgrades alone.

2 ) Building Block 2: EPA should consider re

- dispa tching Four Corners and NGS using Concentrated Solar Power. EPA's Proposal states that since there are no natural gas power plants on the Navajo Nation, Building Block 2 does not provide an opportunity to offset carbon emissions from Four Corners and NGS. However, EPA's analysis ignores that NGS and Four Corners are good candidates for offsetting carbon emissions using Concentrated Solar Power (CSP). The National Renewable Energy Laboratory found that NGS is a "good candidate" to hybridize the plant by augm enting it with solar generated steam because of its excellent solar resource and the proximity of flat vacant land.["Navajo Generating Station and Clean

- Energy Alternatives: Options for Renewables" Hurlburt, et al, National Renewable Energy Laboratory, Jun e, 2012, page 29, available at http://www.nrel.gov/docs/fy12osti/54706.pdf (last visited 12/15/14)] EPA should consider this option in Building Block 2.Although the possibility of solar augmentation and/or substitution onsite at NGS obviously requires more detailed study, it should not simply be dismissed out

- of

- hand without full consideration of its environmental costs and potential emissions

- reduction benefits.

3 ) Building Block 3: EPA's assessment of renewable energy potential on the Navajo Nation is

ar

bitrary and capricious. EPA determined that there is no non

- hydro utility scale renewable energy located on the Nation. EPA then concludes that there will be no such renewable energy development through 2029. EPA's analysis and methodology are arbitrary an d capricious. As noted above, the two large coal plants on the reservation do not provide power to the Navajo Nation. Instead, many homes and businesses on the reservation are served by small distributed generation resources. These resources cannot be igno red by EPA. The extent of these resources should be quantified and assumed to grow at a rate of at least 6%/year, the same percentage of growth EPA assumes for renewable energy growth in the rest of the western United States. [79 Fed. Reg. 65491] EPA's ana lysis also ignores that the Navajo Nation has some of the best solar resources in the entire county. The U.S. Department of Energy's National Renewable Energy Laboratory estimates that the solar energy resource on the Navajo Nation is capable of producing 1,235,874 megawatts of utility scale renewable energy

. NREL's report also notes that "[t]he Navajo Tribal Utility Authority (NTUA) is exploring the feasibility of large

- scale solar, including possible development on a reclaimed portion of the Black Mesa co al mining complex.[Id. at p. 14.] In contrast, EPA's Building Block 3 analysis assumes the Navajo Nation's utility scale solar potential is zero. The NREL report also states that the "Navajo nation has the largest and the most productive developable wind resource areas. NTUA is currently assessing major wind projects that, in all, could amount to more than 600 megawatts of wind power."[Id. at p. 17.] EPA's Building Block 3 analysis also ignores this wind resource. For the reasons stated above, EPA's failu re to accurately assess the true renewable energy potential of the Navajo Nation renders its proposal arbitrary and capricious.
Response 10: In the final rule, EPA establishes emission performance rates for the four EGU located in Indian country, including Four Corners Power Plant and Navajo Generating Station, and mass

- and rate

- based emission performance goals for each of the three affected areas of11 Indian country using the same methodology as it applied in determining the emission performance rates and s tate goals for EGU located outside of Indian country. With regard to the commenters’ concerns with building blocks 1

– 3, see EPA’s response to comments about the building blocks in section V of the preamble to the final rule.

Comment 11: Commenters stat e d that the supplemental proposal provides that "EPA must promulgate federal plan provisions if it determines that such provisions are necessary or appropriate, unless a tribe on whose lands an affected source (or sources) is located seeks and obtains auth ority from the EPA to establish a plan itself." 79 Fed. Reg. at 65,489, and under section 301(d)(4) of the Act and section 49.11 of the TAR, EPA is required to issue a federal plan if a tribe fails to submit a tribal implementation plan or EPA does not app rove the plan it submitted. Commenters note d that the statute does not authorize the "mid

- step" EPA has set forth in the supplemental proposal; i.e., EPA's determination that such provisions are necessary or appropriate, and in the final TAR, EPA confirmed that the "necessary or appropriate" language in section 49.11 of the TAR does not confer discretion to avoid promulgating a FIP. Commenters continue d , stating that in describing section 49.11, EPA explained that it "provides that the Agency will promulgat e a FIP to protect tribal air quality within a reasonable time if tribal efforts do not result in adoption and approval of tribal plans or programs, and thus, EPA will continue to be subject to the basic requirement to issue a FIP for affected tribal areas within some reasonable time." 63 Fed. Reg. at 7265. Commenters conclude d that EPA must therefore revise the final rule to provide that the agency will issue a federal plan for tribes that do not submit a plan or fail to submit a satisfactory plan.

Comment ers add ed that to effectively participate in a carbon trading program, however, the Navajo Nation government will need emission credits or allowances corresponding to its emission goal in order to trade emission credits, which would be established in a 111(d) plan, and for these reasons, the Navajo Nation believes it would be both appropriate and necessary for EPA to develop a 111(d) plan for the Navajo Nation (The Navajo Nation believes it may sell or trade carbon credits from regenerating resources, demand

- side en ergy efficiency measures and other new low

- and non

- emitting electricity generation" without a 111(d) plan. See 79 FR at 65496.) (The Navajo Nation also believes that a federal 111(d) plan could be developed on a multi

- jurisdictional basis in conjunction w ith nearby (or potentially other) states developing 111(d) state plans, if such a thing was appropriate. See 79 FR 65495.)

Commenters state d EPA must commit in the final rule to doing so for any area of Indian country containing designated facilities whic h elects not to submit a plan. Commenters stated EPA proposed CO2 new source performance rules for subpart Da and KKKK sources in January 2014, thereby triggering CO2 standards of performance for existing subpart Da and KKKK sources.[42 U.S.C. section 7411 (d)(1). "each State shall submit a plan which establishes standards of performance for any existing source" (emphasis added)] A plan (whether state, tribal

- as

- state, or Federal) establishing CO2 standards of performance for existing subpart Da and KKKK sou rces (designated facilities)

- wherever they are located

- is therefore not discretionary.[Id.] EPA is not authorized to exempt designated facilities on tribal lands from the requirement to reduce their CO2 emissions. [42 U.S.C. section 7601(d)(4); 40 C.F. R. section 49.11(a); 63 Fed. Reg. at 7,258.]12 Response 11: The EPA disagrees with the commenters’ interpretation of 40 CFR §49.11. A necessary first step to EPA having an obligation to promulgate a federal implementation plan is a finding by the Agency that such a plan is “necessary or appropriate” to protect ai r quality. Only after making such a finding is EPA required to promulgate a plan “without unreasonable delay”. The United States District Court of the Northern District of California specifically endorsed this interpretation in dismissing an unreasonable delay claim regarding the establishment of Regional Haze requirements for the Navajo Generating Station. See, In the final rule, the EPA is establishing emission performance rates for each of the four EGU located in Indian country and

mass

- and rate

- ba sed performance goals for each of the three affected areas of Indian country. It is not establishing emission goals for the Navajo Nation or the other two tribes with EGU located in their areas of Indian country. For a discussion of the potential for enti ties other than the owner/operator of EGU to generate ERC, see section VIII.K of the preamble to the final rule. Multi

- state plans are also addressed in section VIII.

Comment 12: Commenters state d in the proposed TAR, EPA explained that it did not pro pose to treat tribes in the same manner as states for purposes of implementation plan submittal deadlines under section 110(a)(1) of the Act (i.e. three years after the promulgation of a NAAQS, or such shorter period established by EPA) because tribes are not required to seek approval for the implementation of air programs. Commenters remark ed that the supplemental proposal does not set deadlines for submission of tribal implementation plans, and Section 49.4 of the regulations does not include section 111 or the state plan submission deadlines under section 111(d)'s Implementing Regulations (40 C.F.R. section 60.23), nor does the TAR discuss these provisions. Commenters believe d EPA's reasoning for excluding state plan submission deadlines under the NAAQS p rogram, as explained in the proposed TAR twenty years ago, should not apply to this proposal, and EPA should establish plan submission and implementation deadlines that are consistent with those set forth under the Clean Power Plan. Commenters add ed that e xpediting the TAS approval process should help to meet these deadlines, explaining that the TAR authorizes tribes to rely on prior TAS approvals as part of a new application for approval to implement a Clean Air Act program: "[w]here the applicant has prev iously received authorization for a Clean Air Act program or for any other EPA

- administered program, the applicant need only identify the prior authorization and provide the required information which has not been submitted in the previous application." 40 C.F.R. 49.7(a)(8). Commenters state d that the Navajo Nation received TAS approval to implement a Part 71 permit on Four Corners and Navajo Generating Station in 2006 (Jill E. Grant, Implementation of Clean Air Act Programs by American Indian Tribes, in Ju lie Domike and Alec Zacaroli (eds.), The Clean Air Act Handbook, ABA, 2011, at 684, fn. 87.), and this approval may help to expedite the process to submit an implementation plan, if the Nation decides to do so.
Response 12: Unless and until they seek and o btain TAS for that purpose, tribes with EGU located in their areas of Indian country are not required to submit proposed plans implementing the final Emission Guidelines. Since tribes are not required to submit proposed plans, they cannot be subject to th e timeframes for states to submit proposed plans specified in subpart B of 40 CFR part 60 as those timeframes are based on states being required to submit proposed state plans implementing the Emission Guidelines. Even in circumstances where a tribe sough t and EPA approved TAS for purposes of developing a TIP implementing the Emission Guidelines,13 consistent with 40 CFR §49.4, EPA does not believe that it would be appropriate to hold a tribe to those timeframes. Unless and until a tribe submits an applicat ion for approval of TAS for the purpose of developing and proposing to EPA for approval a tribal implementation plan (TIP) implementing the Emission Guidelines, any statement regarding whether EPA would include a deadline for submitting the TIP itself in g ranting TAS for that purpose would be purely speculative. 40 CFR §49.7(a)(8) speaks for itself and, thus, no response in that regard is needed.

Comment 13: Commenters state d that significant time will be required to site, plan, design, permit, and constr uct the new infrastructure required to meet the interim and final goals of a 111(d) program, noting that in Arizona, more than 80% of the land is owned by federal and state governments and tribal nations, and siting and permitting of electricity and gas tr ansmission infrastructure on federal or tribal land is subject to many processes and procedural requirements for compliance that can threaten timely completion of these projects. Commenters explain ed that there are several factors that complicate a utility 's ability to construct the new energy infrastructure needed to meet the requirements associated with the Proposed Rule. Commenters stated o ne of the biggest issues is the lengthy timelines associated with obtaining necessary environmental approvals to con struct and operate these facilities. (verbatim) Commenters stated
t he Western U.S. is unique in the amount of land owned by the federal government, state governments, and tribal nations. SRP is particularly concerned that the high proportion of federal, st ate, and tribal lands in Arizona

- more than 80%

- represents unique challenges to timely completion of new energy

- related projects. Commenters added that s pecifically, in Arizona, approximately 41% of land is owned by the federal government, almost 13% is controlled by the state, and about 27% belongs to tribal nations. In addition, commenters stated, 7,220 square miles within the state have been identified as critical habitat for threatened or endangered species listed under the Endangered Species Act. Co mmenters provided Figure 7

- 7 that shows the extensive amounts of federal and tribal lands within Arizona, including critical habitat designations. Commenters stated s iting and permitting of new energy infrastructure on federal land can take 10 years or mor e. In many cases, commenters stated, obtaining the permits necessary to construct a transmission line can take longer than constructing the line itself.
Response 13: This comment is outside of the scope of this rulemaking.

Comment 14: Commenters state d t he Ute Tribe supports the EPA's Proposed Rule but the proposed interim and final carbon dioxide emission performance goal for the Bonanza Power Plant could be improved. Commenter s state d the Proposed Rule should ensure that Deseret Power reduce emissions through controls and technological efficiencies rather than substituting energy from cleaner sources which would be an environmental injustice. Commenter s continue d
, stating that the Trib e strongly objects to Bonanza Power Plant's inclusion in a multi

- jurisdictional plan or in a cap

- and

- trade program, and allowing Deseret Power to participate in a multi

jurisdictional plan or cap

- and

- trade program would enable Deseret Power to achieve the bulk of its required emission reductions through payment rather than efficiency improvements. Commenter s believe d this defeats the purpose of the Proposed Rule because under such programs, the Bonanza Power Plant could continue to emit at its current level to the detriment of the Tribe, and Deseret Power should be accountable for its indiscriminate carbon emissions.14 Commenter s add ed that these emissions are exacerbating the current impacts of climate change on the Reservation, which will only increase in av erage temperature, increase droughts and erosion on the Reservation, and dry up the Tribe's reservoirs. Commenter s close d , stating that requiring strict standards does not make up for past violations of the Clean Air Act but there is more than enough time for Deseret Power to reduce carbon emissions by more than 6%, and through this Proposed Rule, EPA has the opportunity to enforce a final rule that will help the general welfare of the Ute Indian Tribe.
Response 14: In the final rule, EPA establishes emissi on performance rates for the four EGU located in Indian country, including the Bonanza Power Plant, and mass

- and rate

- based performance goals for each of the three affected areas of Indian country, including the Uintah

Ouray Reservation, using the same m ethodology it used in establishing rates and goals relating to EGU located outside of Indian country. While the EPA understands that the final rule, as implemented through an EPA

- approved tribal implementation plan or a promulgated federal implementation plan may impact tribes differently from the way it impacts states, EPA believes that it is important to establish rates and goals for EGU located in Indian country and to apply the same methodology regardless of the location of a particular EGU unless spec ific circumstances dictate otherwise. Unless the Ute Tribe seeks and obtains TAS status for the purpose of developing a tribal implementation plan implementing the Emission Guidelines and EPA subsequently approves such a plan, the application of the final Emission Guidelines to the Bonanza Power Plant would be achieved through a federal implementation plan should EPA determine that such a plan is “necessary or appropriate”. Any such federal implementation plan would generally track the final Emission Guid elines, possibly including some type of trading program. Unless and until the EPA determines that it is “necessary or appropriate” to establish a federal plan implementing the final Emission Guidelines on the Uintah and Ouray Reservation and promulgates s uch a plan it is not possible to know exactly how the final Emission Guidelines may ultimately affect the Bonanza Power Plant. The question of any alleged past violations of the Clean Air Act is outside the scope of the final rule. Please see section XII .F of the preamble to the final rule for a discussion of the potential interaction between the final rule and tribes and EPA’s efforts to inform tribes of and obtain their input concerning those interactions.

Comment 15: Commenters state d EPA should immed iately clarify that states can take credit for RE generation projects located on tribal lands to meet the states' emission reduction goals. ( As recognized in Executive Order 13175, "the United States has a unique legal relationship with Indian tribal gover nments as set forth in the Constitution of the United States, treaties, statutes, Executive Orders, and court decisions." E.O. 13175, 65 Fed. Reg. at 67249. Accordingly, every federal agency "shall have an accountable process to ensure meaningful and timel y input by tribal officials in the development of regulatory policies that have tribal implications." Id. at 67250. As EPA also recognizes, EPA shares "the federal government's trust responsibility, which derives from the historical relationship between th e federal government and Indian tribes..." EPA Policy on Consultation and Coordination with Indian Tribes (May 4, 2011). EPA's own Indian Policy states that EPA will "give special consideration to Tribal interests in making Agency policy, and [to] insure t he close involvement of Tribal Governments in making decisions and managing environmental programs affecting reservation Iands," 1984 Indian Policy at I, and15 "will assure that tribal concerns and interests are considered whenever EPA's actions and/or decis ions may affect reservation environments," Id. at 3.)

Commenters state d EPA should issue an immediate clarification that EPA has no interest in modifying the current renewable energy development marketplace and supports without conditions or questions mult i

- jurisdictional development of renewable energy resources and that such development can be contracted for use to meet compliance requirements for any state under the Proposed Rule for the States. Commenters stated t he current renewable energy marketplace (which allows for such multi

- jurisdictional development) should be left undisturbed.

Commenters support ed EPA including in its guideline a system that will allow the power plants that serve such areas to take advantage of the energy efficiency and renewab le energy opportunities available in states without affected power plants and recommend that EPA use the regional alternative approach as described in the October 30, 2014 NODA. Commenters also recommend ed that EPA include the potential renewable energy fr om such areas in its determination of the regional potential for renewable energy, which would provide for that potential to be included in the targets of states in the region.

Commenters state d that if EPA does not permit tribes and states to take credit for emission reductions outside of their boundaries, EPA would be restricting the free exchange of this new commodity. Commenters stated t here is also the potential that EPA could be "taking" the value of the credits from tribes and states, in violation of the Fifth Amendment of the U.S. Constitution.

Response 15: See section VIII. K of the preamble to the final rule for a discussion of the ability of entities other than the owners/operators of EGU to generate ERC under a rate

- based state plan.

Comment 16: Commenters stated they do not believe as a matter of policy that RE generating resources must be located in a state to offset CO2 emissions for that state's 111(d) plan. Also,

c ommenters remark ed that commerce across state lines is decidedly a federal res ponsibility, and accordingly, EPA must take care to ensure that its Proposed Rule will not unduly burden interstate energy transactions and commerce. However, commenters stated, such an outcome would result if EPA does not permit Tribes and states to take credit for emission reductions from RE generating resources located outside their boundaries.
Response 16: As further explained in Sec. VIII of the preamble, eligible measures that could be used to adjust a CO2 emission rate under a rate

- based state plan which are located in a state with

a mass

- based plan are restricted from being counted under another state’s rate

- based plan. An exception is made for RE measures that occur in such mass

- based states, because of its unique role in BSER. RE measures must mee t additional eligibility criteria, further explained in Sec. VIII, in order to be used to adjust the CO2 emission rate of an affected EGU in a state with a
rate

- based plan. This exception only applies to RE, other non

- BSER emission reduction measures locat ed in mass

- based states, including demand

- side EE, are restricted from ERC issuance in rate

- based states.16 Comment 17: Commenters state d EPA should require that any state or states that seek to include energy efficiency gains ( in the context of multi

- jurisdictional plans ) should include the potential savings in their targets. Commenters add ed that EPA could also determine that a target adjustment might not be necessary if the potential change in the targets is small enough, as it might be from ar eas with low energy consumption.
Response 17: See section VIII. of the preamble to the final rule for a full discussion of the how states might structure their state plans to account for energy efficiency gains.

Comment 18: Commenters state d EPA addresses areas without affected EGUs, including Vermont and the District of Columbia, and those areas without affected EGUs have expressed interest in participating in multi

- jurisdictional (or state) plans. Commenters state d these areas also may consume e nergy produced elsewhere and could contribute to meeting a multijurisdictional (or state) CO2 goal with its RE or EE capabilities. Commenters add ed that EPA requested methodologies for including the RE and EE potential from these areas in crediting goals i n other areas. [79 FR 65496] Commenters stated it is inappropriate for U.S. EPA to propose a rule that clearly does not identify that portions of the proposal will also impact states covered under the June 18, 2014 proposal. Commenters believe d any proposa l that requests comments on alternatives for any state subject to the June 18, 2014 proposal should have been clearly identified as such.
Response 18: As explained in its November 4, 2014 Supplemental Proposed Rulemaking (79 FR 65481), the EPA based its supplemental proposal on the analytical approach of the June 18, 2014, proposal, and this preamble adopted and relied on all of the information in that proposal, including the background information, explanations, analyses, alternatives, solicitations of c omment, etc. EPA also solivited comment on whether jurisdictions

— including any states, territories and areas of Indian country

— without existing fossil fuel

- fired EGUs subject to this rule can partner with jurisdictions that are subject to the June 14, 201 4 proposal. Therefpre, the EPA clearly identified its solicitation of comment regarding whether areas without affected EGUs may partner with states with affected EGUs under the June 14, 2018 proposal.

Comment 19: Commenters state d that EPA proposed a su pplemental rule to address existing EGUs on tribal nation lands and U.S. territories ("the supplemental proposal"), which were not covered under the CPP proper. Commenters believe d covering these EGUs is essential, since they emit significant quantities of CO2 and must not be granted a loophole to avoid regulation. Commenters argue d that the supplemental proposal must be strengthened, however, because it does not require CO2 emissions reductions from these EGUs that are achievable through application of the best system of emission reduction.
Response 19: In the final rule, EPA establishes emission performance rates for the four EGU located in Indian country and mass

- and rate

- based performance goals for each of the three affected areas of Indian country usi ng the same methodology (the application of BSER) it used in establishing rates and goals relating to EGU located outside of Indian country. Please see sections VI. and VII. for a detailed discussion of how EPA derived the emission performance rates and th e mass

- and rate

- based performance goals, respectively.17 Comment 20: Commenters have concerns with EPA's overall framework for establishing the "best system of emission reductions" (see UNS Comments); however, c ommenters believe d that EPA should be consist ent in its application of the framework as it applies to states, U.S. territories and areas of Indian country.
Response 20: In the final rule, EPA establishes emission performance rates for the four EGU located in Indian country and mass

- and rate

- based p erformance goals for each of the three affected areas of Indian country using the same methodology (the application of BSER) it used in establishing rates and goals relating to EGU located outside of Indian country. Please see sections VI. and VII. of the preamble to the final rule for a detailed discussion of how EPA derived the emission performance rates and the mass

- and rate

- based performance goals, respectively.

Comment 21: Commenters state d that tribes should not be required to participate in 111(d) plans, including multi

- jurisdictional plans, for RE generating facilities located on tribal lands to count toward a state carbon emission reduction goal. In the event that EPA does not provide a n immediate clarification, Commenter s believe d EPA should still explain in the Final Rule that states and tribes do not have to enter into multi

- jurisdictional plans in order for states to take credit for RE projects and RE developed on tribal lands to mee t that state's CO2 emission reductions. Commenters sa id EPA must clarify in the Final Rule, if not sooner, that there are no such prerequisites as it relates to RE development, and EPA should not be forcing states and tribes to enter into potentially costl y and unnecessary multi

- jurisdictional plans to obtain the level of coordination that they have long enjoyed prior to EPA's Proposed Rule.(A major obstacle of the developing a multi

- jurisdictional plan is time. Further delays in allowing tribal lands to be used to develop renewable energy is at a minimum harmful, but could also be considered arbitrary and discriminatory.) Another important concern for tribes raised by the

c ommenters relate to the additional obligations imposed under the Tribal Authority Rul e. That is, commenters stated, Tribes must first seek treatment as a state before they may even submit a 111(d) plan, in addition to negotiating with nearby states to participate in a multi

- jurisdictional plan. In the absence of a tribal 111(d) plan, EPA may, but will not necessarily, issue a federal plan covering that area of Indian Country. Commenters stated e ither one of these options creates uncertainty and delay, hereby hindering transactions between Tribes, states, EGUs, and/or utilities to promote r enewable energy generation and the use of the energy and/or the RECs to address a state's CO2 emission reductions plan. Therefore, c ommenter s conclude d , there should be no requirement that a tribe must have a 111(d) plan for emission reductions from renewa ble energy generating facilities located on tribal lands to count toward a state's carbon reduction goal.

Commenters state d nothing in the Clean Air Act expressly authorizes any Tribe, or the EPA acting under its delegated authority on behalf of the Tribe, to regulate or enter into multi

jurisdictional arrangements that would regulate activity beyond the boundary of its own Reservation. Commenters believe d that the authority of the Tribe to regulate matters external to its own Tribal affairs within its own lands does not extend to multi

- jurisdictional arrangements with states or other authorities (the jurisdictional reach and authority of which do not match that18 of the Tribe) to regulate either the air emissions from the Bonanza Unit 1 nor the activities "be yond the fence" involving non

- tribal member businesses. Commenters cite d the Supreme Court has described the extremely limited nature of a Tribe's reach with respect to engaging in regulatory matters outside its own boundary: "The ownership status of the l and . . . is only one factor to consider in determining whether regulation of the activities of nonmembers is 'necessary to protect tribal self

- government or to control internal relations.' I t may sometimes be a dispositive factor. Hitherto, the absence of tribal ownership has been virtually conclusive of the absence of tribal jurisdiction; with one minor exception we have never upheld under Montana the extension of tribal civil authority over nonmembers on non

- Indian land."[Nevada v Hicks, 533 U.S. 353 (20 01)] Commenters state d there is no jurisdictional alchemy by which the limited authority granted under the Clean Air Act to allow the Tribe to regulate specified air emissions from sources located within its own reservation boundaries to be extended and ex panded through arrangements with states (whose authority is more plenary in this regard). Commenters assert ed that the power to regulate emissions from the Bonanza Unit 1 cannot be delegated in whole or in any part to other authorities under the Act. Comme nters stated t he EPA lacks authority under its delegated Indian Country jurisdiction, for example, to promulgate a plan that would effectively mandate Bonanza Unit 1 to comply with regulatory regimes created by other authorities, states, or regional groups

.

Commenters state d that the authority of the Tribe to regulate matters external to its own Tribal affairs within its own lands does not extend to multi

- jurisdictional arrangements with states or other authorities (the jurisdictional reach and authority of which do not match that of the Tribe) to regulate either the activities of [ c ommenters] in serving communities beyond the boundaries of the Reservation, nor the activities and control measure "beyond the fence" involving non

tribal member businesses. Comm enters oppose d any attempt to expand the jurisdiction of EPA or the Tribe under the CAA to engage in regulatory processes in concert with state authorities, thereby rendering Bonanza Unit 1 subject to authority of region

- wide, multiple jurisdictions on bot h a state and federal level, and explains that this is neither expressly authorized under the Clean Air Act, nor is it inherent within the Tribe's power. Commenters state d that the dictates of Montana v. USA clearly prohibit an inference of broad police, r egulatory, and other governmental power over the activities of non

- tribal members such as Deseret and other non

tribe members doing business on fee and other private lands within the boundaries of the long

disputed Reservation. Commenters state d that just as EPA has no Clean Air Act authority to mandate renewable energy development or operational regulations on non

- tribal activities outside of tribal lands on the Reservation, EPA does not have Clean Air Act authority to mandate energy efficiency programs on the reservation. Moreover, commenters stated that in an area of the country where people lack basic services, it would seem that the last thing a federal agency should be doing is to limit people's access to badly needed electricity.

Commenters state d EPA has made no finding, and there is no support to conclude that emissions of carbon dioxide from Bonanza Unit 1 must be regulated in order to protect air resources strictly within the boundaries of the Reservation. Commenters stated r egulations aimed at cur bing global climate change effects beyond the Reservation cannot give rise to participation in multi

jurisdictional arrangements similar to treatment afforded to states under Section 111(d), and neither EPA nor the Tribe is authorized to engage in such fun ctions beyond the Reservation boundaries.19 Response 21: See section VIII. K of the preamble to the final rule for a discussion of the ability of entities other than the owners/operators of EGU to generate ERC under a rate

- based state plan and section VIII.L for a discussion of various approaches to multi

- jurisdictional plans. Otherwise, the comments are outside the scope of the final rule which establishes emission performance rates for the four EGU located in Indian country and mass

- and rate

- based perfor mance goals for each of the three affected areas of Indian country using the same methodology (the application of BSER) it used in establishing rates and goals relating to EGU located outside of Indian country and the framework for subsequent state, tribal and federal plans implementing the requirements and does not address implementation itself. EPA notes, however, that no entity participating in a multi

- jurisdictional plan will be exercising regulatory authority beyond its own borders. The EPA also note s that CAA section 301(d) constitutes a Congressional delegation of authority to Indian tribes to exercise Clean Air Act authority within the exterior boundaries of the tribe’s reservation regardless of the ownership status of any particular parcel of land

.

Comment 22: Commenters believe d it is important to assure that these efforts are of value in EPA's carbon pollution guidelines, and they therefore support EPA recognition that tribes, whether or not they have affected EGUs, should be able to participate in multi

- jurisdictional programs along with, and to the same extent as, states. Commenters state d that Renewable energy, energy efficiency, and other emission reduction programs available under EPA's proposal, whether located on or off tribal lands, shoul d be available to assist both tribes and states in achieving compliance as part of a state's or tribe's compliance plan or as part of a multi

jurisdictional program in which states or tribes or both participate

.

Commenters state d that in the past, regional planning organizations and other similar such partnerships have been a useful engagement mechanism for Tribes. Commenters support ed the option of multijurisdictional or independent plans for Tribes with facilities impacted by the rule. Regarding EPA's sol icitation for comment on "whether areas without affected EGUs may participate in multi

- jurisdictional plans", Commenters support ed engagement of all Tribal partners in the development of CO2 implementation plans and view this as a possible opportunity for Tribes to co

- create RE infrastructure and stimulate local job growth.

Commenters support ed EPA including in its guideline a system that will allow the power plants that serve such areas to take advantage of the energy efficiency and renewable energy opport unities available in states without affected power plants but it is also important that the targets reflect the potential compliance mechanisms that EPA determines to be available at reasonable cost.

Commenters state d EPA's reliance on the TAR in issuing i ts Proposal is arbitrary and capricious because the TAR only applies to tribes that may have, or acquire, the right to regulate stationary sources located on tribal lands. Commenters note d that since the Navajo Nation is legally incapable of regulating ca rbon emissions from the FCPP and NGS, EPA should rely on a regional market

- based multi

- approach described below for reducing GHG emissions from these

sources.20 Commenters also note d that the Navajo Nation is not an owner of the FCPP or NGS, and the energy generated by the FCPP and NGS are not used on the Navajo Nation. Instead, the owners of FCPP and NGS transmit this electricity to its customers in Arizona, New Mexico, Nevada, and e lsewhere. Commenters observe d that it is evident that the FCPP and NGS are owned by a combination of regional power companies that sell the power to its customer based in multiple states, and accordingly, EPA should use a multijurisdictional regional appro ach to reducing carbon emissions from these plants. Commenters believe d EPA should pursue a multijurisdictional regional approach that either requires prompt retirements of these remaining units or requires a greatly reduced dispatch from these units in or der to achieve the carbon reductions necessary to address climate change.
Response 22: See section VIII. K of the preamble to the final rule for a discussion of the ability of entities other than the owners/operators of EGU to generate ERC under a rate

- bas ed state plan and section VIII.L for a discussion of various approaches to multi

- jurisdictional plans. In the final rule, EPA establishes emission performance rates for the four EGU located in Indian country and mass

- and rate

- based performance goals for each of the three affected areas of Indian country using the same methodology (the application of BSER) it used in establishing rates and goals relating to EGU located outside of Indian country. The question of whether the Navajo Nation has the legal aut hority to establish a tribal implementation plan (TIP) regulating the activities of the FCPP and NGS is outside the scope of the final rule as it goes to implementation of the provisions of the final Emission Guidelines. The EPA will address this issue if and when the Navajo Nation submits a request for approval of TAS for the purpose of developing and implementing such a plan.

Comment 23: Commenters state d that the proposal encourages states to work together to achieve their respective CO2 emissions reductions, and while the c ommenters support this idea, it seems that states are reluctant to enter into agreements of this type without more information and gu idance from the EPA. Commenters encourage d the EPA to provide this assistance to states, and to any interested tribes, to facilitate this goal. Commenters believe d that, overall, tribes have been left out of this process; tribes need to be included from th e beginning stages of any multi

- state plans for energy cost and security, as well as environmental, reasons. Commenters suggest ed that one way of doing this would be to enlist the aid of the existing Regional Planning Organizations (RPO's). Commenters rema rk ed that the RPO's were very valuable in allowing states and tribes the opportunity to work together on Regional Haze concerns a number of years ago, and tribal inclusion is especially important given the amount of renewable energy that is currently produ ced in Indian County, which will only increase over the coming years.
Response 23: See section VIII.L of the preamble to the final rule for a discussion of various approaches to multi

- jurisdictional plans.

Comment 24: Commenters state d that EPA's "region al approach" to BSER and state target setting is preferred, for all state, tribal, and territorial emissions rate target development. Commenters state d (verbatim) EPA sought comment in the Notice of Data Availability21 ("NODA"), on a regional approach to ass essing the potential for CO2 emissions reduction under BSER building blocks 2, 3, and 4. Specifically, commenters stated EPA proposed that each state's renewable energy target be adjusted to reflect the potential for renewable energy across the multi

- state region in which the state is located. Commenters stated t he supplemental proposal reflects this approach, for building block 3, with respect to one option for CO2 emissions target setting for Indian country and territories. Commenters stated i t is CATF's position that this approach is relevant for assessing the degree to which CO2 emissions reductions due to reduced utilization of designated facilities can be achieved due to any of the non

- unit

- specific measures included in EPA's BSER. Commenters stated b e cause power plant CO2 does not produce adverse localized public health impacts, and because designated facilities under this rule are part of an interconnected electricity grid, the opportunity to enable reduced utilization of a designated facility can com e from any region or area that is connected to the area containing the designated facility. Commenters stated a ny of those resources should be evaluated in determining a state's emission rate target. Additionally, commenters stated if a mass

- based implemen tation system involving the exchange of allowances is used, see infra Section IV, jurisdictions (for example territories) that are not grid connected can potentially generate allowances. But for that to occur, commenters stated, some mechanism for assessin g the potential for emissions reductions and some way for formalizing that potential must also occur. For the CO2 reduction potential due to building block 2 redispatch, commenters stated, a regional BSER assessment makes the most
sense, as they pointed ou t in their December 2, 2014 comments. Commenters added that f or building blocks 3 and 4 this is equally true, as a regional approach reflects the interconnected nature of the grid, the designated facility's role in that grid, and allows accurate projection (avoiding double counting) of the CO2 reduction potential from renewable energy and other building block 3 and 4 resources. Commenters stated a regional approach also allows consideration of energy system reliability issues. Commenters stated, t herefore t he BSER analysis, and development of BSER based target CO2 emissions goals for all states, tribal areas and territories can and should be done on a regional basis. For example, commenters stated, while Indian country jurisdictions did not report having eit her natural gas or renewable energy generation, there is a great deal of potential in the regions in which Indian country is located. Commenters stated t he issues raised in the supplemental proposal with respect to Indian country therefore further underlin e the importance of a regional approach to calculating building blocks 2 and 3. At present, however, commenters stated, the CO2 emissions targets for Indian country with designated facilities do not reflect any redispatch because there are no natural gas c ombined cycle ("NGCC") units within these areas. Commenters stated that i n part that is a baseline problem

- while EPA proposes to apply the West region's 6 percent annual average renewable energy growth factor to Indian country, it proposes to apply that growth factor to Indian country's baseline renewable generation of zero, resulting in a building block 3 goal of zero. Alternatively, commenters stated, EPA is proposing to use a baseline of 0.37 percent consistent with the lowest baseline in the states. C ommenters said that is not enough

- to truly reflect a regional approach, the Agency should use as a baseline the regional baseline. Commenters stated
t hat would better yield tribal CO2 emissions targets reflecting the best system of emission reduction. Co mmenters stated CATF agrees that a regionalized approach to redispatch and renewable energy potential better reflects the interconnected nature of the grid and the opportunities available to states to reduce CO2 emissions from designated facilities. Commenters stated a regionalized approach to redispatch would address the concern that states, tribes, and territorial areas with coal

- fired designated facilities and limited available natural gas capacity22 have less stringent state goals than would be the case if the actual regional interconnected nature of the electricity system were reflected in the goal setting process. (27 SNPRM, 79 Fed. Reg. at 64,551. See generally Lucy McKenzie et al., Strengthening the Clean Power Plan: Three Key Opportunities for t he EPA, 27 ELEC. J. 1, 10

- 11 (Dec. 2014) (describing the advantages of regional implementation plans

. ) Commenters close d , stating this approach also allows the BSER to reflect the lower compliance costs and abatement measures available when the analysis is done on a regional basis.
Commenters support ed allowing the participation of multi

- jurisdictional, including areas without affected EGUs, as these areas will be able to contribute to CO2 emissions reductions through Building Block 3 and Building Block 4 p rograms. Commenters believe d that the expansion of participation coverage to multi

- state areas has the potential to increase overall program efficiency; however, any such system must be designed to ensure the absence of double counting, and to be able to v erify that purchased RECs do ultimately displace fossil fuel

- fired emissions in the United States. Commenters note d that if participation is expanded across national borders such that the EPA allows use of RECs generated outside of the United States for

co mpliance, Commenters recommend ed that the EPA require any such agreements be tied to delivery of the associated electricity into the United States for displacement of domestic fossil fuel

- fired generation.

Commenters state d that Tribal and federal lands ac ross the western states will impact state strategies to comply with the Proposal.

Commenter s state d EPA requests comment on whether areas without designated facilities, such as Vermont, the District of Columbia, certain U.S. territories and most areas of I ndian country, may participate in multi

- jurisdictional plans, noting that including these jurisdictions may expand the renewable energy and energy efficiency measures available to displace generation from designated facilities. [SNPRM, 79 Fed. Reg. at 65,4 96.] Commenters agree d that any clean energy measures within any jurisdiction (whether with or without designated facilities), should be eligible to contribute to CO2 emissions reductions at designated facilities elsewhere. Commenters stated t hat this po int is highlighted by the regional approach to the BSER offered by EPA. Commenters added t hese states, territories, and tribal lands can and should be part of the CO2 solution at designated facilities located elsewhere. Commenters stated t he integrated nat ure of the electricity grid, in which these jurisdictions do participate means that actions taken there do enable reduced utilization of designated facilities elsewhere on the grid. Commenters stated
t he question that remains is how CO2 emissions avoided t hrough low

- or zero

- carbon energy generation and energy efficiency measures in these jurisdictions could be used to adjust or credit CO2 emission rates in states covered by the CPP. [SNPRM, 79 Fed. Reg. at 65,496.] Commenters' position is that states, and tribal or territorial areas without designated facilities must make a submittal to certify that there are no designated facilities within the pertinent areas, and where relevant, must make clear the intention with respect to the future of any already retir ed designated facilities. Commenters stated t o the extent that EPA finalizes a regional approach to BSER based on the potential for building block 3 and 4 resources in these jurisdictions to reduce CO2 emissions from designated facilities, the jurisdiction s must submit plans or statements certifying or confirming the resources available or projected to reduce utilization of designated facilities in other states. And, c ommenters close d , should a state, tribe, or territorial area seek allowances under any mas s

- based allowance trading compliance system,23 there must be some basis for tracking the renewable or their low

- or zero

- carbon resources within their boundaries, which can be provided by such plan or certification.

Commenters recommend that EPA's final rule provide states and tribes with the flexibility necessary to work cooperatively to develop effective strategies for compliance. Commenters continue d , stating, in addition to allowing for the blending of individual state and tribal goals into a region, EPA should also consider allowing strategies that allow for cooperation on specific elements without requiring the combination of goals. Commenters sa id this flexibility will allow for states and tribes to work more collaboratively without mandating the comple xities of a full regional plan.

Response 24: In the final rule the EPA has finalized a number additional options fostering state cooperation without requiring a single multi

- state plan or joint goal. Sec. VIII of the preamble discusses the obligations of s tates that do not have affected EGUs. Sec. VIII also discusses how affected EGUs may use, and under what co n ditions, use ERCs and allowances from other states.

Comment 25: Commenters state d Clean Air Act section 111(d) requires EPA to "establish a procedure similar to that provided by section 7410 [and emissions guidelines][See 40 Fed. Reg. 53,340, 53,342 (Nov. 17, 1975). Commenters stated EPA properly interprets its CAA section 111(d) duty to approve timely and satisfactory plans as requiring promulgation of substantive criteria including emissions guidelines reflecting an appropriate best system of emission reduction. Commenters stated EPA is not re

- opening its interpretation of "satisfacto ry" in 42 U.S.C section 7411(d)(2)(A) in this proposal, 79 Fed. Reg. at 34,852, nor should it. Moreover, commenters added, CAA section 116 specifically prohibits states from adopting or enforcing emission standards under section 111 that are "less stringen t than the standard or limitation." [ 42 U.S.C. section 7416.]
Response 25: The EPA appreciates commenters’ support of its interpretation of its responsibility under CAA §111(d). The language in CAA §116 is self

- explanatory.

Comment 26: Commenters state d that in October 2014, multiple parties filed challenges to the EPA BART rule in the Ninth Circuit Court of Appeals, and while the c ommenters, which has intervened in these actions, support the United States in defending the rule, they also believe it

wou ld be prudent to allow adequate flexibility in the final rule to address the possibility that the Court overturns EPA's BART Rule. Commenters explain ed that by meeting its emissions goals at NGS through compliance with EPA's BART Rule, EPA expects that tri bes will not incur any additional costs under the Tribal EGU Rule. Commenters believe d this is a key reason for their support, as they strongly oppose any goal or requirement for Navajo Territory that could increase the cost of NGS energy and, by extension , CAP water delivery. Commenters continue d , stating that in 2004, they relinquished their long

- held Federal Indian reserved water rights in reliance upon the continued availability and delivery of CAP water, which would be made affordable through the use of NGS electricity, and revenue from the sale of excess NGS power funds the Lower Colorado River Basin Development Fund (LCRBDF), which subsidizes the fixed operation, maintenance, and replacement charges associated with the delivery of CAP water for24 Arizo na Indian tribes. Commenters explain ed that after incurring the costs associated with the BART Rule commitments, any further EPA

- mandated action at NGS could increase NGS's capital and operation and maintenance costs to the point of either closing the powe r plant or at least substantially increasing power costs, and in addition, the LCRBDF funds to subsidize the costs of delivering CAP water to the Community and to construct the facilities necessary to allow the Community to fully utilize the water allocate d to it in its water rights settlement would be diminished. Commenters believe d that a significant rise in water costs, or worse, the shutdown of NGS, would make it extremely difficult, if not impossible, for the them to pay for CAP water, a primary use of which is for Community agriculture. Commenters stated f arming the Community's land is of great importance for cultural, economic, and health reasons. Commenters stated i n reliance on the availability of affordable and dependable CAP water, the Community i s projecting to bring 146,330 acres of the Community's land back into agricultural production. Currently, 40,000 acres are being cultivated. Commenters explain ed that to deliver water throughout the Community, the Community is developing an expansive 2,400

- mile irrigation canal system under the Pima

- Maricopa Irrigation Project (P

- MIP), in reliance upon the delivery of affordable CAP water that was a central aspect of the Community's bargain in settling its water claims. Commenters believe d that compliance w ith the Tribal EGU Rule at NGS, unlike at the other power plants in Indian Country, affects not only the tribe where the plant is located, but many other tribes such as they who rely on NGS for delivery of federally

- guaranteed water, a trust resource under the Arizona Water Settlement Act (AWSA). For this reason, c ommenters request ed EPA must consider its trust obligations to, and consult with, them as this rulemaking proceeds. As trustee of the c ommenters' water rights, they contend ed that EPA cannot impos e obligations at NGS that limit, suppress or otherwise undermine the their right to receive and use its CAP water allocation guaranteed by the AWSA.[While the Community appreciates that the Tribal EGU Rule is not expected to impose additional costs at NGS, EPA must recognize that the BART Rule has, and will continue to have, significant cost implications for the Community. The Community supported the BART Rule because it was the best and only viable BART alternative under consideration at NGS, and it trigge red a key commitment by the United States to work with the Community to address the very real impacts of the proposed changes to NGS mandated by the BART Rule. The Community does not view the BART Rule as fully satisfying the United States' obligations to the Community given the significant cost that imposing BART at NGS will have on the Community. Thus, EPA's BART selection was the best first step in what will be an ongoing process to mitigate impacts on the Community.] [EPA has an express trust responsibi lity to protect the water rights that the AWSA provides to the Community. Section 204(a)(2) of the AWSA states: "the water rights and resources described in the Gila River Agreement shall be held in trust by the United States on behalf of the Community . . . ." The AWSA authorized, ratified and confirmed the Gila River Agreement, and therefore creates these water rights, which constitute a trust resource].
Response 26: The promulgation of the BART Rule for NGS and the final Clean Power Plan rule are two sep arate and distinct rulemakings. The EPA acknowledges that both rules may impact the cost of operating NGS which may in turn impact the cost of water under the CAP; however, the EPA believes that it is important to treat EGU located in areas of Indian coun try under the Clean Power Plan in essentially the same way that it treats EGU located outside of Indian country. As a result, in the final rule, EPA establishes emission performance rates for the four EGU located in Indian country and mass

- and rate

- base d performance goals for each of the three affected areas of Indian country using the same methodology (the application of BSER) it used25 in establishing rates and goals relating to EGU located outside of Indian country. At this time EPA has no way of knowin g precisely how the two rules will impact NGS as that will depend on which BART compliance option the owners/operators of NGS choose and on the structure of any implementation plan. Please see section XII.F of the preamble to the final rule for a discussi on of EPA’s interactions with various Indian tribes concerning the Clean Power Plan.

Comment 27: Commenters urge d EPA to redesign and repropose its treatment of the Uintah

Ouray Reservation and the Bonanza Station. Specifically, commenters stated that to the extent EPA has authority to adopt goals for the reservation and Bonanzas Unit One, those goals must reflect only cost

- effective, technically feasible heat rate improvements (HRI) that can be made at that unit. Commenters state d that adjustments must be made to the standards set forth under the Supplemental Proposal for the Uintah

- Ouray Reservation, with flexible and achievable accommodation to allow for Deseret and the Bonanza Unit's unique circumstances.
Response 27: I n the final rule, EPA establishes emission performance rates for the four EGU located in Indian country, including the Bonanza Station, and mass

- and rate

- based performance goals for each of the three affected areas of Indian country, including the Uintah

- Ouray Reservation, using the same methodology (the application of BSER) it used in establishing rates and goals relating to EGU located outside of Indian country. The question of how those provisions may ultimately be implemented is outside the scope of the final rule.

Comment 28: Com menters state d the Supplemental Proposal reflects additional emission reductions, beyond those the proposal posits under building block one for the Bonanza unit, for potential demand

- side efficiency improvements that could be achieved through programs invo lving end

- use consumers within the Reservation. Commenters explain ed that because no such improvements could be mandated or achieved on the Reservation, the Bonanza unit would be required to reduce carbon dioxide emissions even more than under building blo ck one for the Reservation to meet the goal that EPA has calculated (under blocks one and four) for the Reservation. Commenters state d (verbatim) “ that EPA's building block four proposal is flawed for the same reason that applying building block three to the Reservation would be flawed. Just because some states have been able to implement energy efficiency programs does not mean that a low

- income, sparsely populated Indian Reservation which lacks the management infrastructure that States have, could do the same. The record contains no information as to how the Tribe or EPA would go about attaining EPA's assumed reductions in electricity consumption. Nor does the record contain any evidence as to whether the Tribe would even have authority to implement energ y efficiency programs on the Reservation, particularly as to the vast majority of load located there, which consists of non

- tribal concerns operating on non

- tribal lands (BLM or fee lands) which lie within the exterior boundary of the historic Reservation. EPA's authority under the Clean Air Act to regulate activities on Indian Country derives solely from, and is co

- terminus with, the authority vested in the Tribe.["Because the EPA may administer a federal program only "in the shoes of a tribe or the shoes of [a] state...", it can exercise no more jurisdiction than could the tribe or state whose shoes it fills. Oklahoma Dept. Environmental Quality v. EPA, 740 F.3d 185 (D.C. Cir. 2014), quoting Michigan v. EPA, 268 F.3d at 1085.] That authority is limited with regards to activities of non

- tribal members such as [Commenters] and others operating on non

-26 tribal trust lands. In the seminal case of Montana v United States, 450 U.S. 544 (1981), the Supreme Court established the "general proposition that the inherent s overeign powers of an Indian tribe do not extend to the activities of nonmembers of the tribe" Id. With regard to non

tribal industrial electric load (oil, gas, etc.) operating on BLM lands or on their privately owned fee lands within the historic reservat ion boundaries, [Commenters] also believe that those end

users generally have no business or other relationships sufficient to extend tribal jurisdiction to regulate their non

- tribal activities.[Even if the non

- tribal businesses engaged in industrial activ ities on fee or other non

- tribal lands within the reservation boundaries have entered into some form of agreement with the tribe permitting entry onto tribal lands, Montana's consensual relationship exception requires that any regulation imposed by the Ind ian tribe have a nexus to the consensual activity itself. "A nonmember's consensual relationship in one area does not trigger tribal civil authority in another . . . . " Atkinson v Shirley, 532 U.S. 645 (2001).] The Supreme Court has directed that "the exe rcise of tribal power beyond what is necessary to protect tribal self

- government or to control internal relations is inconsistent with the dependent status of the tribes, and so cannot survive without express congressional delegation." Montana, 450 U.S.
at 544. The Supplemental Proposal goes well beyond the narrow delegated congressional authority to regulate air emissions at the source. The Proposal contemplates plans similar to those to be developed by states under the Proposed Rule (for state jurisdictio nal emission sources), including provisions to mandate, promote, and regulate energy efficiency reductions,

re

- dispatch decisions among and between electric generation resources, etc. These "beyond the fence" measures

- to the extent applied to any portion of the vast majority of electric load within the Reservation carried on by non

- tribal entities with non

- tribal counterparties, cannot be adopted nor enforced by either the Tribe nor by EPA acting in its role for the Tribe under the Clean Air Act. Although a Tribe may exercise a very limited civil jurisdiction to safeguard against injury to the welfare of tribal members, this authority is extremely limited, in the absence of express congressional authorization. Clearly, concerns over the global climate effe cts of carbon dioxide do not warrant and cannot justify expanded civil jurisdiction over [Commenters] and/or the Bonanza Unit 1. In order to support civil jurisdiction over conduct potentially affecting the health or welfare within the tribal lands, the co nduct in question "must do more than injure the tribe, it must 'imperil the subsistence of the tribal community.' ” Commenters have noted that 'th[e] elevated threshold for application of the second Montana exception suggests that tribal power must be neces sary to avert catastrophic consequences."[Plains Commerce Bank v Long Family Land & Cattle Co., 554 U.S. 316 (2008)]
Response 28: In the final rule, EPA establishes emission performance rates for the four EGU located in Indian country, including the Bonanz a Station and mass

- and rate

- based performance goals for each of the three affected areas of Indian country, including the Uintah

- Ouray Reservation, using the same methodology (the application of BSER) it used in establishing rates and goals relating to E GU located outside of Indian country. BSER as identified in the preamble to the final rule does not include Building Block 4. See, section V. of the preamble to the final rule for a detailed discussion of what constitutes BSER. The remainder of the comm ent addresses issues that are beyond the scope of the final rule which, as presented above, establishes performance rates and mass

- and rate

- based goals and also establishes provisions governing the development and approval of state, tribal and federal pla ns implementing the final Emission Guidelines, but does not address the specific mechanism for implementing the Emission Guidelines in a particular area. The EPA does note, however, that CAA section 301(d) constitutes a Congressional delegation of authori ty to Indian tribes to exercise Clean Air Act27 authority over all areas within the exterior boundaries of a tribe’s reservation regardless of the ownership status of any particular parcel of land.

Comment 29: Commenters state d that EPA's application of building block four to the Uintah

Ouray Reservation contains a basic methodological flaw. Commenters explain ed that in what EPA calls "Step 5" for developing the proposed carbon dioxide standard on the Uintah

- Ouray, EPA uses the figure of 470,007 MWh to represent a projection of sales of electricity within the Uintah

- Ouray reservation.["2012 Total MWh (+7.51% T&D losses)" identified in Appendix 1 to the Technical Support Document to the Supplemental Proposal.] Commenters stated th ey do not understand how EPA calculated or derived this figure, explaining that unlike the figures denoted for other Indian and US Territory resources, this figure, which is intended to represent a projection of sales of electricity within the Uintah

- Ouray reservation appears simply as a plugged figure. Commenters sa id EPA admits that the Ute Tribe did not report any quantity of electricity sales in its submissions to EIA, see Table 2 to Technical Support Document, p. 3. Commenters continue d (verbatim) “ the Supplemental Proposal reflects a reduction from the historic 2012 baseline emission rate for Bonanza Unit 1 to estimate and reflect potential EER efficiency improvements that could be achieved through programs involving end

- use consumers within the Reserv ation. EPA's only reference provided for how/where it derived the figure of 470,007 MWh of "2012 Total MWh" for the UTE (Uintah

- Ouray) resource is as follows: "Projected annual electricity sales by region are included in the supporting technical files to t his TSD.." See TSD p. 3. As previously noted, unlike the amounts of sales listed for each of the other tribal facilities and U.S. Territories, the stated (assumed) figure of 470,007 MWh for the Ute tribal resource is merely a plugged amount entered without explanation, support, or citation to any reference. EPA either has made an uneducated "guess" what the amount of retail load is on the Ute tribal land, or it has relied on some information/data source that is not specified and, to [Commenters'] knowledge not trustworthy and inaccurate. The EPA's figure of 470,007 MWh grossly overstates potential, actual, or forecasted sales of electricity on areas within the Uintah

- Ouray reservation. [Commenters] Power is the sole provider of wholesale electric power and e nergy to Moon Lake Electric Association ("MLEA"), the distribution utility which provides retail service to customers located within the Ute tribal lands. Although there are no detailed data gathered that differentiates between electricity consumed within the Ute tribal land and power used on adjoining/adjacent communities, [Commenters] obtained data from MLEA concerning total 2012 sales within areas located on and close to the Reservation. ” Commenters presented Figure 2 (titled: “Retail Sales by MLEA on ar eas within and adjacent to Uintah Ouray Reservation (Calendar Year 2012)” which provided the retail MWh sales for all area south of Hwy 40 (114, 443 MWh) and tribal lands north of Hwy 40 (14,580 MWh)

. Commenters stated t he total, aggregate combined wholesa le power load within the areas listed in Figure 3 include some electric load that is used outside the Reservation, but furnished through shared distribution facilities extending partially into the Reservation. Commenters stated t he retail sales figures the refore very likely overstate actual sales within the Reservation. Commenters stated a s Figure 3 shows, retail sales within the Reservation do not approach 470,007 MWh in a single year. For the year 2012, the total annual metered load at these distribution facilities totaled 129,023 MWh. Although there is no basis for EPA to apply building block four to the Reservation, to the extent EPA does so, it must lower the "Step 5" adjustment for the Ute tribal lands by reducing its 470,007 MWh figure found in Append ix 1 and Appendix 2 to the Supplemental Proposal TSD.28 [Commenter s ] urge d EPA to lower the "Step 5" adjustment for the Ute tribal lands by reducing its 470,007 MWh figure found in Appendix 1 and Appendix 2 to the Supplemental Proposal TSD to a more realisti c figure of 130,000 MWh. [Commenters] believe d the 130,000 MWh to still be artificially too high, and repeats its concerns with respect to the limited nature of authority that the Tribe (and therefore EPA) may exercise over the vast majority of these sales

. Commenters stated that b y far the majority

- probably 90 % of electric use on tribal land

- involves non

- tribal members, primarily oil and gas development by entities that neither engage in business with the Tribe or its members, nor would be subject to Tribal regulation concerning the operation, configuration, or nature of business undertaken and equipment operated within the exterior boundaries of the Reservation.
Response 29: In the final rule, EPA establishes emission performance rates for the four EG U located in Indian country, including the Bonanza Station and mass

- and rate

- based goals for each of the three affected areas of Indian country, including the Uintah

- Ouray Reservation, using the same methodology (the application of BSER) it used in estab lishing rates and goals relating to EGU located outside of Indian country. BSER as identified in the preamble to the final rule does not include Building Block 4. See, section V. of the preamble to the final rule for a detailed discussion of what constit utes BSER. See sections VI. And VII. of the preamble to the final rule for a discussion of how EPA derived the emission performance rates and the mass

- and rate

based performance goals, respectively.

Comment 30: Commenters state d that the Proposed Rule a s well as the Supplemental Proposal establishes a compliance implementation schedule from 2020 through 2029, with full compliance required by 2029. Commenters believe d the EPA should eliminate the Interim Goal for the Ute jurisdiction for the following rea sons (verbatim): “ The Ute Tribe of the Uintah

- Ouray Reservation is a very small entity with extremely limited resources. The Tribe does not have and has not applied for Clean Air Act regulatory authority, and has little in place as infrastructure to suppor t its own environmental regulatory administrative authority. EPA Region 8 has issued all federal permits pertaining to Clean Air Act in the past. It is unlikely that the Tribe will have sufficient time and resources to develop a carbon dioxide plan; EPA wi ll most likely be called upon to do so. EPA, however, cannot, as it apparently assumes, simply step in and impose a Section 111(d) plan for the reservation. EPA has no independent jurisdiction over clean air matters in tribal lands; its only source of such authority is purely derivative of authority vested in the Tribe.[Oklahoma Dept. Environmental Quality v. EPA, 740 F.3d 185 (D.C. Cir. 2014).] ” Commenters stated the Tribe has more limited authority over certain non

- tribal activities than a state. For inst ance, [Commenters] have previously noted that implementing building block four requirements within the Reservation boundaries would not only be a dauntingly complex process, it would be beyond the power or authority of the Tribe in all events, at least wit h respect to efficiency programs and/or renewable resource requirements intended to reach non

- tribal concerns engaged in non

- tribal activity on fee lands or other non

- tribal lands

-- the vast majority of electric end users within the Reservation. Commenter s stated t he Tribe has no authority to dictate energy efficiency measures that multi

- state oil and gas operators must undertake where such operators have no business dealings with the Tribe or tribal members. Commenters stated EPA has never undertaken the necessary rulemaking, notice and/or comment with respect to any assertion under the Clean Air Act concerning the status of particular parcels of property within29 the Reservation boundary. Commenters stated EPA issued the Supple mental Proposal without first undertaking proposed rulemaking, notice, or fact finding necessary. Commenters stated i t is not practical that the Supplemental Proposal could be finalized, the Tribe given necessary time to analyze it, and EPA create a propos ed compliance plan, and then [Commenter s ] to challenge the jurisdictional basis during the remaining period before the Interim Period would begin. [As a

non

- party to the Ute Tribe litigation which led to the Tenth Circuit's 1985 en banc decision known as " Ute III", 773 F.2d 1087, [Commenters] would be entitled to an opportunity to raise the issue of the subsequent U.S. Supreme Court statutory interpretation found in the Hagen decision, 510 U.S. 399 (1995), which was not, nor could not have been, presented b y the parties to the litigation that culminated ten years earlier. Commenters stated a s a non

- party to the litigation, EPA and/or the United States would have difficulty asserting issue preclusion against another non

- litigant. Moreover, the subsequent Supr eme Court precedent in Hagen has not been addressed by the courts in the context of a lawsuit commenced after the final mandate of the Ute III case involving facts specifically pertaining to Indian country jurisdiction within the Uncompahgre portion of the Uintah and Ouray Reservation. Commenters stated t he 10th Circuit has subsequently recognized the error in its own statutory interpretation in Ute III, see "Ute Tribe V", 114 F.3d 1513 (10th Cir. 1997), and presumably would now decide that the portion of t he Reservation once known as the Uncompahgre, on which Bonanza is located, has been diminished or disestablished. Commenters stated t he appellate court was prevented from altering its earlier mandate only by virtue of the fact that no present case or contr oversy was presented to the Court in Hagen concerning the Uncompahgre portion of the Reservation.][EPA does not address the jurisdiction of the Tribe over non

- tribal activities on non

- tribal lands. The inquiry as to what constitutes "Indian Country" for pu rposes of CAA jurisdiction is the same as the definition set forth in 18 U.S.C. section 1151. That statute provides that property within the exterior boundary of an Indian Reservation is not necessarily "Indian Country" unless it also is "under the jurisdi ction of the United States Government." Id. Most of the non

- tribal electric load (and the large majority of the total load) within the Reservation takes place on BLM lands. However, BLM does not actively manage those lands for the benefit of the Tribe; rat her, the BLM's purpose for "actively control[ing] the lands in question," is definitively not for the purpose of "effectively acting as a guardian for the Indian," see Hydro Resources, Inc. v. U.S. E.P.A.608 F.3d 1131, 1149 (10th Cir. 2010). As a result, t he Indian Country superintendence requirement is not necessarily satisfied with respect to those lands. Correspondingly, that also means that BLM lands are not all "under the jurisdiction of the United States Government," as is necessary for Indian Country status. EPA has made no determination as to the status of specific parcels of land within the Reservation that are administered by the BLM and with respect to which the BLM is not "effectively acting as a guardian for the Indian," see Hydro Resources, 608 F.3d at 1149, and whether those parcels can be within Indian Country as defined by section 1151.8 These BLM lands stand in stark contrast to other types of land located within the exterior boundaries of the historic Reservation to which Congress stated: " Title to any lands and rights acquired hereunder shall be taken in the name of the United States in trust for the Ute Indian Tribe of the Uintah and Ouray Reservation, Utah, and such lands or rights shall be exempt from State or local taxation." 62 Stat. 7 8 (emphasis added). Those tribal lands held in trust clearly fall "under the jurisdiction of the United States Government."]
Response 30: The comments are outside the scope of the final rule as they address the implementation of the final Emission Guidelin es. The final rule establishes emission performance rates for individual EGU and mass

- and rate

- based performance goals for relevant30 geographic areas and establishes requirements for state, tribal and federal implementation plans, but does not address the specific mechanism for implementing the Emission Guidelines in a particular area. The EPA notes, however, that CAA section 301(d) constitutes a Congressional delegation of authority to Indian tribes to exercise Clean Air Act authority over all areas of t he tribe’s reservation regardless of the ownership status of any particular parcel of land.

Comment 31: Commenters state d Section 111(d) prohibits EPA from adopting emission guidelines for existing sources from a source category when the Agency has alread y regulated that source category under section 112. CAA section 111(d)(1)(A)(i). Commenters elaborate d that EPA listed coal

- and oil

- fired EGUs as a "source category" under section 112 in 2000, 65 Fed. Reg. 79,825, 79,826, 79,831 (Dec. 20, 2000), and regul ated emissions from these sources in 2012 under the MATS rule, 77 Fed. Reg. 9304 (Feb. 16, 2012), and because EPA has already promulgated a national emission standard for existing coal

- fired power plants under section 112, it may not promulgate the emissio n guidelines it has proposed here.
Response 31: Please see section IV. of the preamble to the final rule for the EPA’s response to this comment.

Comment 32: Commenters state d that the supplemental proposal would violate c ommenters' rights under the Fifth Amendment as an uncompensated taking of property will result. Commenters explain ed that if, as a result of the Supplemental Proposal, a tribal or EPA sponsored plan were promulgated which makes it impossible for c ommenters to comply with its debt obligatio ns, and/or which forces c ommenter s to pay fees, purchase credits, or forego substantial generation from Bonanza Unit 1 in order to comply and meet the goals set forth in the Supplemental Proposal, the severe curtailment and/or imposition of unrecoverable a nd economically unviable fees will result in a partial taking. Commenters remark s assert ed that the Fifth Amendment of the Constitution prohibits the taking of "private property . . . without just compensation." U.S. CONST. amend. V. The Supreme Court long ago extended the takings concept to regulation that goes too far: "The general rule . . . is that while property may be regulated to a certain extent, if regulation goes too far it will be recognized as a taking." Pa. Coal Co. v. Mahon, 260 U.S. 393, 415 (1922). Commenters stated r egulations that "completely deprive an owner of 'all economically beneficial use' of her property" constitute a per se taking. Lingle v. Chevron U.S.A. Inc., 544 U.S. 528, 538 (2005) (quoting Lucas v. S.C. Coastal Council, 505 U. S. 1003, 1019 (1992)). Commenters argue d that partial takings must also be compensated. Commenters added s uch a partial taking exists where certain factors can be found to suggest that regulation goes too far, specifically, (1) the character of the governm ent action; (2) the economic impact of the regulation on the claimant; and (3) the extent to which the regulation interferes with distinct investment

- backed expectations. Penn Cent., 438 U.S. at 124. Commenters state d that severely limiting the capacity or remaining useful life of Bonanza Unit 1 will constitute a taking giving rise to constitutional obligation to compensate Commenters. Commenters stated
t he Penn Central factors are "designed to allow 'careful examination and weighing of all the relevant cir cumstances.'" Tahoe

- Sierra Pres. Council, Inc. v. Tahoe Reg'l Planning Agency, 535 U.S. 302, 322 (2002) (quoting Palazzolo v. Rhode Island, 533 U.S. 606, 636 (2001) (O'Connor, J., concurring)). Commenters add ed that the factors focus "directly upon the sev erity of the31 burden that government imposes upon private property rights." Lingle, 544 U.S. at 539. Commenters stated i f as a result of a tribal or EPA sponsored plan as contemplated by the Supplemental Proposal, c ommenters are forced to significantly curt ail the operations of Bonanza Unit 1, c ommenters and the economically challenged rural member consumers who depend on the unit for sustained energy needs in their communities are entitled to due compensation from the regulating authority enacting or promulgating such plan.
Response 32: The comments are outside the scope of the final rule as they address possible consequences of the implementation of the final Emission Guidelines. The final rule establishes emission performance rates for individual EG U and mass

- and rate

- based performance goals for relevant geographic areas and establishes requirements for state, tribal and federal implementation plans, but does not address the specific mechanism for implementing the Emission Guidelines in a particular area.

Comment 33: Commenters state d the Supplemental Proposal attempts to claim for EPA, acting in its derivative role on behalf of the Tribe, broad authority to establish standards and promulgate plan(s) that necessarily implicate and intrude on strictl y State jurisdictional matters involving

c ommenters' electric utility resource siting, permitting, planning, dispatch and utilization, etc. Commenters believe d that by far the majority of consumers served by their Bonanza Unit 1 live in communities far rem oved from the Reservation, and the orderly regulation of utility operations within the State of Utah and surrounding states where these rural consumers work, carry on business and farming, invest in community and economic development, and rely on c ommenter s' stable supply of electric power falls squarely within the purview of the States to regulate. Commenters believe d the Supplemental Proposal would revise and invade authority and oversight of the electric utility industry as established by state law; allo wing the Tribe (or EPA acting in its limited role for the Tribe under the CAA) to exercise significant utility regulatory command and control through a plan enforced and administered entirely differently than the traditional utility governance as created a nd clearly delineated by Congress and the Tenth Amendment.
Response 33: The comment is outside the scope of the final rule as it addresses the implementation of the final Emission Guidelines. The final rule establishes emission performance rates for indiv idual EGU and mass

- and rate

- based performance goals for relevant geographic areas and establishes requirements for state, tribal and federal implementation plans, but does not address the specific mechanism for implementing the Emission Guidelines in a pa rticular area.

Comment 34: Commenters state d the Section 111(d) rule proposal seeks to require federal regulation of even a greater portion of, and additional aspects of, the total electricity generation and distribution market. Commenters argue d that th is decision clearly indicates that the federal government, whether through FERC or U.S. EPA, does not have unbounded authority to regulate electric markets that traditionally have been left to the states.32 Response 34: Please see sections III. And IV. of th e preamble to the final rule for the EPA’s response to this comment. Further, we disagree that we are expanding our authority to include wholesale energy market regulation or state retail regulation. Our emission guidelines simply reflect an achievable emi ssions limit through the application of the BSER and do not in themselves require states or sources to implement the BSER. Moreover, these emission guidelines provide states with the flexibility to establish, implement, and enforce standards of performance and do not intrude on the regulatory domain of FERC or the states nor is it further expanding federal regulation over electricity generation and distribution. It cannot be said that because environmental requirements may have an effect on the wholesale en ergy markets or retail markets that the EPA is therefore intruding into energy regulation. Certainly, in the legislative history of the 1970 CAA Amendments, Congress expressly identified power plants as a priority source category for regulation under CAA s ection 111.

Comment 35: Commenters state d the Supplemental Proposal does not specify nor address how the statutory provision of 111(d) concerning the determination and consideration of the Bonanza Unit's "Remaining Useful Life" would be addressed, and EP A does not specify the authority nor does it identify the process or procedure that would be used to ensure that any proposed standard upheld and protected the "state's" role in making such a determination, and the flexibility to take the same into conside ration. Commenters add ed that EPA does not address the authority of either EPA or the Tribe to make such a determination or to incorporate plan provisions to protect the remaining useful life. Commenters state d that the Proposed Rule appears to justify sig nificantly curtailing, if not foregoing, state discretion to consider remaining useful life and other factors in developing a state plan. Proposed Rule. at 34,925

- 26 Commenters stated EPA first asserts that deviating from the Proposed Guidelines based on r emaining useful life or other factors is simply unnecessary given the flexibility EPA has designed into the Proposed Guidelines. Id. at 34,925. Commenters stated EPA points out that, with respect to states where multiple units are affected, states can adju st requirements applicable to specific EGUs to accommodate their needs and make up for any adjustments to apply less stringent requirements to one EGU by making requirements for other EGUs (or other entities) more stringent. Commenters argue d that this fir st position fails in the case of the Uintah

- Ouray reservation and the Supplemental Proposal, explaining that EPA must accommodate c ommenter s by adjusting the Supplemental Proposal in regards to this requirement, either by engaging c ommenters directly to ar rive at suitable flexible adjustments to any proposed requirement, or by altering the Supplemental Proposal to describe with particularity a workable process and procedure whereby the very adjustments EPA points to for accommodating specific EGU's (in this case the only EGU) within the Uintah

- Ouray. Commenters continue d , stating that EPA argues that it can alter the state's authority to take remaining useful life into account and to deviate from or adjust EPA's emission guideline because the emission guidel ine the Agency has proposed differs so dramatically from the usual "presumptive standard of performance that must be fully and directly implemented by each individual existing source within a specified source category." 79 Fed. Reg. at 34,925. Commenters a ssert ed that this statement, even if valid for states with multiple operating units, also misses the mark for the single

- unit operating within the Uintah

- Ouray, explaining that the proposed performance standard for the Uintah

- Ouray set forth in the Supplem ental Proposal, without significant modification to the Proposal, indeed would and does act precisely as a33 'presumptive standard of performance that must be fully

- implemented by [the] individual existing source." Commenters sa id that source is the Bonanz a Unit. Commenters conclude d
, stating the Supplemental Proposal must be significantly modified to address and include much more flexible and case

- specific consideration.
Response 35: Please see section III. And IV. of the preamble to the final rule for a d iscussion of the legal basis for the final rule.

Comment 36: Commenters state d the Supplemental Proposal, and the Proposed Rule on which it is based, relies in numerous respects on EPA's assumption that utilities may achieve the stated goal by, among ot her things, achieving more than the required/assumed improvement in carbon dioxide emissions at some units, in order to achieve, on a fleet

- wide basis, the proposed interim and final goals. Commenters remark ed that whereas large utilities own numerous juri sdictional EGUs that may make such an approach feasible, c ommenters do not. Thus, commenters state d
, they cannot employ the type of optional solutions cited by EPA as justification for assumptions used to derive the goals for the Uintah

- Ouray Reservation. Commenters offer ed , for example, that EPA asserts that affected operators within each state can implement both plant

- wide and fleet

- wide measures to achieve emission reduction requirements. Commenters stated , however, is the only jurisdictional entity and has only one generating unit within the Uintah

- Ouray. Commenters sa id that EPA points to measures including implementing methods for HRI on EGUs at the same plant or at other plants within the generation fleet, thereby eliminating or mitigating circumstanc es at some units which have previously upgraded by implementing potential HRI projects. Commenters argue d this reasoning cannot apply to Bonanza; since, Bonanza already undertook the largest and most promising of such HRI projects well before 2012, and c om menters have no other jurisdictional unit(s) on which to effectuate such future heat rate improvements, and thus, EPA's "averaging" logic fails where, as here, there is but one unit, one operator, one single jurisdiction.
Response 36: The comments are outs ide the scope of the final rule as they address the implementation of the final Emission Guidelines. The final rule establishes emission performance rates for individual EGU and mass

- and rate

- based performance goals for relevant geographic areas and esta blishes requirements for state, tribal and federal implementation plans, but does not address the specific mechanism for implementing the Emission Guidelines in a particular area. The EPA notes, however, that many of the concerns expressed by the
commenter s can be addressed through participation in a multi

- jurisdictional plan. See section VIII.L of the preamble to the final rule for a full discussion of multi

- jurisdictional plans.

Comment 37: Commenters state d no generating resources exist other than the Bonanza unit on the Uitnah

- Ouray Reservation; there is no unused or under

- utilized capacity of NGCC, Nuclear, or other resources. Commenters conclude d that given that there exists but one single generating resource, there does not exist unused or available transmission capacity of any magnitude to support significant development of alternative generating resources within the Reservation, and the geographic isolation of the Reservation from any large population center and the lack of significant electric tra nsmission capacity make future development of additional resources34 extremely costly, and improbable. Commenters conclude d that the only way that the reservation can achieve EPA's assigned goal is through HRI at Bonanza Unit 1, and thus, possibly among

ever y jurisdiction affected by EPA's Section 111(d) rule, the Uintah

- Ouray reservation has the least

- indeed, has no

- flexibility in implementing the rule's requirements. Commenters state d that because EPA views flexibility as such an important aspect of the rule, the lack of flexibility for the reservation demonstrates that the rule does not meet the standard of reducing carbon dioxide emissions in a cost

- effective manner.
Response 37: The comment is outside the scope of the final rule as it addresses the implementation of the final Emission Guidelines. The final rule establishes emission performance rates for individual EGU and mass

- and rate

- based performance goals for relevant geographic areas and establishes requirements for state, tribal and federal i mplementation plans, but does not address the specific mechanism for implementing the Emission Guidelines in a particular area. The EPA notes, however, that many of the concerns expressed by the commenters can be addressed through participation in a multi

- jurisdictional plan. See section VIII.L of the preamble to the final rule for a full discussion of multi

- jurisdictional plans.

Comment 38: Commenters state d EPA used the same assumption for HRI at Bonanza that it used generically in its original proposal , that is, that coal

- fueled EGUs can improve their heat rate by 6% or, alternatively, 4%. Commenters note d that as demonstrated in comments on that proposal by NRECA and others, these estimates far overstate the ability of the industry as a whole to improv e heat rate. Commenters explain ed that for the Bonanza Unit 1, these estimates are based on no actual data or analysis at all, and EPA did not examine whether c ommenters had already undertaken all or some of the capital or operating and maintenance program s that EPA relied on in developing its generic industry HRI estimates. Commenters add ed that EPA did not ask the plant operator to supply it with any specific information about the unit, and EPA did not examine specific possible HRI projects for the Bonanz a unit and whether any would or would not be cost

- effective. Commenters also add ed that EPA did not offer any explanation as to why it thinks that its generic industry

- wide assumptions apply to Bonanza Unit but rather that EPA simply assumed that its gener ic building block one analysis should apply to Bonanza, and that assumption, however, does not constitute substantial evidence and is arbitrary. Commenters add ed that the Proposed Rule analyzes potential HRI measures and offered the following among its pro posed conclusions: "By applying best practices to their operating and maintenance procedures, owners and operators of EGUs could reduce heat rate [by an] estimated range of 1.3 percent to 6.7 percent technical potential for improvement in the average heat rate of the entire fleet of coal

- fired EGUs." [Proposed Rule, at 79 FR 34856] Commenters state d that by applying its "fleet

- wide averaging" logic, EPA concludes that for states where fleet

- wide averaging would be appropriate, that operators could achieve a n "average" 4% assumed HRI improvement through adoption of "best practices" of operating and maintenance procedures. Commenter s explain ed that fleet

- wide averaging, or assumptions based on fleet wide logic are not easily translated to a single unit such as Bonanza Unit 1, and, moreover, use of assumptions based on data culled from fleet

- wide observations is particularly inappropriate and arbitrary to apply to the Bonanza Unit, which has a demonstrated performance track record well above average. Commenters believe d that for the goal to be sustainable as achievable, EPA must analyze and35 assess the technical potential HRI improvements at Bonanza Unit 1 as a stand

- alone single unit. EPA did not do so.

Commenters believe d that for Bonanza Unit 1, the HRI is es pecially arbitrary, and given EPA's own analysis, concludes that rigorous operating/maintenance practices may only be able to achieve as little as 1.3 percent technical potential HRI improvement at any given unit.5 Commenters believe d that the proposed st andard for the Uintah

- Ouray reservation should be revised to reflect no more than a 1.3 percent HRI improvement which presumably might be achieved on account of better or "best" operating and maintenance practices at Bonanza Unit 1.

Commenters state d the a ssumption of a total 6% HRI that could be achieved at Bonanza Unit1 is unsupported and unsupportable, given that they has already implemented the specific projects on which EPA relied in assuming the amount of HRI that is achievable at Bonanza Unit 1. Comm enters offer ed , for instance, that they already incorporate significant best operating/maintenance practices, and the HRI resulting from those practices are already reflected in the Bonanza unit's historical emissions. Commenters add ed that they are noted as a very efficient operator of the Bonanza Unit, and Bonanza is routinely recognized as maintaining one of the highest operating and maintenance levels in the nation for units of similar characteristics; a fact reflective of the high level of maintenance and superior operating practices already employed at Bonanza. To illustrate the comparatively high level of attention that operators give to procedures and maintenance concerns, c ommenters provide d the comparative information on a table , Figure 1 ( titled : “ Bonanza Unit 1

- Generating Availability Data Comparison to Similar Operating Units ”. Commenters explain ed that as demonstrated in Figure 1, Bonanza already operates at levels that demand the best practices of operation and maintenance; Bonanza routinely takes measures cited in the Proposed Rule, including "practices such as turning off unneeded pumps at reduced loads, installation of digital control systems, more frequent tuning of existing control systems, or earlier like

- kind replacement of worn existin g components..." For example, Bonanza typically schedules planned maintenance cycles that are shorter than other coal units. Commenters listed a number of specific "best practices" already utilized and implemented by c ommenters at the Bonanza Unit well before the 2012 baseline period selected by EPA. I n addition, c ommenters have implemented capital projects resulting in HRI well before the issuance of the Proposed Rule. Commenters explain ed that they have already spent considerable capital on increasing the efficiency at Bonanza Unit 1. Commenters continue d
, stating that EPA relied on a 2009 Sargent & Lundy ("S&L") Report that examined potential HRI projects. Commeters stated that Bonanza incorporated most of such projects well before any baseline period for determining carbon dioxide emissions goals under the Supplemental Proposal. T he commenter s included a lists O&M practices employed at Bonanza Unit 1 and Equipment Efficiency Improvements at Bonanza Unit 1, which the commenter s stated "illustrate that Bonanza Unit 1 has already incorporated and uses a majority of identified efficiency practices and measures set forth in the EPA Proposed Rule and the 2009 Sargent & Lundy Report." Commenters believe d the carbon standard for the Uintah

- Ouray Reservation s hould not be artificially made more stringent on account of the early actions taken at Bonanza 1 to achieve efficiency improvements and manage carbon emissions prior to the baseline period for the Supplemental Proposal. Commenters close d , stating that the Proposed Rule states that EPA "recognize[s] that individual EGUs would only be able to implement the best practices or upgrades that were applicable to their specific designs or fuel types and that had not already been36 implemented." [Proposed Rule at 34859 ] yet, EPA has not addressed inherent penalty assessed to early actors in the Proposed Rule.
Response 38: As to the comment regarding the achievability of the assumed HRI
, t he comment is otherwise outside the scope of the final rule as it addresses the imp lementation of the final Emission Guidelines. The final rule establishes emission performance rates for individual EGU and mass

- and rate

- based performance goals for relevant geographic areas and establishes requirements for state, tribal and federal impl ementation plans, but does not address the specific mechanism for implementing the Emission Guidelines in a particular area. The EPA notes, however, that many of the concerns expressed by the commenters can be addressed through participation in a multi

- jur isdictional plan. See section VIII.L of the preamble to the final rule for a full discussion of multi

- jurisdictional plans.

Comment 39: Commenters state d that because EPA's supplemental proposal appears to be consistent with the proposal made in the Emis sion Guidelines for Existing Stationary Sources: Electric Utility Generating Units; Proposed Rule; 79 Fed. Reg. 34830 (June 18, 2014),

c ommenters recommend that EPA ensure that any changes made to the initial proposal are consistently applied to the supple mental proposal.
Response 39: The final rule constitutes final action on both the June 18, 201 4 proposed rule and the November 4, 2014 supplemental proposed rule (79 FR 65489; November 4, 2014) and the final Emission Guidelines present a consistent approac h.

Comment 40: Commenters state d in response to EPA's requests for comment on treatment of renewable energy, demand

- side energy efficiency and other new low

- or non

- emitting electricity generation across international boundaries in a state plan, EPA shoul d allow inclusion of such new resources only if the following conditions are met: 1) the new international resources used for crediting will result in reduced emissions from fossil

- fuel generation in the United States and 2) that the international resource s are not double

- counted as a non

- emitting or low

- emitting resource for a regulatory obligation of both the source country and Clean Power Plan compliance. Commenters add ed that EPA should also consider whether such resources are reasonably available to adjacent states and can therefore be included in setting targets for those
states.
Commenters addressed the potential for leakage between states and between new and existing generation. Commenters stated EPA should similarly ensure that generation shifts across our borders does not allow power plants in the U.S. to comply with the clean power plan without actually achieving the anticipated reduction in carbon pollution.

Commen ters state d some stakeholders have also expressed interest in how to treat RE and EE potential across international boundaries. [79 FR 65496] Commenters stated that f or example, allowing resources in Canada to be used in meeting an area's goal. Commenters remark ed that even this proposal, which on the surface does not have any bearing on Ohio, contains concepts that U.S. EPA may alternately choose for states not included within this proposal. Commenters37 stated t his lack of notice and transparent rulemaking would clearly violate the Administrative Procedure Act. Commenters believe d that due to the complexity of the undertaking, U.S. EPA cannot propose pieces of a rule without fully explaining the impacts on all affected parties.
Response 40: See section VIII. L of the preamble to the final rule for a discussion of interstate effects and leakage. As noted above the EPA is not including building block 4 (EE) in the definition of BSER in this final rulemaking. See section V of the preamble to the final rule for a discussion of BSER as defined and applied in the final rule.

Comment 41: Commenters stated that historically environmental rulemaking has been oriented to the interests of the states and industry and that environmental regulatory perspectives from India n Country, from the Navajo Nation, are routinely overlooked. Commenters stated that EPA is celebrating a 30th year of having an Indian policy and that the 1984 Indian policy and the 1990 amendments to the Federal Clean Air Act should prevent perspectives from Indian Country from being overlooked, however, U.S. EPA today still faces challenges to develop rules that work for Indian Country, including the Navajo Nation.
Commenters stated that the proposed supplemental rule is a good proposal but the Navajo Nation recommends a reexamination of the building block approach and an appropriate application of building blocks, but only with much better understanding of the conditions on the Navajo Nation. Response 41: As described in sections III.A and XI.F of the preamble to the proposed carbon pollution emission guidelines for existing EGUs (79 FR 34845

- 34847; June 18, 2014) and sections II.D and VI.F of the preamble to the proposed carbon pollution emission guidelines for existing EGUs in Indian Country and U.S. Territories (79 FR 65489; November 4, 2014), the final CPP was developed after extensive and vigorous outreach to tribal governments. After issuing the supplemental proposal, the EPA held additional consultation with tribes as described in Section XII.F of the preamble to the final rule. See section V. of the preamble to the final rule for a discussion of BSER as defined and applied in the final rule.

Comment 42: Commenters stated the ambiguity in the proposed rule concerning the development of a federal i mplementation plan, if needed raises additional concerns. Commenters stated if a state fails to submit a plan or the plan submitted by the state is not approved by EPA then the federal government is required to put a federal plan in place for that state. W ithout additional clarity in the rule
, c ommenters assumed that EPA would most likely build the federal plan around its preferred BSER, inclusive of Building Block 4. Commenters stated as such, if building codes remain an approvable measure under Building B lock 4, it is conceivable that the federal government would incorporate them into the federal plan, in essence "adopting" a building code standard; this is something they clearly have no authority to do.

Response 42: The EPA has provided clarity around state plans in section VIII of the preamble to the final rule. Additionally, as noted above, building block 4 is not included in the definition of BSER for this final rulemaking. See section V of the preamble to the final rule for a discussion of BSER as defined and applied in the final rule.38 Comment 43: Tribe s and Territor ies

-- Unique Circumstances
Commenters noted that EPA did not consider the unique circumstances of the Navajo Nation. According to commenters, EPA's fundamental error in its application of Building Block 4 to the Navajo Nation was its reliance, in crafting Building Block 4, on data from energy efficiency programs in states and regions of the country that have vastly different circumstances from those of the Navajo Nation. According to com menters, EPA proposed a program for the Navajo Nation based upon what it learned from examination of the state programs but noted that circumstances for the Navajo Nation more closely resemble the poorer nations in the world, such as Bangladesh or Ghana, t han the Navajo Nation's neighboring states or any other state, for that matter. Commenters noted that a program that works well for a state may not work for the Navajo Nation and is unlikely to do so. In fact, according to commenters, if there is a problem with electricity demand on the Navajo Nation, it is that it is too low, not that electricity use is inefficient.

Commenters also noted that per capita electricity consumption on the Navajo Nation is well below that of any of the states. According to comme nters, the purpose of demand

- side measures is to reduce electricity usage through more efficient devices (LED lights or more efficient appliances, for example) or through behavioral changes: however, per capita energy consumption on the Navajo Nation is al ready well below that of any of the states, even the most energy

- efficient states such as Hawaii and California.

Supplied figures from commenters showing per capita residential and per capita total electricity consumption (in MWh/yr), developed from EIA Fo rm 861 data and U.S. Census data and as shown, demonstrate that the Navajo Nation already uses far less energy per person than even the most energy efficient states.

According to commenters, it is apparent that EPA did not factor in energy usage or ability to pay in establishing energy efficiency goals, but it should have. Commenters stated that it is unfair and unjust to require a people who use so little electricity and live in extreme poverty to bear a burden similar to that of people who use so much mor e electricity and are in a much better position to afford increased electric rates.

Commenters noted that EPA should recognize the Navajo Nation's unique situation and should allow it to increase its electricity usage to be closer to that of its neighbors. According to commenters, EPA did not evaluate actual electricity demand trends, ability to pay, or per capita electricity use in developing its goals under Building Block 4. Commenters noted that this proposed approach is very harmful to the Navajo Nation

. At current electricity usage levels, commenters noted that the Navajo Nation economy cannot grow, the Navajo Nation cannot develop a modern economy and the Navajo people are confined to a state of extreme poverty. According to commenters, the Supplementa l Proposed Rule does nothing to alleviate this condition, but rather exacerbates it. According to commenters, under EPA's proposed approach, the Navajo Nation's annual rate of electricity usage shrinks at an average rate of about 1.06% per year and the per

- capita demand in 2019 drops to only 26% of39 that of its neighbors. Commenters noted that EPA's approach to Building Block 1 reduces the electricity usage of the Navajo Nation and makes it an even smaller fraction of what its neighbors use, guaranteeing con tinued poverty levels on the Navajo Nation. According to commenters, if the Navajo Nation were to increase its electric energy usage to a level comparable to where its neighbors will be in 2029 after application of Building Block 4, it would result in an a verage annual electric energy growth rate or 12.8% over the 17 years from 2012 to 2029 to a rate of 2,144,947 MWh. Commenters stated "This is what is called the Parity Glidepath." Commenters noted that such a high rate of growth is not likely to occur with out substantial investment, but it demonstrates the disparity that exists between electricity availability to the Navajo Nation versus its neighbors. Commenters stated that EPA should have accounted for this disparity.

According to commenters , EPA's propo sed application of Building Block 4 to the Navajo Nation will not reduce CO2 emissions and will increase the cost and decrease the availability of electricity on the Navajo Nation, thereby denying the Navajo Nation the possibility of developing a modern ec onomy and preventing an improvement in the living standards on the Navajo Nation so that they are comparable to the living standards of the states. Commenters noted that EPA should develop a goal that would allow the Navajo Nation to follow the Parity Glid epath and end up on a par with its neighbors.

Response 43: As noted above, building block 4 is not included in the definition of BSER for this final rulemaking. See section V of the preamble to the final rule for a discussion of BSER as defined and appli ed in the final rule.

1.7 ENDANGERMENT FIN DING

Comment 1: Commenter s state d that the "30%" and "meaningful" reduction criteria are arbitrary and capricious because EPA has done no analysis to determine whether such GHG reductions will have any effect on a ir pollution. Commenter s contend ed that EPA has not issued an endangerment finding specifically for the 111(d) rule, or any finding or analysis establishing that the 30% goal or 'meaningful' criteria are proper CAA criteria. Commenter s add ed that a 30% or "meaningful" reduction may be too great or too little, but the public cannot be certain because EPA has not justified the reduction or provided analysis or information on what impact, if any, the Rule will have on EPA's stated purpose of lim iting climate change. 79 Fed. Reg. 34,838

- 34,841. Commenters stated EPA cites the 2009 Endangerment Finding, 74 Fed. Reg. 66,496 (Dec. 15, 2009) and lists a variety of potential impacts from GHG emissions, but does not quantify the benefits or justify its 30% or "meaningful" target.

Commenter s add ed that the Rule is arbitrary and capricious, constitutes an abuse of discretion, and is otherwise not in accordance with law.
Response 1: First, an endangerment finding would not be the point at which EPA conside rs specific standards. Second, the climate benefits of CPP have been estimated by applying the social cost of carbon (SCC) (see the Regulatory Impact Analysis for full details). The SCC is a40 metric that estimates the monetary value of impacts associated wi th marginal changes in CO 2 emissions in a given year. It includes a wide range of anticipated climate impacts, such as net changes in agricultural productivity and human health, property damage from increased flood risk, and changes in energy system costs, such as reduced costs for heating and increased costs for air conditioning. It is typically used to assess the avoided damages as a result of regulatory actions (i.e., benefits of rulemakings that have an incremental impact on cumulative global CO 2 emissions). Third, the commenter s mischaracterize what is required under this section of the Act. Under Section 111d of the Act, state plans must establish standards of performance that reflect the degree of emission limitation achievable through the appl ication of the “best system of emission reduction” (BSER) that, taking into account the cost of achieving such reduction and
any non

- air quality health and environmental impact and energy requirements, the Administrator determines has been adequately demon strated.

Comment 2 : Multiple commenters submitted a variety of comments arguing that EPA had not met its obligation to make an endangerment finding under Section 111(b) and/or that some form of endangerment finding requirement arises under Section 111(d) because a Section 111(b) standard is a prerequisite for Section 111(d) regulation.
Response 2: First, the comments concerning EPA’s obligation to make an endangerment finding under Section 111(b) are not relevant to this rule. Issues related to EPA’s obli gation to make an endangerment finding under Section 111(b) are addressed in the preamble and otherwise in the record for EPA’s 111(b) rule. Second, Section 111(d) contains no requirement to make an endangerment finding. Though Section 111(d)(1)(A)(ii) do es provide that Section 111(d) requirements will apply to pollutants “to which a standard of performance under this section would apply if such existing source were a new source,” that does not create any obligation to make an endangerment finding under s ection 111(d) or otherwise bring issues concerning endangerment findings under Section 111(b) into this rulemaking.

Comment 3: Commenter s state d agreement with EPA that Section 111 does not require that EPA issue a formal endangerment finding, and that even if Section 111 did require such a finding, EPA's rational basis would qualify as one. Commenter s also agree d that parallel EPA rulemakings under Section 111(b) properly address and resolve the endangerment question: specifically, the discussions of endangerment from carbon emissions put forth in EPAs 111(b) regulation of new or modified power plants.(79 Fed. Reg. 1429, Jan. 8, 2014)
Response 3: EPA agrees that Section 111 does not require that EPA issue a formal endangerment finding. However, issues related to EPA’s obligation to make an endangerment finding under Section 111(b) are addressed in the preamble and otherwise in the record for EPA’s 111(b) rul e.41 Comment 4: Commenter s state d the increasing evidence of the sensitivity of climate to rising levels of greenhouse gases such as Super Storm Sandy and more rapid disappearance of arctic sea ice underscores the need for states to take action to reduce greenhouse gas emissions. Commente rs stated t he Clean Air Act offers an avenue for addressing these greenhouse gas emissions and carbon pollution. Commenters stated o nce EPA finds that greenhouse gases are responsible for air pollution, must issue guidance to the states on how to implement the best system of emission reductions for existing sources. Commenters stated t he Clean Air Act requires states to develop plans similar to the State Implementation Plans for Criteria Pollutants for Existing Sources of Non

- criteria Pollutants, in this ca se, greenhouse gases. Commenter s stated that the regulations that you are considering now offer an opportunity to tailor a plan specific for Pennsylvania which would accomplish the emission reductions that are necessary to move forward to combat climate di sruption.
Response 4: EPA addresses how climate change impacts support the need for greenhouse gas mitigation in the preamble of this rule and in RTC Section 8.7.1. Details regarding how state plans will support these emissions reductions are included in t he preamble of this rule.

Comment 5 : Commenter s conclude d that the EPA and all of the executive agencies share a fiduciary obligation under the Public Trust Doctrine to protect the atmosphere from the effects of human

- induced global energy imbalance. Commenters stated t he EPA may not manage the trust resource in a way that substantially impairs the atmosphere, the climate system, the oceans or water supply, or the public interest in a healthy atmosphere. Commenters stated i f the EPA and the federal gov ernment, as trustees of the atmosphere, do not take immediate effective action to protect, preserve, and restore the atmosphere back into balance, our children, future generations, and innumerable species will continue to suffer greater injury and damaging consequences. The
commenter s cited several supporting documents (See James Hansen, et al., Assessing 'Dangerous Climate Change': Required Reduction of Carbon Emissions to Protect Young People, Future Generations and Nature, PLOS ONE 8:12, e81628
, 2013 ; A micus Brief on Behalf of Scientists in Support of Youth Appellants, Alec L. v. McCarthy, No. 13

- 5192 (D.C. Cir. 2013) ; Expert Declarations in Support of Youth Plaintiffs, Alec L. v. Jackson, No. 1:11

- cv

- 02235 (D.D.C. 2011 and U.S . Global Change Research Pro gram, Global Climate Change Impacts in the United States (2009)) Commenter s conclude d that significantly, fundamental constitutional rights of young people will be irreparably violated.

Response 5 : EPA has concluded that in this rule it is protecting the health and welfare of both present and future generations

.

Comment 6 : Commenter s state d that because CO2 emissions have not been demonstrated to directly cause adverse public health effects, EPA is forced to determine that CO2 may cause or42 contribute to endangerment of public welfare, but that adverse effects on public health have not been demonstrated. Commenter s add ed that this finding would allow the states to exercise maximum flexibility in developing suitable plans under 40 CFR 60.24(d) which provides that States may balance the emission guidelines, compliance times, and other information provided in the applicable guideline document against other factors of public concern in establishing emission standards, compliance schedules, and var iances.
Response 6 : First, to clarify what EPA did state in the record regarding GHGs and endangerment to public health in the 2009 Endangerment Finding under Section 202 of the Clean Air Act, EPA stated the following:
“After review of public comments, the Administrator continues to believe that climate change can increase the risk of morbidity and mortality and that these public health impacts can and should be considered when determining endangerment to public health under CAA section 202(a). As descri bed in Section IV.B.1 of these Findings, the Administrator is not limited to only considering whether there are any direct health effects such as respiratory or toxic effects associated with exposure to greenhouse gases.
In making this public health findin g, the Administrator considered direct temperature effects, air quality effects, the potential for changes in vector

- borne diseases, and the potential for changes in the severity and frequency of extreme weather events. In addition, the Administrator consi dered whether and how susceptible populations may be particularly at risk.” (74 FR 66524).
The EPA continues to rely on the best available science in order to make its determinations. The EPA relies on major assessment reports, including the US Global Chan ge Research Program’s National Climate Assessments (NCA), which consider the entire literature in context rather than selecting a small number of individual studies. The third and most recent NCA (2014) states that:
Climate change threatens human health a nd well

- being in many ways, including impacts from increased extreme weather events, wildfire, decreased air quality, and illnesses transmitted by food, water, and diseases carriers such as mosquitoes and ticks. Some of these health impacts are already und erway in the United States.
Therefore, EPA has considered these comments, and finds that they do not provide credible evidence of flaws in the EPA’s approach of relying upon the best estimates of the major assessments, nor do they demonstrate that climate change does not represent a threat to human health.

Comment 7 : Commenter s state d in recognizing the flexibility available to the states, EPA made a clear distinction between pollutants which pose a direct threat to human health as opposed to those that pose a threat to human welfare, but for which adverse public health effects have no t been demonstrated. Commenter s explain ed that much greater latitude is provided to the states when a pollutant has not been demonstrated to have adverse public health effects, since the provisions of 40 CFR 60.24(d) apply, which provides that States may b alance the emissions43 guidelines, compliance times, and other information provided in the applicable guideline document against other factors of public concern in establishing emission standards, compliance schedules, and variances. Commenter s assert ed thus it is mandatory that EPA make such finding clear in the guideline documents, and this finding would allow the states to exercise maximum flexibility in developing suitable plans.
Response 7 : In 2009, the Administrator found that elevated concentrations of greenhouse gases are reasonably anticipated to endanger both public health and public welfare. As discussed in the preamble, there are many health impacts resulting from a changing climate, and new assessments released since the 2009 Endangerment Finding further confirm and support the 2009 finding of endangerment of both public health and welfare. Mass. v. EPA was clear that the consideration of endangerment must be based on “whether greenhouse gases contribute to climate change”, without taking into acco unt policy considerations. Therefore, the EPA will not alter the finding of endangerment for both public health and public welfare.

Comment 8 : Commenters state d that while EPA argues in the preamble to the proposal that only CO 2 emissions from fossil

- fueled power plants endanger public health and welfare, the 2009 endangerment finding did not specifically determine this. The commenter s cite d the first sentence of the 2009 endangerment finding, that with respect to mobile sources, "six greenhouse gases taken in combination endanger both the public health and the public welfare of current and future generations." Further, the commenter s remark ed , the endangerment finding repeats several times that "six well

- mixed greenhouse gases" p ose health and welfare risks, and even in the proposed rule, EPA reviews the endangerment to health and welfare caused by greenhouse gases generally, not CO2 in particular. C ommenter s argue d that the 2009 mobile source endangerment finding did not determin e that each of the six identified greenhouse gases individually threaten health and welfare, but rather that EPA's use of the term "well

- mixed" was deliberate and consistent throughout the finding, and that EPA may not simply ignore the specific elements o f its endangerment finding today because it finds them inconvenient.
Response 8 : The 2009 Endangerment Finding defined the air pollution which endangers public health and public welfare as the mix of six long

- lived and directly

- emitted greenhouse gases, al so referred to as well

- mixed greenhouse gases. CO2, as one component of the mix of six long

lived greenhouse gases, is therefore an air pollutant in and of itself. It is not necessary for a single regulation to mitigate all six well

- mixed greenhouse gases simultaneously in order to address the air pollution. There is longstanding precedent for defining an air pollutant broadly, even if a particular source category may not emit every substance covered by that air pollutant, or if a particular regulation may not regulate every substance (74 Fed. Reg. at 66,541, discussing heavy duty truck standards applicable to VOCs and PM, and noting “it is highly unlikely that heavy duty trucks emit every substance that is included in the group defined as VOC or PM”). In fa ct, the 2009 Endangerment Finding encompassed all six gases, despite the fact that motor vehicles do not emit PFCs or SF6.44 Additionally, the commenter s ha ve a misunderstanding regarding the term “well

- mixed”. “Well

mixed” is a reference to a physical prop erty of each individual gas, not a statement about the gases being mixed with each other. As stated in the 2009 Finding (74 Fed. Reg. at 66,517), “‘Long

- lived’ is used here to mean that the gas has a lifetime in the atmosphere sufficient to become globally well mixed throughout the entire atmosphere, which requires a minimum atmospheric lifetime of about one year.”
Therefore, while the air pollution remains the mix of six long

- lived greenhouse gases, the regulation can appropriately address any individual component of that mix.

Comment 9 : Commenter s state d that CPP is arbitrary and capricious, constitutes an abuse of discretion, and is otherwise not in accordance with law. The c ommenter s contend ed that the 30% goal or 'meaningful' criteria are not proper CAA criteria. Commenter s add ed that a 30% or "meaningful" reduction may be too great or too little, but the publi c cannot be certain because EPA has not justified the reduction or provided analysis or information on what impact, if any, the Rule will have on EPA's stated purpose of limiting climate change. Commenters stated EPA cite d the 2009 Endangerment Finding, and lists a variety of potential impacts from GHG emissions, but does not quantify the benefits or justify its 30% or "meaningful" target.
Response 9 : First , the climate benefits of CPP have been estimated by applying the so cial cost of carbon (SCC) (see the Regulatory Impact Analysis for full details). The SCC is a metric that estimates the monetary value of impacts associated with marginal changes in CO 2 emissions in a given year. It includes a wide range of anticipated cli mate impacts, such as net changes in agricultural productivity and human health, property damage from increased flood risk, and changes in energy system costs, such as reduced costs for heating and increased costs for air conditioning. It is typically used to assess the avoided damages as a result of regulatory actions (i.e., benefits of rulemakings that have an incremental impact on cumulative global CO 2 emissions). Second , the commenter s mischaracterize what is required under this section of the Act. Unde r Section 111d of the Act, state plans must establish standards of performance that reflect the degree of emission limitation achievable through the application of the “best system of emission reduction” (BSER) that, taking into account the cost of achievi ng such reduction and
any non

- air quality health and environmental impact and energy requirements, the Administrator determines has been adequately demonstrated.45 1.8 BUILDING BLOCKS 2, 3, AND 4: INTRA

- STATE AND INTER

- STATE COMPLIANCE

Comment 1 : Commenter s state d EPA must establish a protocol for rigorous enforcement and compliance actions against states that refuse to comply with this unusually decentralized rulemaking, and EPA must anticipate quickly assuming enforcement power, much as it autho rized to do under the Clean Water Act, where EPA determines that a state is refusing to enforce its state

- level CWA rules.
Response 1 : As explained in section VIII of the preamble, the EPA is not finalizing the proposed portfolio approach or state commitm ent approach, and any comments on these proposed approaches to 111(d) state plan design are therefore moot. Instead, the EPA is finalizing an option to submit a “state measures” plan type, under which a mass CO 2 emission goal may be partially or entirely a chieved through state measures that impose requirements on entities other than affected EGUs that are not included in the federally enforceable 111(d) state plan, provided the state submits standards of performance for CO 2 emissions from affected EGUs in t he form of a federally enforceable “backstop” that would be triggered if the state measures fail to achieve the required CO 2 emission performance level. Under a state measures plan, the backstop emission standards constitute the standards of performance re quired by section 111(d), and the state plan provides for the implementation and enforcement of such standards of performance by specifying the trigger mechanism and conditions under which the backstop emission standards apply to affected EGUs. Upon EPA ap proval of a state measures plan under section 111(d), the backstop emission standards become federally enforceable requirements, which EPA and citizens may enforce against affected EGUs under section 113 and section 304 of the Act, respectively, once trigg ered and implemented to address a shortfall in necessary emission reductions. See section VIII.
The final emission guidelines require that all 111(d) state plans, including state measures plans, specify CO 2 emission monitoring, reporting and recordkeeping requirements for affected EGUs, demonstrate that plan measures are enforceable, and contain the process, content and schedule for state reporting to the EPA on plan implementation and progress toward meetin g the required CO 2 emission performance level. For state measures plans in particular, the final emission guidelines also require states to submit annual reports to the EPA that address periodic programmatic milestones to show progress in program implement ation. See section VIII. The EPA intends to review each submitted state plan on a case

- by

- case basis to determine whether it satisfactorily addresses the Act’s enforceability requirements. Final EPA action on any submitted 111(d) state plan, including a s tate measures plan, is subject to judicial review under section 307(b) of the Act.

Comment 2 : Commenter s state d there are questions as to who has the legal authority to administer programs across the state and whether a legislative act would be required to allow46 specific authority that would need to be resolved before state compliance plans are finalized that ultimately could delay the process. Commenter s cite d Gifford, Sopkin, and Larson , which released a white paper that highlights these issues for seve ral states who face similar legal complications as Georgia. (Gifford, Raymond, Gregory Sopking, and Matthew Larson. State Implementation of CO2 Rules: Institutional and Practical Issues with State and Multi

- State Implementation and Enforcement. White Paper 2.0. November 2014) Commenter s state d that its public service Commission regulates Georgia Power in this area. However, according to the commenters, the Commission, by state law, does not have authority over the 49 participants in the Municipal Electric Authority of Georgia (MEAG Power) or the various Electric Membership Corporations (EMCs). Commenters stated i t is unclear who has the authority to run EE/DSM programs and auth ority to access the specific data needed to properly run an EM&V program for MEAG Power and the EMCs. Commenters stated MEAG Power and the EMCs provide roughly a third of the total retail energy sales for the state making the resolution of this issue criti cal.
Response 2 : We are not finalizing our proposed determination of BSER with respect to energy efficiency programs (building block 4). The state can therefore comply with the emission guidelines without relying on building block 4. In addition, as deta iled in section V.A.6 of the preamble , there are non

- BSER measures that can be used to reduce CO2 emissions from affected EGUs. Thus, the specific concerns of the commenter with respect to authority over energy efficiency programs are largely moot. With respect to the general concerns of the commenters, as explained in Section VIII of the preamble, EPA’s recognition that certain states may need time to make changes to state law depending on how they decide to structure their state plans was among the r easons for providing states with the ability to obtain an extension beyond September 6, 2016. Given the extension, the overall three

- year deadline for final submittals is consistent with the three

- year deadline for SIP submittals under section 110(a), and reasonable by comparison with similar or shorter deadlines for submittal of attainment plans.

Comment 3 : Commenter s state d that opponents have criticized the Clean Power Plan by arguing that EPA's statewide emissions limits, which include interstate trading as a potential compliance option, are unprecedented and unsupported under the Clean Air Act because section 111(d) direc ts the administrator to "establish standards of performance for any existing source for any air pollutant."(42 U.S.C. 411(d)(1)(A) (emphasis added)) but, in reality, EPA, under both Republican and Democratic administrations stretching back decades, has rep eatedly instituted statewide emissions limits and trading programs to address air pollution, where the statute refers to controlling emissions from individual sources. Commenter s add ed that the Clean Power Plan is not the first section 111(d) program that EPA has designed to include statewide limits and encourage interstate trading. Commenters stated u nder President George W. Bush, EPA enacted the Clean Air Mercury Rule ("CAMR"), which set state

- level targets for mercury emissions from power plants and allo wed for interstate trading.(Standards of Performance for New and Existing Stationary Sources: Electric Utility Steam Generating Units, Final Rule, 70 Fed. Reg. 28,606, 28,606 (May 18, 2005). The DC Circuit vacated this rule in New Jersey v. EPA, 517 F.3d 5 74 (D.C. Cir. 2008), on unrelated grounds. See I d. at 577

- 78, cert denied sub nom. Util. Air Reg.47 Grp. v. New Jersey, 555 U.S. 1169 (2009). Commenters stated t he court held that EPA had failed to comply with the relevant delisting procedures under the haza rdous air pollution section of the Clean Air Act. Commenters stated t he court did not reach the issue of EPA's decision to set statewide emissions limits and allow for trading under section 111(d).) Because of the cooperative federalism design of section 1 11, commenters stated EPA decided to set state

- level emission targets and then allow states to opt

- in to an interstate cap

- and

- trade system, instead of mandating participation.(70 Fed. Reg. at 28,621; see also State Plans for the Control of Certain Polluta nts from Existing Facilities, 40 Fed. Reg. 53,340, 53,340

- 41 (Nov. 17, 1975) (implementing regulations for section 111(d), which describe the cooperative process for designing standards of performance for existing sources of a designated pollutant, whereby EPA first issues emissions guidelines "reflect[ing] the degree of control attainable with the application of the best systems of emission reduction" and states then develop plans containing emission standards that "must ordinarily be at least as stringent as the corresponding EPA guidelines")) Commenters stated that i n conjunction with that rulemaking, EPA amended the section 111 implementing regulations to provide that a state's "[e]mission standards shall either be based on an allowance system or prescri be allowable rates of emissions except when it is clearly impracticable."(70 Fed. Reg. at 28,649) Commenters stated t his language providing that states may meet their compliance requirements through either a tradable allowance system or a prescribed emissions rate has remained in place since 2005.(See 40 C.F.R. section 60.24(b)(1)) Commenters stated that i n proposing and enacting CAMR, the Bush Administration EPA extolled the virtues of an interstate trading regime and explained why state

- level budgets and emissions trading are justified under section 111. Commenters said that f or example, EPA explained: "The term 'standa rd of performance' is not explicitly defined to include or exclude an emissions cap and allowance trading program. In the final rule, commenters stated EPA interprets the term 'standard of performance,' as applied to existing sources, to include a cap

- and

trade program. Commenters stated t his interpretation is supported by a careful reading of the section 111(a) definition of the term."( See 70 Fed. Reg. at 28,616) "Nor do any other provisions of section 111(d) indicate that the term "standard of performance " may not be defined to include
a cap

- and

- trade program." ( Id. at 28,617) "EPA has determined that a cap

- and

- trade program based on control technology available in the relevant timeframe is the best system for reducing Hg emissions from existing coal

- fired Utility Units."(Id) "The EPA below also outlines a method for apportioning the nationwide budget to individual States . . . . The EPA maintains that the emission budget provides an efficient method for achieving necessary reductions in Hg emissions (as des cribed in earlier sections of this preamble), while providing substantial flexibility in implementing the program."(Id. at 28,621)

. Commenters stated that i nterestingly, many of the same utilities and states that oppose the use of statewide limits and flex ible compliance options in the Clean Power Plan voiced support for the very same features of CAMR. Commenters stated that i n joint briefing on the court challenge to CAMR, a number of industry groups, including the Utility Air Regulatory Group and the Edis on Electric Institute, as well as a number of coal

- intensive states like Alabama and West Virginia, argued that a cap

- and

trade program is unlawful under Sec. 111. Commenters stated EPA has offered compelling legal justifications for a mercury cap

- and

- trad e program. . . . A mercury cap

- and

- trade program is also reasonable as a matter of public policy.(Joint Brief of Respondent

- Intervenors at 26, New Jersey48 v. EPA, 517 F.3d 574 (D.C. Cir. 2008) (No. 05

- 1097)) Commenters also stated t hese parties further argu ed, "CAMR maximizes reductions in U.S. mercury deposition while providing EGUs flexibility to achieve those reductions in a cost effective manner."( I d.) Commenters stated that j ust like its Clean Power Plan, EPA's CAMR rulemaking set statewide emissions ta rgets and allowed for

- but did not mandate

- interstate emissions trading as a compliance mechanism for power plants under section 111(d).(Note, though, that in CAMR, EPA explicitly included a cap

and

- trade program within its interpretation of "standard of pe rformance" as applied to existing sources. 70 Fed. Reg. at 28,616. In contrast, commenters stated EPA does not explicitly include a
cap

- and

- trade program within its interpretation of "standard of performance" in the Clean Power Plan. However, in both cases , EPA indicated that it would allow the use of interstate trading as a compliance option, without mandating its use.) Commenters stated t his approach was formulated under the leadership of George W. Bush and embraced wholeheartedly by a number of states an d industry groups that now decry the ability of EPA to use section 111(d) to enable an interstate emissions trading plan. Commenter s concluded , stating that these groups' earlier statements and EPA's consistent approach support the legality and sagacity of a state

- level emissions trading approach for pollution from power plants under section 111(d).

Commenter s continue d , citing the Clinton Administration EPA's effort to enforce the Good Neighbor Provision, the NOx SIP Call, set statewide budgets and featured an optional trading
program. Commenters stated EPA "encourage[d] States to consider electric utility and large boiler controls under a cap

- and

- trade program as a cost

- effective strategy." Commenters stated i t created a model program, which states could opt into. Commenters stated EPA explained in the rule that a regional trading system would allow states to achieve the required emissions reductions at the least cost.(Id. at 57,400) Likewise, commenters stated
, EPA under the George W. Bush Adminis tration created statewide emissions reduction requirements and crafted an interstate trading mechanism in its Clean Air Interstate Rule ("CAIR"). Comenters stated s imilar to the 1998 NOx SIP Call, CAIR allowed states to opt into a model interstate emission s trading program.(Rule to Reduce Interstate Transport of Fine Particulate Matter and Ozone (Clean Air Interstate Rule); Revisions to Acid Rain Program; Revisions to the NOx SIP Call, 70 Fed. Reg) Commenters stated t he agency explained, "If States choose t o . . . participate in the cap

- and

- trade program, allowances could be freely traded, encouraging least

- cost compliance over the entire region."(Id. at 25,231) Commenter s add ed that building on the cost

- effective trading approach in those two earlier effort s to implement the Good Neighbor Provision, in the Transport Rule, the Obama administration EPA set statewide emissions reduction levels and designed "air quality

assured trading programs" to "ensure that necessary reductions will occur within every covere d state."(Federal Implementation Plans: Interstate Transport of Fine Particulate Matter and Ozone and Correction of SIP Approvals, 76 Fed. Reg. 48,208, 48,210 (Aug. 8, 2011).) Commenters said that EPA explained, "the trading component of the Transport Rul e provides flexibility to the power sector and enables industry to comply with the emission reduction requirements in the
most cost

- effective manner . . . thus minimizing overall costs."(Id. at 48,347) Commenter s remark ed that the Supreme Court recently u pheld the Transport rule. Commenters stated t he Court held, "EPA's cost

- effective allocation of emission reductions among upwind States . . . is a permissible, workable, and equitable interpretation of the Good Neighbor Provision."(EPA v.49 EME Homer City Ge neration, LP, U.S., 134 S. Ct. 1584, 1610 (2014) Commenter s close d
, stating that the Supreme Court's affirmance of EPA's consistent, decades

- long interpretation that the Good Neighbor provision, which refers to individual sources, can be used to set statew ide emissions budgets supports EPA's similar interpretation of the related Section 111(d) in the Clean Power Plan. Commenter s note d that in order to comply with the Best Available Retrofit Technology ("BART") standard required by Section 169A of the Clean Air Act, [42 U.S.C. section 7491] several Southwestern states and municipalities

- New Mexico, Utah, Wyoming, Albuquerque city, and Bernalillo County

- adopted a regional cap

- and

- trade program to address haze/visibility impairment from sulfur

- dioxide emiss ions over the Colorado Plateau.(Final Rule, Approval and Promulgation of State Implementation Plans; Wyoming, 77 Fed. Reg. 73,926,73,927 (Dec. 12, 2012); Final Rule, Approval, Disapproval and Promulgation of State Implementation Plans; Utah, 77 Fed. Reg. 7 4,355, 74,357 (Dec. 14, 2012); Final Rule, Approval and Promulgation of State Implementation Plans; New Mexico, 77 Fed. Reg. 70,693, 70,695 (Nov. 27, 2012); Final Rule, Approval and Promulgation of State Implementation Plans; City of Albuquerque

- Bernalillo County, 77 Fed. Reg. 71,119, 71,121 (Nov. 29, 2012)) Commenters stated EPA had indicated in its regulations on regional haze that states could use a cap

- and

- trade program to comply with BART standards, if the program would achieve "greater reasonable
prog ress" toward improving regional haze than would source

- specific standards.(40 C.F.R. section 51.309(d)(4)(i); WildEarth Guardians v. EPA, 770 F.3d 919, 925 (10th Cir. 2014))

Commenter s continue d , stating that when designing emission guidelines for large m unicipal
waste combustors under section 111(d), EPA allowed states to include compliance options that allowed the combustors to average their emission rates and trade NOx emission credits between plants.(Standards of Performance for New Stationary Sources and Emission Guidelines for Existing Sources; Municipal Waste Combustors , 60 Fed. Reg. 65,387, 65,402 (Dec. 19, 1995). 40 42 U.S.C. section 7521(a)(1)) Commenters stated that s imilarly, though vehicle standards under section 202 apply to "new motor vehicle s or new motor vehicle engines," EPA applied a fleet

- wide average, where manufacturers could receive credit for more efficient vehicles and bonus credit for zero

- emissions vehicles, and some trading was allowed among manufacturers.(See 2017 and Later Model Year Light

- Duty Vehicle Greenhouse Gas Emissions and Corporate Average Fuel Economy Standards, 77 Fed. Reg. 62,624, 62,627

- 28 (Oct. 15, 2012)) C ommenter s closed , stating that EPA's repeated use of flexible compliance mechanisms when the statute refers to individual sources supports the propriety of its use of flexible compliance mechanisms in the Clean Power Plan.

Response 3 : We appreciate these comments.

Comment 4 : Commenter s state d EPA lacks the requisite legal authority to mandate the degree of interstate cooperation and coordination that would be needed to ensure effective implementation of the Proposal. EPA notes that it will be more cost

- effective for States to take a regional a pproach via a multi

- state plan or coordination agreements, [See e.g., EPA TSD

- Legal Memorandum p.90 (noting the cost to comply with Block 2 will likely be much more cost

-50 effective if undertaken on a regional basis as opposed to intrastate approach)] bu t EPA has no actual legal authority to require the admittedly more cost

- effective approach by requiring multi

state plans or coordination agreements by the States.

Commenters contend ed that EPA cannot force states into a regional coalition. Commenters
st ated that EPA proposes alternative approaches based on regional considerations or allocations, but states their intent is not to require regional plans. [79 FR 64549] Commenters believe d EPA is proposing a Section 111(d) proposal that necessitates a region al plan in order for states to achieve their goals, since many of the individual state goals are not achievable, and argues that EPA cannot force states into a regional coalition

Response 4 : We are not forcing states into regional coalitions or multi

- state plans. Interstate trading, through multi

- state plans, plans with trading linkages, or trading

- ready plans, would (as commenters admit) likely be the most cost

- effective plan approach

. However, EPA is not requiring states to adopt these types of plans. If a state chooses based on its policy preferences another approach, such as retirements in order to meet a mass goal, the state may do so.

Thus, in the NOx SIP call, EPA provided for s tates to join an interstate cap

- and

- trade program, but did not require them to. States could choose other approaches so long as they met the NOx emission budgets. As a result, the NOx SIP call was consistent with federalism principles. See Michigan v. E PA , 213 F.3d 663, 686

- 87 (D.C. Cir. 2000). Although the NOx SIP call set caps based on a different cost

- effectiveness methodology, the general principle is the same for these emission guidelines.
Since we are not requiring states to enter into multi

- stat e trading , the argument , stripped of its state plan veneer, amounts to an argument that it is unreasonable for EPA in determining BSER to assume that states will allow sources to trade with sources in other states . We disagree, for the reasons given in Se ction V .A of the preamble.

1.9 POTENTIAL COMBIN ATIONS OF THE BUILDI NG BLOCKS AS COMPONE NTS OF THE BSER

1.9.1 Proposed BSER

- combination of all four building blocks as the BSER

Comment 1 : Commenters stated, instead of proposing a definite and specific system of BSER for states to apply to a designated existing source, the EPA is proposing a vague list of items that states may utilize, at their discretion, which might conceivably lead to e mission reductions. Commenters said the EPA's building blocks are not a proposed BSER sufficient to satisfy the EPA's duty to determine a system of means for obtaining emission reductions. Commenters51 stated the building blocks exceed the EPA's authority, p ropose overstated results and unachievable energy generation redispatches, and threaten the commenters' economic viability and their members.

Response 1: We disagree. For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memor andum, our interpretation of the BSER is reasonable and within the scope of EPA’s authority in light of the statutory text, statutory context, statutory purpose, and legislative history.

Comment 2: Commenters stated that the "flexibility" the EPA touts in the draft rule is illusory, especially for small facilities. Commenters said that state goals are set assuming that each state implements a GHG reduction plan that includes all four building blocks that make up the BSER. Commenters said if a state fails t o adopt all four building blocks, it likely cannot meet its target. Commenters said if the EPA issues a federal plan for a state, it will be legally unable to implement building blocks 2

- 4, and thus the standards of performance for most, if not all states, would be unachievable and thus contrary to the CAA if the EPA pursues federal plans.

Response 2: We disagree. For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reasonable and within the scope of EPA’s authority in light of the statutory text, statutory context, statutory purpose, and legislative history.

Moreover, as we explain in sections V.A. and V.B. of the preamble, our emission guidelines simply reflect an achievable emiss ions limit through the application of the BSER and do not in themselves require states or sources to implement the BSER. That is, EPA is responsible for determining the level of emission limitation from the source category, while states have the responsibi lity of assigning emission requirements to their sources that will ensure their achievement of that level of emission limitation. States may fulfil their responsibility by establishing emission standards or creating plans consistent with the guidelines. In doing so, states will be able to choose from a wide range of emission reduction measures, including measures that are not part of the BSER.

Comment 3: Commenters stated that if the EPA should move to finalize the proposed section 111(d) guidelines, a more narrowly defined BSER is required to mitigate the pitfalls of the proposal. Commenters said EPA contends that its preferred BSER option is the best sy stem because all four building blocks, taken together, get a greater emission reduction at a lower cost than the alternate BSER. Commenters said the EPA repeatedly acknowledges that individually, each building block on its own merits can be deemed a "syste m of emission reduction" consistent with the premise of achieving technically feasible emissions reductions at a reasonable cost and being adequately demonstrated. Commenters said options exist for the EPA to narrow the52 proposal to more precisely align wit h the requirements of the statute and address potential unintended consequences of implementing the rule as proposed.

Response 3: As we explain in section V. B. of the preamble and in the Legal Memorandum, we have refined our analysis of the BSER.

Comment 4: Commenters stated that EPA cannot rely on facilities that received funding under the Energy Policy Act of 2005.

Commenters stated, that EPA cannot rely on facilities that received funding under the EPAct of 2005. Commenters said, EPA mentions in the p roposal that "one or more facilities involved in programs mentioned or relied on in this proposal may have received some form of assistance under the EPAct of 2005" and explains its interpretation of the word "solely." ESPS Proposal at 34,856, n.92.

Comme nters stated, EPA's BSER analysis is also unlawful to the extent that it relies on projects that have received funding under the EPAct of 2005. Commenters said, given the EPAct of 2005's focus on experimental technologies, it is not surprising that Congres s recognized the program's inconsistency with the legal standards for establishing NSPS and prohibited the use of such programs to establish that a technology is adequately demonstrated: No technology, or level of emission reduction, solely by reason of th e use of the technology, or the achievement of the emission reduction, by 1 or more facilities receiving assistance under this Act, shall be considered to be adequately demonstrated for purposes of Section 111 of [the Clean Air Act]. 42 U.S.C. section 1596 2(i). Commenters said, section 1307 of the EPAct, outlining the treatment of tax credits for qualifying advanced coal projects, includes a nearly verbatim prohibition on the EPA Administrator's consideration of CCPI

- funded projects under Section 111 of the Clean Air Act. 26 U.S.C. section 48A(g). Commenters said, the Associations have previously commented on EPA's purported justification for relying on facilities that had received EPAct of 2005 funding and incorporate those comments by reference.

Commenter s stated, the EPAct of 2005 prohibits EPA from considering evidence from projects funded under that act in setting "standard[s] of performance" under Section 111 of the CAA if, in the absence of such projects, EPA cannot establish that the NSPS control tec hnology is "adequately demonstrated." Commenters said, in other words, EPA is required by statute to conduct a "but for" analysis to determine whether the control technology would qualify as BSER but for evidence from projects funded under the EPAct of 200 5. Commenters said, if not, EPA cannot rely on the control technology in establishing a standard of performance. Commenters said, otherwise EPA could avoid the statutory limitations imposed by Congress simply by referring generally to other non

- EPAct of 20 05

- funded projects, even if those other projects would be insufficient to establish that a given control technology qualified as BSER. Commenters said, such an interpretation would frustrate Congress' purpose in passing the EPAct of 2005 and would contradi ct the plain language of the statute.53 Commenters stated, therefore, when a proposed or final NSPS must rely on evidence from projects funded by the EPAct of 2005 to be justified, such projects necessarily constitute the "but for" basis for the standard and are effectively the sole support for the control technology. Commenters said, here, in the proposed rule, EPA proposes to do exactly what the EPAct of 2005 prohibits: it states that it is relying on projects that were funded under the EPAct of 2005, but f ails to identify which projects received such funding or conduct the necessary "but for" analysis to determine if they are the sole support for the technology EPA relies on to establish BSER.

Commenters stated, EPA claims that it is free to consider EPAct of 2005

- funded projects so long as it "does not depend solely upon those projects, and the [adequately demonstrated] determination remains adequately supported without any information from" EPAct of 2005 projects." See 79 Fed. Reg. at 34,856 (citing EPA, N ODA, 79 Fed. Reg. 10,750 (Feb. 26, 2014). Commenters said, EPA's expansive interpretation of the word "solely" creates a loophole so large that it essentially swallows the rule. Commenters said, EPA asserted in association with the January 2014 proposal th at, while it cannot rely exclusively on EPAct of 2005

- funded projects, the projects can "provide part of the basis for" an adequately demonstrated determination.

Commenters stated, in other words, according to the EPA, as long as the Agency can point to

so me other shred of supporting evidence, it is permitted to rely on EPAct of 2005

- funded projects to show that a control technology is adequately demonstrated under Section 111. Commenters said, this contorted interpretation of the EPAct of 2005 is clearly c ontrary to the statute and to Congressional intent as described above, and places virtually no limit on the EPA's ability to rely on EPAct of 2005

- funded projects. Commenters said, indeed, that is the case here. Commenters said, rather than explaining the role that EPAct of 2005

- funded projects played in EPA's BSER analysis, EPA simply states in passing in a footnote that some EPAct of 2005 projects may have been considered. Commenters said, given Congress' clear mandate here, EPA cannot make broad statemen ts about the quality of its BSER analysis without providing interested stakeholders the necessary tools, such as the identities of EPAct of 2005

- funded projects, to verify its assertions. Commenters said, EPA has failed to do so here, and the proposal, if finalized would be unlawful under the EPAct of 2005.

Commenters said that Vogtle 3 and 4 has received or will receive assistance provided through that legislation; therefore the units should not be demeaned "adequately demonstrated." Commenters said, See C ongressional Research Service Report, Nuclear Energy Policy, at p. i (Sept. 19, 2013) ("Significant incentives for new commercial reactors were included in the Energy Policy Act of 2005 (EPACT05, P.L. 109

- 58), such as tax credits and loan guarantees.").

Re sponse 4: EPA’s interpretation of the EPAct05 provisions is set out in Memorandum “EPAct05” (July, 2015) found in the docket for the section 111 (b) New Source performance Standard, as well as in responses to comment in chapter 2 of the Response to Comment Document for that rule (EPAct response unit). In short, the agency reasonably has concluded that each of the three provisions prevents the EPA, in determining the BSER, from finding that a technology or emission limit is adequately demonstrated based exc lusively on evidence from54 facilities supported under EPAct05. However, the EPA interprets all three provisions to allow the EPA to consider and rely upon information from EPAct05

- supported facilities in combination with information from other facilities. The EPA also rejects commenters’ suggestion that the EPA’s reading of the word “solely” would allow the EPA to avoid a limitation on its consideration of EPAct05

- assisted facilities by including a mere scintilla of evidence from non

EPAct05 facilities. Th at situation is not presented here, where the principal evidence that the BSER is demonstrated and feasible comes from sources which received no assistance of any type under EPAct05. See Marine Shale Processors v. EPA, 81 F. 3d 1371, 1383 (5 th Cir. 1996) (“We make no comment on this argument; this is simply not a thimbleful case”). Indeed, Building Blocks 1, 2 and 3 are based on the performance of mature technologies that have been demonstrated many times over at facilities not receiving EPAct assistance
, and commenters have identified no units received such funding other than nuckes . So, at best, the commenters’ apparent (and implausible) position is that if there is a scintilla of evidence that one facility received EPAct05 assistance, then it is barred from considering performance of any non

- EPAct facility! With regard to comments respecting nuclear facilities Vogtle 3 and 4, nuclear facilities are not included within the BSER determination for the final guidelines so these comments have become moot.

C omment 5: Commenters said that the proposed rule building block approach used to develop the states' plan could potentially miss opportunities for those methods to work together synergistically. Commenters said that, the Proposed Rule could unnecessarily i ncreasing emissions and risk grid reliability due lack of planning for integration and reliability needs. Commenters said that the building block methods without sufficient attention to integration and reliability needs could result in (i) EGUs having to b e operated to support reliability in a way that overwhelms the emissions reduction impacts of technical HRIs in building block 1and (ii) reliability

- induced curtailment of clean energy resources could reducing their expected emissions impacts and increasin g their effective cost in building block 3. Commenters said EPA could avoid unnecessary and undesirable outcomes in the proposed rule, if a consideration of grid integration and reliability are a part of BSER.

Response 5: These issues were taken into acco unt in determining the final BSER.

Comment 6 : Inclusion of building block 3 and building block 4 in BSER is beyond EPA’s authority.

Commenters stated USEPA admits that each of blocks 1 and 2 on their own could result in significant CO2 emission reductions at reasonable costs yet cites the benefit of reducing reliance on fossil fuels and improving fuel diversity by using block 3. Commenters said USEPA also states that block 4 would improve the power system's reliability by reducing pressure on the grid due to reducing the amount of electricity being transmitted. Commenters said USEPA is not tasked with deciding which fuels are to be used in this country, nor in what proportion different fuels are to be used. Commenters said USEPA does not have expertise in t ransmission or grid.55 Commenters said USEPA wants to move away from certain types of generation and encourage the development of other measures, namely blocks 3 and 4. Commenters said it is the Agency’s task to provide emission guidelines for existing EGUs that inform the states on developing their standards of performance.

Response 6 : As we explain in sections V.A. and V.B. of the preamble, our emission guidelines simply reflect an achievable emissions limit through the application of the BSER and do not in themselves require states or sources to implement the BSER. That is, EPA is responsible for determining the level of emission limitation from the source category, while states have the responsibility of assigning emission requirements to their sources tha t will ensure their achievement of that level of emission limitation. States may fulfil their responsibility by establishing emission standards or creating plans consistent with the guidelines. In doing so, states will be able to choose from a wide range o f emission reduction measures, including measures that are not part of the BSER.

Comment 7 : The following commenters agree with the proposed combination of the four building blocks as the BSER.

Commenters said states have already adopted several policies to reduce the electricity sector's climate impact, some focusing on reducing power plants' CO2 emissions, others addressing this outcome in a more roundabout fashion by encouraging EE and RE. However, commenters were unclear which, if any, of these direct and indirect strategies actually mitigate plants' emissions because scholars have yet to test their effects using plant

- level emission data. Commenters said using a newly released data source to determine whether states' policies significantly shape indivi dual power plants' CO2 emissions, they found that certain types of direct strategy (emission caps and GHG targets) and indirect ones (public benefit funds and electric decoupling) lower plants' emissions and are viable building blocks of a federal climate regime.

Commenters stated that this co

- proposed definition of BSER is a permissible interpretation of the Act, agreed with the proposed building blocks and the alternative approaches described by EPA with emission trading systems or emission allowance syst ems.
Commenters supported use of all four building blocks, as this permits compliance efforts both inside and outside the EGU and gives states maximum flexibility to meet their goals.

Commenters wanted EPA to adopt the strongest possible regulations that will reduce further increases in GHG the most and the fastest. Commenters agreed with BB1 for most reduction and BB2 for faster reduction. Commenters said natural gas is not the long te rm solution, and agreed that the BSER should include building blocks 3 and 4. Commenters said the projected electricity price increase from this plan of less than 7% is quite affordable.56 Commenters stated the combination of all four building blocks best r epresents the BSER because it achieves greater emissions reductions at a lower cost, takes advantage of the wide range of measures that states, cities, towns and utilities are already using to reduce carbon emissions from EGUs and recognizes the integrated nature of the electricity system and the diversity of electricity generating technologies. Commenters said utilizing a strategy limited to combining only building blocks 1 and 2 would fail to take advantage of the significant carbon emissions reduction th at could be achieved by deploying renewable energy technologies.

Commenters also supported the EPA's broad interpretation for state standards of performance to apply a "standard for emissions" to "any existing source" in the listed category. Commenters sa id while the EPA must seek out the system that best serves the goals of CAA section 111, there are many available options for reducing carbon emissions from existing power plants through upgrades at these facilities. Commenters recommended that the EPA wor k with state, local and tribal governments to explore and promote local approaches to spur renewable energy sources that in turn also promote local solutions.

Commenters supported EPA's proposal that states may also demonstrate compliance through addition to non

- BSER measures.

Commenters said reliance on these building blocks 2, 3, and 4

- including the use of PC projects

- is consistent with the CAA, with long

- standing interpretation of the CAA by the courts, and with widely

- employed and adequately demons trated energy practices. Commenters said the NOPR relies only on those approaches to emission reduction from electricity production that are well demonstrated. Commenters said Performance Contracting (PC) projects are employed in every state in the nation. Commenters said though not explicitly discussed in the NOPR, the abundant experience with implemented PC projects means they are also adequately demonstrated. Commenters said the term "system" in "best system of emission reduction" should not be assumed t o have been a casual or unintentional choice by Congress when it drafted sec. 111. Commenters said Congress could have used other terms including "device", "equipment" or "technology" if it intended to constrict EPA's authority under section 111(d) only to requiring pollution controls that could be physically attached to, or exclusively used within, an emissions source. Commenters said the term "system" indicates a broader approach to emission control strategies permitted by this section of law, consistent with past court rulings relevant to EPA's current proposal.

Commenters stated the District of Columbia urges EPA to maintain its BSER approach and ensure that the state emission guidelines will maximize air quality protection and reductions in carbon emis sions.

Commenters noted that the system reflects the reality of the electric grid, where interconnected energy generation resources are managed dynamically to ensure energy demand is met.57 Commenters agreed that the BSER encompasses many of the least cost measures that can reduce CO2 emissions; in Oregon, these measures have worked well, and RE and EE improvements have been the most significant methods, resulting in emissions reductions, economic development and reduced electric rates.

Response 7 : We apprec iate these comments , as explained in Section V of the preamble we are not adopting the alternative BSER

.

Comment 8 : In comments submitted prior to the proposal in April 2014, and resubmitted following proposal, commenters offered the following as part of their answer to the question

,

" How should EPA set the performance standard for state plans," in EPA's " Considerations in the Design of a Program to Reduce Carbon Pollution from Existing Power Plants. "

Commenters stated that CAA section 111(d) does not di rect EPA to set the performance standard for state plans; rather, it directs EPA to establish procedures similar to those for state implementation plans under section 110. Commenters stated that under section 111(d) and 40 C.F.R. Part 60 Subpart B, EPA is authorized to establish emission guidelines that provide information for the development of state plans. Commenters stated with this direction, EPA would establish guidelines that describe the following:

• various systems of emission reduction that have been adequately demonstrated at existing EGUs;

• the degree of emission reduction that is achievable with each system, along with costs and environmental effects of applying each system to designated facilities (i.e., EGUs);

• time schedules expected to be necessa ry for design, installation, and startup of control systems;

• the application of the BSER, considering costs of such reduction, that has been adequately demonstrated for existing EGUs and the compliance times within which equivalent emissions standards can be achieved; and

• the specification of different emission guidelines or compliance times for different sizes, types, and classes of EGUs as control costs, physical limitations, location, or other factors
warrant.

Commenters stated that following the proced ures, or emission guidelines, the states have the authority and responsibility to determine the BSER has been adequately demonstrated and is achievable for individual sources within the state and to establish the actual performance standards, taking into c onsideration, among other factors, the remaining useful life of each existing source.

Commenters agreed with EPA that " Given the broad range of factors that affect a utility's decisions regarding the make

- up of its power plant fleet, it would not be reasonable for EPA to second

- guess decisions regarding the remaining useful life of facilities ." Commenters stated that58 the consideration of remaining useful life is assigned to the states under CAA section 111(d)(1)(B) . Commenters stated that utilities in their state have spent around $3 billion for the installation of controls for criteria pollutants and air toxics to comply with various regulatory requirements over the last few years and to be able to continue operation. Commenters stated that the state should be able to consider the age of each affected EGU within the state, the "sunk costs" for emissions controls already installed or planned for each EGU to meet other regulatory requirements, and the potentially stranded investments that would result fr om the permanent shutdown of an affected EGU.

Commenters argued that the determination of the BSER must be source

- based and not system

based. Commenters stated that standards of performance should be based on reductions in CO2 emissions that can be reason ably achieved through actions at individual electric generating units , such as on

- site energy efficiency measures. Commenters stated that once the source performance standards are set, then the states should have flexibility in implementing the standards t o help reduce compliance costs. For example, commenters suggested that states could allow sources credit for emission reductions from "beyond the fence line," including the procurement of RE generation (i.e., wind) and the implementation of programs such a s demand

- side management and end

- use EE initiatives.

Commenters stated that a new complication in their state in considering the BSER and establishing standards of performance for each source is the nearly universal movement of regional power pools (or RT Os) to next

- day dispatch . Commenters stated that electric generation and transmission in their state is coordinated through the Southwest Power Pool (SPP), which just institutionalized next

- day dispatch in 2014. Commenters stated that the effects of this c hange are not completely realized but likely will result in large base

- load units (mostly coal

- fired) being called upon more for generation and to operate at higher capacity. Commenters stated that due to the increased utilization of these units being the most economical, slightly higher CO 2 emissions may result.

Response 8 : For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reasonable and within the scope of EPA’s authority in light of the statutory text, statutory context, statutory purpose, and legislative history. While we are not re

- opening the 1975 regulations, in response to comments, we explain in the preamble why they give the EPA broad authority to determine the BSER an d, based on that, statewide emission limitations for sources in the state.

Comment 9 : The following commenters generally agree with the proposal, but suggest a few changes.

Commenters supported EPA for its outreach efforts and the approach put forth in the proposal, specifically, the "outside the fence" approach taken to determine BSER and the broad compliance options available to the states. Commenters said this approach is supported by the59 CAA and anticipated regulatory and market developments but believed some adjustments will be necessary before the rule is finalized.

Response 9 : We appreciate this supportive comment and agree, as reflected in the final rule, that some ad justments were necessary.

Comment 10: Commenters stated that EPA should limit target setting to what can be achieved within the fence line, i.e. on the existing generating units targeted for reduced CO2 emission reductions. Commenters said of the four BSER Blocks that EPA proposed, only Block 1 addresses measures that are implemented on the electricity generation unit. Commenters recommended that EPA retain the flexibility that EPA has refined with Blocks 3 and 4 by allowing credit toward meeting proper ly weighted Block 1 targets. Commenters said in Minnesota, Block 2 measures should already have received consideration through Integrated Resource Planning, and, similarly, early action in Minnesota should be more than sufficient for satisfying EPA's CPP p roposal measures through 2030.

Response 10: We disagree. As explained in Section V of the preamble the Agency is basing BSER on BB 1

- 3. For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of th e BSER is reasonable and within the scope of EPA’s authority in light of the statutory text, statutory context, statutory purpose, and legislative history.

Comment 11: The following commenters believe the BSER should just be Building blocks 1, 2 and 3.

Commenters agreed the only ways to cost

- effectively control carbon emissions from the affected EGUSs is to increase the efficiency of existing units; to encourage greater utilization of lower or no carbon emitting technologies; and to promote energy effici ency in the use of electricity. Commenters suggested that EPA base BSER on the first three building blocks, with revisions, as an approach more consistent with how the power system naturally works. Commenters said they understand and support efforts to inc rease demand side EE, but believe that this tool is better used as a compliance option through SIPS. Commenters said demand side EE is outside the "power system" and undermines the coherence of EPA's "system" based approach to BSER..

Response 11: We disagr ee. As explained in Section V of the preamble the Agency is basing BSER on BB 1

- 3. For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reasonable and within the scope of EPA’s

au thority in light of the statutory text, statutory context, statutory purpose, and legislative history.60 Comment 12: The following commenters agree with the proposal, but believe more focus should be on Building Block 3.

Commenters stated an effective and r esponsible carbon reduction plan would have as its overarching goal: the removal of the most carbon, at the least cost, in the shortest amount of time, and without creating additional environment or social problems. Commenters said the only BSER energy res ources that meet this goal are EE and RE resources and recommended EPA give priority to use of these for maximum carbon reduction, and guide state compliance mechanisms towards an emphasis on the implementation of them.

Commenters stated use of RE and dema nd side EE should be incentivized and promoted. Commenters said there is a significant need to increase the use of RE to address the impacts of climate change and suggested including incentives that encourage states to deploy RE on a larger scale. Commente rs said increased capacity and evolving technology allow RE to be used at lower cost and larger scale than contemplated in the proposed rule. Commenters said increased targets for RE use within each state would allow for even greater reductions in carbon e missions in a cost

- effective manner that would also support innovation and create new jobs. Commenters recommended the development of comprehensive systems to improve EE at the individual level.

Response 12: See Chapter V.E. of the Preamble of a discussion of increased reductions from BB3.

Comment 13: The following commenters support multi

- state plans as a BSER option.

Commenters stated EPA can avoid some of the inefficiencies, unnecessary costs and reliability impacts from the Proposed Rule by allowing c ompanies that generate electricity across multi

state areas to demonstrate compliance in the various states that they operate using company

based multi

- state plans. Commenters said this approach fits within the parameters of the Proposed Rule and will prov ide states and companies the flexibility to achieve CO2 emission reductions in the most cost

- effective, technically sound manner. Commenters said they urge EPA to approve this portfolio management approach as BSER.

Commenters stated allowing companies to a llocate zero and certain low carbon resources to show compliance with their obligations in states across their multi

- state generation system can readily fit within the legal requirements set forth in the Proposed Rule. Commenters said while the details of how such an allocation scheme will work must be established during the state plan development process, the rule as currently proposed does not preclude companies from using such a method to meet their obligations consistent with the requirements of adopted state plans. Commenters asked that EPA clarify that, whether a given state adopts its own plan or participates in a state

- based multi

- state plan, companies must be allowed to allocate their zero and low carbon resources among the states where they operate and have obligations under the rule.61 Commenters said this better reflects the multi

- state nature of the electrical grid, facilitates state plan development, avoids disruption to the grid, enables load growth without waste, and better fits with the inters tate nature of the electrical power supply networks.

Response 13: While EPA agrees with many of the policy concerns expressed by the commenters, we disagree with some of the specific recommendations, which misunderstand the roles of EPA and the States under section 111(d). EPA can provide, and has provided in these emis sion guidelines, flexible approaches for States to adopt to minimize the costs of compliance and to address reliability concerns. In particular, the flexibilities provided by multi

- state plans, plans with specified trading linkages, and trading

- ready plan s would allow companies with affected EGUs in multiple states to efficiently comply through interstate trading. Thus, these emission guidelines allow States to address the policy concerns expressed by the commenters.
Ultimately, though, and as the commen ters appear to recognize, a State can decide on its approach so long as the state plan meets the minimum requirements of these guidelines. Thus, EPA cannot dictate to States that they accommodate multi

- state companies by allowing multi

state trading , alth ough EPA strongly encourages states to do so and agrees with the commenters that it may help minimize costs . If instead a state chooses to comply by, for example, retiring certain affected EGUs in order to meet a mass goal, the state may do so. And under section 116 of the Act, states may impose more stringent emission limitations than are required under these emission guidelines. See 42 USC 7416. Thus EPA is not able to provide the sort of direct guarantee to multi

- state companies that the commenters r equest.

Comment 14 : The following commenters think that EPA did not consider the interconnected nature of the power system when deciding BSER.

Commenters stated that EPA did not assess the effects each building block will have on the other building block s or on the bulk power system when simultaneously undertaken at the levels EPA believes are achievable. Commenters continued that because the goals and compliance periods proposed do not reflect the reliability implications of the changes to the interconne cted power system that will be required to implement the BSER building blocks, they do not fully depict the changes the system may have to implement, the costs that will be incurred or the time that these changes will take.

Commenters stated if reducing CO 2 is the overarching goal of the CPP, utilities should be given a planning horizon that allows flexibility to utilize the lowest emitting baseload plants that are available. Commenters said new nuclear facilities take approximately 20 years to plan, permit
, and construct. Commenters said the EPA's 2030 deadline eliminates the option of using new nuclear to significantly reduce a utility's carbon footprint; however, the CPP would require state

of

- the

- art coal plants to be shuttered and replaced with natural gas generation, which will only reduce CO2 emissions by approximately 50 percent and strand coal plant assets in Florida that are worth billions. Commenters said the portion of the goal that is derived from Building Block62 1, which is based on heat rate imp rovements for coal plants, cannot be achieved if those plants are shut down as required by the CPP.

Commenters encouraged EPA to evaluate the building blocks collectively. Commenters provided that increases in NGCC dispatch, renewables and demand

- side EE w ill cause more coal

- fired EGUs to operate less, possibly resulting in more coal

- fired EGUs operating as load

- following units as opposed to base load units. Commenters said as EPA has indicated, load

- following coal fired EGUs have less opportunity for heat rate improvements; therefore, the target established for the Building Block 1 component by EPA may not be achievable given the impacts of Building Blocks 2, 3 and 4.

Commenters stated that while they appreciate the need for state flexibility, the plan's bu ilding blocks are not equal in terms of environmental impact and climate change mitigation and should be weighted accordingly.

Commenters stated that the combination of building blocks must be considered as a whole and one part of the Proposal cannot be se vered from other parts. Commenters stated that U.S. EPA is setting these goals based on what is achievable from a national perspective and not looking at individual state characteristics such as sufficiency of the natural gas pipeline or what HRIs have already occurred at specific units. Commenters stated that if any single building block is invalidated, the perceived "flexibility" being afforded to states under this approach becomes even more misleading and if any building block is invalidated, U.S. EPA should be required to review the proposal in its entirety to ensure whatever goals remain are still adequately demonstrated to be an achievable system of emission reductions.
Response 14 : For the reasons discussed in Section V.A.7 EPA disagrees that the building blocks are not severable and that additional review would be needed. We also disagree that if a building block were invalidated state flexibility would decrease as the available reductions would remain as a compliance option. As described in the preamble and elsewhere in this RTC the factors noted above have been appropriately accounted for. Additionally, commenters’ concerns about load

- following are address ed in section V.C of the final rule preamble of the CPP and Chapter 2 of the GHG Mitigatio n Measures TSD supporting the final CPP.

Comment 15 : Commenters said EPA contradicted itself in the proposal when they said the building blocks are a combination of multiple measures working together, and then asserted that each block could stand alone if a court were to deem one unlawful. Commenters said E PA's BSER analysis shows that two of the building blocks are somewhat dependent on each other, and EPA has noted there could be a rebound effect if building block 1 were applied in isolation. Commenters stated HRIs at coal

- fired EGUs could make those gener ating units more competitive, resulting in their greater use, absent other incentives to reduce generation and CO2 emissions from coal

- fired EGUs. Commenters noted that according to EPA, building block 2 (re

dispatch) provides the necessary incentive to re duce generation from coal

- fired EGUs; therefore,63 building blocks 1 and 2 are interrelated. Commenters said a determination that building block 2 is unlawful would require EPA to reconsider its BSER determination in its entirety, or at least the inclusion o f building block 1 as a component of BSER. Commenters stated EPA makes no effort to demonstrate that building blocks 3 and 4 are interconnected with building blocks 1 and 2, so as to make the combination of all four measures a system. Commenters said EPA s uggests that the four building blocks are a system in light of the integrated nature of the electricity grid; however, commenters stated that it is the building blocks, not the regulated source category, that must be interconnected under EPA's proposed new definition of system. Commenters noted EPA repeatedly argues that the building blocks can be implemented independently of one another, which suggests they are not really a system at all. Commenters said a multiplicity of independent, free

- standing element s cannot be a system of emission reduction under any reasonable interpretation of that term. Commenters summed that EPA's argument that its BSER components are severable is incompatible with its argument that its BSER components combine to form a system of emission reduction

- either the building blocks "work[ ] together as parts of a mechanism or interconnecting network" or they are severable, but they cannot be both. Commenters continued if EPA finalizes its new approach to determining BSER, it must relinqu ish its argument that its BSER components are severable. Commenters said any finding that a building block is unlawful or invalid will require a reconsideration of the BSER determination as a whole.
Response 15 : For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reasonable and within the scope of EPA’s authority in light of the statutory text, statutory context, statutory purpose, and l egislative history. Moreover, the severability of any one building block is not incompatible with defining a system of emission reduction as a set of measures that work together to reduce emissions. For example, in the integrated grid, merely because a pow er plant is taken out of service due to a malfunction does not mean that the whole electrical system fails. For the same reason, the severability of any one building block will not require a reconsideration of the BSER as a whole. We address severability i n section VI of the preamble.

1.9.2 Alternate approach to the Best System of Emission Reduction

Comment 1: Commenters opposed basing BSER on building blocks 3 and 4, but supported credits for those measures. Commenters said utilities should then be allow ed to voluntarily use what are currently building blocks 3 and 4 as an optional crediting mechanism. Commenters said this is consistent with the language and structure of CAA 111(d), as well as existing CAA precedent, and precedent set by leading state pro grams.
Response 1: : For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reasonable and within the scope of EPA’s64 authority in light of the statutory text, statutory context, st atutory purpose, and legislative history. Accordingly we have retained BB3 but excluded BB4 from our BSER. Energy efficiency remains an important compliance option.

Comment 2: EPA has Authority to Require Reduced Utilization as Part of BSER; EPA can include reduced utilization of affected sources as BSER.

Commenters supported EPA's interpretation that the BSER can include reduced utilization of affected sources under 111(d) of the CAA, and that the authority to limit the quantity of emissions logical ly carries with it the power to interpret the BSER as involving requirements to reduce the utilization of affected sources. The commenters' support is based on the following points:

a) That the proposed BSER determinations are in accordance with President Obama's instruction to EPA to "ensure, to the greatest extent possible, that [EPA] . . . develop approaches that allow the use of market

- based instruments, performance standards, and other regulatory flexibilities; [and] ensure that the standards enable co ntinued reliance on a range of energy sources and technologies."

b)That the recognition of the integrated nature of the electric grid is central to both BSER approaches, and whether Building Blocks 2, 3, and 4 are components of the BSER or not, the electri c grid includes all generators and electricity consumers. EPA asserts that a BSER determination that recognizes the integrated nature of the electric system is consistent with the way in which the industry addresses resource planning issues. In regulated s tates, utilities generally develop integrated resource plans that set forth their strategies for meeting future demand for electricity services in a cost

- effective manner. These plans may include measures from Building Blocks 2, 3, and 4. In non

- regulated states, independent system operators ("ISOs") and regional transmission organizations ("RTOs") administer capacity auctions where owners of existing EGUs, developers of renewable capacity, and developers of demand

- side resources all compete to provide pote ntial resources for meeting projected electricity demand. 79 Fed. Reg. at 34,881.

c) That EPA's interpretation that the BSER can include the reduced utilization of affected sources is a permissible interpretation of the Act, and the legislative history of the 1970 Clean Air Act Amendments "indicates that Congress recognized that emitting sources could comply with pollution control requirements by reducing production, including retiring." Id. at 34,889. In its proposed amendments, the Senate's Committee of Public Works stated that the protection of public health, as required by the national ambient air quality standards and the emission standards for hazardous air pollutants, would require major action throughout the country, whether in the form of technolog y controls or retirements: "[m]any facilities may require major investments in new technology and new processes. Some facilities may need altered operating procedures or a change of fuels. Some facilities may be closed." S. Rep. No. 91

- 1196 (1970).65 Comment ers also noted that during its deliberations, the Senate Committee raised concerns with respect to basing the ambient air standards on the concept of technical feasibility, concluding, nevertheless, that existing sources should either meet the required sta ndard or close down: "In the Committee discussions, considerable concern was expressed regarding the use of the concept of technical feasibility as the basis of ambient air standards. The Committee determined that 1) the health of people is more important than the question of whether the early achievement of ambient air quality standards protective of health is technically feasible; and, 2) the growth of pollution load in many areas, even with application of available technology, would still be deleterious to public health.” Therefore, the Committee determined that existing sources of pollutants either should meet the standard of the law or be closed down, and in addition that new sources should be controlled to the maximum extent possible to prevent atmosph eric emissions." S. Rep. No. 91

- 1196, at 2

- 3 (1970). Commenters argued that this legislative history suggests that Congress intended for EPA to impose stringent standards under different Clean Air Act programs that, as a practical matter, could result in r educed utilization of the sources or entities regulated under those programs. Commenters added that Congress itself has established standards under the Act whose practical effect has been the reduced utilization, including the closure, of some of the regul ated units and cited as an example Title IV's Acid Rain Program.

d) That interpreting the term "best system of emission reduction" under Section 111 as including measures to decrease emissions by reducing the utilization of affected sources is consistent w ith the Act's primary purpose of encouraging air pollution prevention by states (as well as the federal and local governments). Id. Sec. 7401(c). Commenters also argued that in its findings and declaration of the Act's purposes, Congress provided "that air pollution prevention (that is, the reduction or elimination, through any measures, of the amount of pollutants produced or created at the source) and air pollution control at its source is the primary responsibility of States and local governments." Id. S ect. 7401(a)(3).

e) That although Section 111 and the Implementing Regulations do not define the terms "emission limitation" or "emission standards," Section 302(k) of the Act defines both terms as a requirement established by the states (in the case of e mission standards) or by EPA "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?" 4 2 U.S.C. sec. 7602(k). Commenters argued that the authority to limit the quantity of emissions logically carries with it the power to interpret the BSER as involving requirements to reduce the utilization of affected sources.

e) That in prior emission gui delines under Section 111(d) and Section 129 of the Act, EPA has determined that the BSER included measures implemented outside the source's boundaries that reduced their utilization and thus their emissions. Commenters discussed examples using EPA’s emiss ion guidelines for existing hospital, medical, and infectious waste incinerators, which requires state plans to include waste management plan requirements that are "at least as protective" as the applicable requirements for new sources of the same type, an d require the owner or operator of an affected facility to prepare a waste management plan for separating solid waste components from the health care waste stream in order to reduce the amount of toxic66 emissions from incinerated waste. 40 C.F.R. sec. 60.55 c; Subpart DDDD, the emission guidelines for commercial and industrial solid waste incineration units, which requires affected sources to submit waste management plans that identify "both the feasibility and the methods used to reduce or separate certain c omponents of solid waste from the waste stream in order to reduce or eliminate toxic emissions from incinerated waste." 40 C.F.R. sec. 60.2620; and similar requirements that apply to "other" solid waste incineration units under Subpart FFFF. 40 C.F.R.

sec. 60.3012. Commenters noted that the waste management measures under all these regulations are intended by EPA to reduce emissions through the reduction of inputs and "can achieve significant reductions in their waste stream, reduce the volume of waste to b e incinerated, and thereby reduce the amount of air pollution emissions associated with that waste." Thus, commenters argued that the agency has previously contemplated that certain measures that are not implemented directly at the affected source can be u sed to reduce inputs in the combustion process, and thus the utilization of these sources, without altering the technology by which those sources produce and control emissions of air pollutants.

Commenters stated that EPA's regulation of hospital, medical , and infectious waste treatment has increased the costs of incineration and, as a practical matter, has caused the closure of incinerators in favor of alternative compliance options, with a decrease from over 2,000 units in the mid

- 1990s to 57 in 2008. Co mmenters also argued that outsourcing waste management to commercial waste treatment companies today is the most common compliance option for medical incinerators, and that the availability of waste management measures for compliance has also resulted in a decrease in the percentage of medical waste incinerated, increased use of alternative treatment methods, and thus the reduced the utilization of these units.

Response 2: We appreciate these comments, which are supportive of this rule. We have refined the role that reduced generation plays in our determination of the BSER, as explained in the preamble.

Comment 3: Several commenters oppose EPA requiring reduced utilization of regulated sources as BSER stating that EPA’s alternative approach to BSER is unla wful, unreasonable and unprecedented.

Commenters argued that Section 111 is focused on technologically

- achievable emission reductions from individual sources and reduced utilization is not a technology

- based standard.

Commenters argued that since BSER is not statutorily defined, its meaning can be inferred from the CAA text which calls for emission reduction not production reduction, that it must take into account the costs of achieving the reduction which they interpret to mean that BSER carries with it p roduction neutrality, and state that it must be applicable to an existing stationary source.

Commenters argued that CAA section 111 does not authorize EPA to use reduced utilization as a system of emission reduction. Commenters argued that CAA 111 contempl ates that NSPS and67 ESPS shall be point

- source

- specific emission limitations, except for sources of fugitive or otherwise unmeasurable emissions. Commenters concluded that consistent with Congress' desire to promote economic growth, the NSPS program was int ended to allow for the construction of new facilities so long as they adopted modern, adequately demonstrated and affordable control technology, and it was never intended to restrict facilities from operating. Commenters argued that EPA’s interpretation of Section 111 is unprecedented and undermines the original congressional intent to promote economic growth by setting specific source performance standards. Commenters asserted that BSER is, and has always been, about examining “adequately demonstrated” tec hnology that can be installed at facilities in a cost

- effective manner and it was not Congress’ intent to decrease production and restrict operation of otherwise viable energy sources.

Commenters argued that effectively forcing the early retirement of all coal

- fired EGUs in several States (and a significant number of coal

- fired EGUs elsewhere) fails to take into account the remaining useful life of these facilities. Commenters stated that the Administrator commanded that states be allowed to consider the re maining useful life of a source in developing a section 111(d) plan. Commenters argued early retirements will result in significant stranded costs for facilities, particularly those that have recently incurred significant costs associated with complying wi th other federal rules such as MATS.

Commenters argued that forcing existing sources to shut down or compelling non

- use of certain sources is not a “system of emission reduction” under Section 111(d), that such an interpretation would have no clear limitin g principle, and this is contrary to the CAA requirements that any “best system of emission reduction” be “adequately demonstrated.” Further, commenters claimed that EPA has never proposed reduced utilization or operation of the source as a “system of redu ction” under Section 111. Commenters further claimed that EPA has never considered capping a source’s operation as part of a system of emission reduction in any of its previous NSPS or emission guideline rulemakings.

Response 3: In the proposal, the EPA identified reduced generation as an alternative BSER. The EPA is not taking that position in the final rule. Rather, the EPA is taking the position that substitution of cleaner generation is the BSER. While reduced generation may be a component of substitu tion that allows affected EGUs to meet their emission limits, it is not itself the BSER. Substitution allows sources to ensure the same level of product output (in this case, electricity) while reducing emissions from the regulated unit. Thus, the degree o f reduced generation that can be justified after considering costs and other factors is limited to the amount of substitute generation available on the grid.

Comment 4: Commenters stated, a performance standard calibrated in lbs

- CO2/MWh is intended to imp rove a designated facility's performance by reducing emissions per unit of output. Commenters asserted that the CCP's core strategy, however, is to reduce emissions by decreasing68 the output (electric generation) of coal power plants. Commenters asserted t hat decreasing output does not improve a source's performance and, thus, cannot qualify as BSER.

Response 4: We disagree with this comment. For the reasons discussed in the preamble, substituting higher emitting generation for lower emitting generation is a valid approach to the BSER. In addition, the performance standard for this rule may be calibrated either in lbs

CO2/MWh or as a mass limit, and reductions in generation can reduce mass emissions.

Comment 5: Congress has previously introduced curtailmen ts and operation of clean units to replace curtailments

Commenters stated, at the same time that Congress established the current BSER standard, Congress designed the CAA Title IV trading system that would lead some EGUs to shut down or reduce utilization while shifting electricity generation to other cleaner facilities. Commenters provided examples from the 1990 Clean Air Act Amendments of curtailments used to control EGU emissions that cause acid rain, the receipt of allowances for "avoided emissions" by paying for renewable energy and energy efficiency measures, and the reactivation of inoperative "very clean units" through a streamlined permitting process presumably so that these low

- emitting units could replace the curtailed generation of dirtier units. Commenters said Congress was not just aware that shifting generation from high

- emitting to low

- emitting resources was an available system for reducing power

- sector emissions, but Congress took deliberate steps to enable this
cost

- effective system for prot ecting human health and the environment.

Response 5: We agree with the comment.

Comment 6: EPA, states, and the courts, have long understood that utilization is a key determinant of emissions levels, and that reduced utilization can achieve air quality g oals

Commenters said, since the 1990's, regulators implementing the CAA have routinely relied on mechanisms such as "synthetic minor" permits and "plant

- wide applicability limits" by which owners of sources may avoid certain permitting requirements if they agree to operate facilities so as to keep pollution levels below stated regulatory annual emissions thresholds, even though their facilities' physical capacity to emit exceeds the thresholds. Commenters said these mechanisms rest on the recognition that p ollution is a function of a source's emissions rate and the time it is in use, and that limiting utilization can be an effective way of limiting pollution. The commenters said this demonstrates that, in certain instances at least, reductions in operation ( or promises not to increase operations) are appropriate regulatory tools under the Clean Air Act. The commenters said, in 1979, the D.C. Circuit recognized that under the PSD program "EPA has authority to require inclusion in state plans of provision for t he correction of any violation of allowable increments or maximum allowable concentrations, and may even require, in appropriate instances, the relatively severe correctives of a rollback in operations . . ." Alabama69 Power Co. v. Costle , 636 F.2d 323, 363 (D.C. Cir. 1979). The commenters said, Section 111's "best system of emission reduction" standard must encompass this basic mechanism for reducing emissions.

Response 6: We agree with this comment.

Comment 7: Commenters stated, EPA has also correctly obs erved that "[r]eduction of, or limitation on, the amount of generation is already a well

- established means of reducing emissions of pollutants in the electric sector." 79 Fed. Reg. at 34,889 (listing several emission control programs under which reduced ge neration is an available compliance option). The commenters said, reduced generation is already a prominent consideration in compliance planning for EGUs, and ICF's Integrated Planning Model's optimization process incorporates "reduce running regime" as on e of the main compliance options for policies that set an emissions
cap.
Response 7: We agree with this comment.

Comment 8: Commenters asserted that Congress knew how to address intermittent control strategies such as shutting down or reducing utilization of regulated sources

- and when it did, it explicitly rejected their use. Commenters cited as examples, in section 123 of t he CAA, Congress provided that "dispersion techniques"

- defined to include "intermittent . . . control of air pollutants varying with atmospheric conditions"

- "shall not . . . affect[] in any manner" the "degree of emission limitation required for contro l of any air pollutant under an applicable implementation plan." Id. section 123(a), (b); and refer to CAA sections 402(a) and 404(a). Commenters claimed that Congress rejected control strategies that vary utilization based on atmospheric conditions in fav or of strategies that reduce the rate of emissions and that the "standard of performance" language of section 111 is inconsistent with the concept of "intermittent control" strategies, and Congress's explicit rejection of these strategies in the context of implementation plans counsels against any reading of section 111(d) to authorize their

use.
Commenters argued that regulations under the proposed rule aimed at eliminating emissions by eliminating altogether the generation of electricity reflects a depar ture from Section 111.

Commenters argued that EPA in this proposal departs from its own previous understanding of Section 111(d) to treat non

- use as a BSER. Commenters said, in a background document explaining the Section 111 process, EPA notes that BSER

- based performance standards are "based on the effectiveness of one or more specific technological systems of emissions control ...." EPA, "Background on Establishing New Source Performance Standards (NSPS) Under the Clean Air Act,"; see also id. (noting th at Section 111(d) allows accommodations for existing sources based on, inter alia, "process design at a particular facility [or] physical impossibility of70 installing necessary control equipment"). Commenters argued that outside of the current proposal, eve n the Agency recognizes that BSER refers to "technological systems," "control equipment" and similar mechanical or technological improvements.

Commenters argued that the use of facility retirement under Section 111(d) cannot be justified by pointing to oth er broader provisions of the Act that are not technology

- based. Commenters said, the legal memorandum supplementing the Proposed Rule asserts that Congress has recognized reduced utilization in several contexts as a method to reduce air pollution. Commente rs asserted that the examples provided are distinguishable in important respects and do not provide a justification for the proposed approach in this rulemaking. Commenters said, first, the legal memorandum provides that "SIPs under CAA section 110, in ord er to assure reductions in NAAQS pollutants to meet attainment requirements, may need to impose emission limits on industrial sources that those sources could meet only by “retiring" and offers this as precedent for EPA's proposed approach for the ESPS. Co mmenters argued that this reference is not an applicable precedent for requiring the shutdown or reduced utilization of units because NAAQS are fixed, health

- based standards that essentially set a cap on the total emissions for all sources within a region, thus these standards differ substantially from source performance standards, which are technology

- based standards that seek to make sure that sources are taking advantage of emission reduction techniques that are available and that have been demonstrated to work. Commenters said, second, the legal memorandum looks to authority under Section 112, providing that: Congress was clear that the standards could be sufficiently stringent so that "effectively, ... a plant would be required to close because of the a bsence of control techniques." Commenters asserted that this example is distinguishable from the context of regulating existing sources under Section 111 since Section 112 requires the application of maximum achievable control technology

- a more stringent standard than the standard applicable to Section 111.

Response 8: We disagree. For the reasons discussed in the preamble and in the Legal Memorandum, our interpretation of the BSER is reasonable in light of the statutory text, statutory context, and legis lative history.
We also disagree than our interpretation is inconsistent with section 123. Section 123 was designed to discourage utilities from taking advantage of variations in “atmospheric conditions” by using dispersion techniques or tall stacks. Intermittent controls and other dispersion techniques, Congress recognized, “are techniques which seek to reduce concentrations of pollutants not by reducing the amounts of pollutants emitted into the air, but rather by relying on the dispersion of pollutants throughout the at mosphere.” H.R. Rep. No. 95

- 294, at 81 (May 12, 1977). This is so because intermittent load switching is used to reduce emissions from one powerplant but increase emissions at another where greater emissions would be permitted. Id. at 81.
Building blocks 2 and 3, on the other hand, are premised on substitute generation to lower

emitting or zero

- emitting generators, which does not vary with atmospheric conditions nor does it result in greater overall emissions. In this way, the affected source’s emissions wo uld decrease and not be offset by an overall emissions increase. Accordingly, we believe our building blocks are consistent with section 123.71 Comment 9: Commenters asserted that the CPP does not “redefine” or “redesign” any particular source. Specifically , commenters stated that the EPA’s proposal, which contemplates considering the potential for coal

- fired boilers to co

- fire with or convert to natural gas in assessing emission reduction potential in each state, does not attempt to redefine or redesign EGU sources. Commenters stated that the CPP offers states and the power sector tremendous flexibility in deciding how to reduce greenhouse gas emissions and meet state targets, and does not force any particular source to fundamentally alter its operations. Co mmenters asserted that each state will choose how to meet its goal through whatever combination of measures reflects its particular circumstances and policy objectives.

Commenters presented several arguments that the BSER determination is not limited by a ny notion of "redefining the source". First, commenters dismissed industry arguments about "redefining" or "redesigning" the source that refer to policies related to determining BACT under the Prevention of Significant Deterioration" (PSD) program of secti on 165 of the CAA. Commenters acknowledged that EPA has previously taken the position that, when determining BACT, the agency will not require the source to fundamentally alter its design as a means of reducing emissions; commenters noted the policy stems from a concern that it might be disruptive for a facility seeking a permit if EPA were to second

- guess the operator's choices. However, commenters iterated that EPA has also noted in current guidance (see EPA, PSD and Title V Permitting Guidance for Greenh ouse Gases (March 2011) at 27) that there is nothing in the statute that compels this policy against "redesigning" or "redefining" a source. The commenters noted that in other cases (Sierra Club v. EPA, 499 F.3d 653, 654

- 55 (7th Cir. 2007); Sierra Club v. U.S. EPA, 499 F.3d 653, 655 (7th Cir. 2007)) the court cited no CAA provisions directly when agreeing with EPA that it could choose not to redefine a source in the facility

specific BACT determination. Further, commenters stated that because the policy is not compelled by the statute, EPA has allowed state permitting authorities the discretion to engage in a broader analysis that may include “redefining” the source.

Commenters further urged that any limit on "redesigning" a source is not relevant to the sy stem

wide determination of BSER under section 111(d); commenters recognized that the PSD program and the section 111(d) program are substantially different, and urged that making any analogies between the two with respect to “redefining the source” is inap propriate.

Commenters argued that an emission guideline under section 111(d) governs a source category on a nationwide basis; commenters stated that emissions guidelines are intended to level the playing field for the regulated industrial sector and may r equire some facilities to make extensive changes to bring their operations up to par with other members of the source category. Therefore, commenters argued that the notion of not "redefining a source" is less relevant to nationwide standards for entire so urce categories.

Commenters also asserted that the statutory language on BACT is distinctly different from the statutory language on BSER. Specifically, commenters provided that the definition of BACT72 includes the term "system" within a much longer list o f other possible descriptions of the scope of the BACT inquiry ("production processes and available methods, systems, and techniques, including fuel cleaning, clean fuels, or treatment or innovative fuel combustion techniques"), whereas section 111(a)(1) s imply calls for standards of performance to be based on the best "system" of emission reduction, with no list of possible pollution reduction mechanisms. Commenters stated that in light of the different statutory text, structure, practical, and policy

cons iderations between the two programs, EPA is within its discretion to interpret the scope of the BSER inquiry to be broader than the BACT inquiry. Commenters also noted that although the statutes regarding BACT provide that a BACT standard should not be les s stringent than "any applicable standard established pursuant to section 7411 or 7412 of this title" (i.e., the section 111 standards serve as a "floor" for the BACT limit), this does not mean, if EPA has chosen not to "redefine the source" for BACT, it s hould not do so in the section 111(d) standards. Commenters asserted it would be perverse for a narrow policy interpretation of BACT to influence EPA's BSER determination because the latter determination would periodically elevate the BACT floor.

Finally, commenters also stated that evidence that the BSER determination is not limited by any notion of "redefining the source" is found in the regulations implementing section 111(d) (40 C.F.R. Pt. 60, Subpt. B (40 C.F.R. sections 60.20

- 60.31); commenters urged that nowhere do those regulations prohibit EPA, when establishing emission guidelines for the states to implement BSER, from considering alterations of the operations of the regulated facilities.

Response 9 : We agree with commenter that there are importan t distinctions between a source specific BACT and BSER and that the redefining the source concept is inapplicable in the BSER
context

.

Comment 10: The commenters argued, the large number of retirements that would be necessitated by EPA's guidelines provides further evidence that EPA's approach to determining BSER exceeds the agency's statutory authority. The commenters argued that requiring the
prem ature closure of coal

- fired EGUs that have not completed their planned useful lives as assumed and approved by state regulatory authorities would create a significant regulatory problem for state utility regulatory authorities and ratepayers. The commenter s argued that these plants were built to fulfill U.S. Energy Policy dating back to 1977, when natural gas and oil were in short supply, and the federal government sought to fulfill America's energy needs by reducing dependence on supplies of oil and gas an d instead encouraging a switch to coal. Commenters stated that I in 1978, the Power Plant and Industrial Fuel Use Act took effect, with the purpose of encouraging and fostering the greater use of coal and other alternate fuels

- in lieu of natural gas and pe troleum

- as a primary energy source. Commenters stated C coal

- fueled generator units built during this time period generally had 40

- 60 year useful lives, and the utilities that constructed them planned on investment returns over the entire useful lives of th e units. Commenters stated A a large amount of this generating capacity remains online, and . The commenters argued that premature closures of coal

- fired plants should not be required by new federal rules, especially73 when these same plants were built to ful fill U.S. Energy Policy. Instead, commenters asserted, as required by the CAA, EPA must consider the "remaining useful lives of the sources."

Response 10: For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our i nterpretation of the BSER is reasonable and within the scope of EPA’s authority in light of the statutory text, statutory context, statutory purpose, and legislative history.

As we explain in sections V.A. and V.B. of the preamble, our emission guidelines simply reflect an achievable emissions limit through the application of the BSER and do not in themselves require states or sources to implement the BSER. That is, EPA is responsible for determining the level of emission limitation from the source category , while states have the responsibility of assigning emission requirements to their sources that will ensure their achievement of that level of emission limitation. States may fulfil their responsibility by establishing emission standards or creating plans consistent with the guidelines. In doing so, states will be able to choose from a wide range of emission reduction measures, including measures that are not part of the BSER.

Commenter’s arguments are addressed in section VIII.G.1 of the preamble and secti on IX of the Legal Memorandum.

Comment 11: Commenters asserted states plainly have the ability to develop plans to achieve emission reductions and take advantage of the many benefits of gas

- fired generation, and sources in turn are capable of achieving co mpliance. Commenters said, a strategy to reduce emissions and take advantage of clean

- burning natural gas generation resources throughout the source category also promotes beneficial environmental and energy impacts. Commenters said, for example, NGCC util ization carries the important environmental co

- benefit of reducing emissions of conventional pollutants, in addition to reducing CO2 emissions. [See, e.g., 79 Fed. Reg, at 34,841. See, e.g., RIA at 4

- 17.] Commenters said, moreover, expanding utilization of domestically produced natural gas supplies promotes fuel diversity and energy independence. Commenters said, since emission reduction measures within the regulated source categories have already been undertaken by sources covered by the proposed rule, the y may be considered to be adequately demonstrated.
Response 11: EPA has included redispatch to existing natural gas in the final BSER.

Comment 12 : Commenters opposed the alternative BSER calculation method that relies solely upon building block 1 for HRI at coal facilities. Commenters said this approach would not be consistent with statutory requirement for the BSER as it does not adequately consider proven existing state frameworks for reducing carbon emissions or the greater usage reductions from existi ng coal facilities through efforts put forth in blocks 2, 3 and 4.74 Commenters stated that building block 1 is the only block in which EPA attempts to curtail emissions from designated facilities. Commenters believed building block 1 to be unlawful for othe r reasons, but is the only block which aims to accomplish what all BSER is required to do: derive improvements from an existing source and consider the remaining useful life of the facility in determining whether and, if so, to what extent, to require such reductions. Commenters continued that the "outside

- the

- fence

- line" and "beyond

- the

- source

- category" measures in BSER, is contrary to both law and best practice. Commenters said that EPA must establish procedures and emissions guidelines, and each state th en develop a plan which establishes standards of performance for any existing source for any air pollutant. Commenters questioned EPA's understanding of the terms "performance" and "existing source."

Commenters said the amount of reduced utilization would reflect all of the policies and emission reductions associated with building blocks 2, 3, and 4. Commenters said those policies would not, however, be express components of state plans, but would instead be complementary measures. Commenters said EPA has n o authority to establish a standard of performance based on reduced utilization of a source, and this alternative is therefore unlawful. Commenters said under section 111, a standard of performance is a standard for "emissions of air pollutants." Commenter s said it is not a standard for operation of the source. Commenters said there is no ambiguity in the statute that would allow EPA to read this limitation out of section 111. Commenters said every indication is that Congress intended this provision to be c onstrued narrowly. Commenters continued section 111(b)(5) prohibits EPA from imposing "any particular technological system of continuous emission reduction to comply with any [NSPS]." Commenters said if a particular technology requirement is a step too far , ordering cessation of operations cannot be a permissible option. Commenters said a standard of performance is required to address a source's maximum design emission rate, not its total emissions. Commenters said a section 111 standard of performance must reflect measures that reduce a source's rate of emissions. Commenters said the CAA addresses this matter specifically, clearly distinguishing between emission standards and performance standards. Commenters said an emission standard "limits the quantity.. .of emissions of air pollutants." Commenters said performance standard, on the other hand, requires "continuous emission reduction." Commenters said imposing a limit on operation does not require continuous emission reduction.

Response 12 : For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reasonable and within the scope of EPA’s authority in light of the statutory text, statutory context, statutory purpose, and legislative history. While the BSER is not based on reduced utilization as a stand alone measure, we address reduced utilization in section V.B. of the preamble as well as the Legal Memorandum.

Comment 13 : Commenters stated EPA’s proposal to utilize 'beyo nd the fence line' measures to develop a calculation of BSER that would apply to affected units on the grounds that reduced generation remains BSER cannot withstand scrutiny, as activities that lie outside the control of the affected unit cannot possibly b e proven "technically feasible." Commenters said because75 EPA is relying on BB measures (such as RES or EE mandates) that have not been adopted in many states it is arguable whether these measures are "adequately demonstrated."Commenters stated EPA points t o other CAA provisions that the Agency argues allow for requirements to reduce operations. Commenters said these programs do not support such an interpretation of section 111. Commenters said the NAAQS program and the residual risk provisions of section 11 2 impose general requirements to protect the public health. Commenters said Section 111, on the other hand, requires source

- specific standards of performance found to be achievable and
cost

- effective at individual sources. Commenters said voluntary shutdow ns contained in settlement agreements provide no support for the conclusion that EPA may impose such obligations via regulation. Commenters continued if EPA were able to establish operation level

based standards, it would effectively be authorized to deter mine the size of any source. Commenters said this is fundamentally at odds with the principle that EPA cannot "order a fundamental redesign of the facility." See UARG v. EPA, 134 S. Ct. at 2448.

Commenters stated in the alternative methods outlined in the NODA, the underlying goal

- setting algorithm governing building blocks 3 and 4 provide emissions reductions through displacement of all of New Jersey's coal and oil

- fired generation along with a significant amount of existing NGCC generation. Commenters sai d for the reasons previously identified in the proposed application of building block 2, this is not a realistic or a reasonable outcome.

Commenters stated EPA's proposed interpretation would give the agency effectively unlimited authority to decide which types of generation, or production process of any product, will be allowed within the United States. Commenters said the EPA is attempting to argue that it has the authority to set BSER to force companies to reduce operations or cease business operations a ll together based solely on the EPA decision that the product that company produces can be produced using a different technology that the EPA finds to be acceptable. Commenters said not only is this interpretation a gross overreach of authority, it is also clearly contrary to section 111, and commenters quoted section 111(b)(5) states that "nothing in this section shall be construed to require, or to authorize the Administrator to require, any new or modified source to install and operate any particular tec hnological system of continuous emission reduction to comply with any new source standard of performance." Commenters said blocks 2 and 3 in particular specifically meet the FCAA definition of "technological system of continuous emission reduction", i.e., a technological process for production or operation by any source which is inherently low

polluting or nonpolluting. Commenters said while the EPA may attempt to argue that this provision would only apply to new source performance standards, it would be ir rational of the EPA to assume that Congress' intent was the EPA should establish more stringent emission standards on existing sources than it has determined to be feasible for new sources; yet, this is exactly what the EPA has proposed with this rule unde r section 111(d) and its prior proposal for new sources under section 111(b). Commenters added the state goals for Texas and many other states, are more stringent than the EPA's proposed standards of 1,100 lb/MWh for new coal

- fired EGUs and 1,000 lb/MWh fo r new large NGCC units, and that there are no existing fossil fuel

fired EGUs that can meet the 791 lb/MWh final standard that the EPA has proposed for Texas, thereby forcing the state to rely on RE generation facilities. Commenters said the EPA may76 attemp t to argue that they are not requiring any source to install any particular technology because the proposed rule only establishes emission guidelines for the states, but given the lack of alternatives for the states to comply with their state goals without requiring reduction in generation at some sources and expansion of RE, the effect is still the same. Commenters said the EPA is requiring the installation of particular technological systems of continuous emission reduction, using the states as the interm ediary.

Commenters stated EPA's proposed "alternative approach" for the BSER, under which affected EGUs would be required to reduce their mass emissions by the amount achievable if building blocks 2, 3, and 4 were applied is inappropriate. Commenters said EPA lacks the statutory authority to force these affected EGUs to shut down or operate for fewer hours so that natural gas, RE sources, or demand side efficiency improvements can fill that void. Commenters said this "alternative" reflects a distinction wit hout a difference. Commenters said the alternative approach imposes the same requirements and leaves states with the same options it had under the first building

- block approach. Commenters said it is an alternative approach in name only, not in substance. Commenters said at its core, the alternative approach is just an attempt by EPA to disguise its impermissible "outside the fence" interpretation of BSER.

Commenters stated EPA's "alternative" approach to BSER is unjustifiable. Commenters said EPA identifi es the "system of emission reduction" to be, in the alternative, the reduction of affected EGUs' mass emissions that are achievable through reductions in generation, in addition to the efficiency gains set out in building block 1. Commenters said this form ulation is far afield from what can be required of a state plan under section 111(d), as a section 111(d) plan "establishes standards of performance for any existing source." Commenters said the plain language construction of the phrase "for any existing s ource" can only mean that the emissions standard must be set at a level that a source itself can achieve. Commenters said this is consistent with Section 111(d)'s focus on control technology at the particular source, as will be discussed later in these com ments. Commenters said finding that a reduction of utilization at an EGU through building blocks 2, 3 and 4 could satisfy a standard of performance for a source would set EPA up in the role as an environmental super

- regulator who could require any industry subject to NSPS to produce less and its associated customers to consume less, thereby substituting the agency's judgment on investment and production decisions for that of the company's owners and operators, undermining commercial needs and expectations. Commenters said Congress could not have given EPA the authority to micromanage the nation's economy through the CAA.

Commenters stated EPA cannot rely on other, arguably broader provisions in the CAA to expand its authority under section 111(d). Commenter s said EPA's reliance on the use of reduced operation or facility retirement as a means of complying with a national ambient air quality standard is misplaced. See 79 Fed. Reg. at 34,889; Legal Memo at 83. Commenters noted EPA's explanation, 40 Fed. Reg. a t 53,343, that section 111 standards of performance are technology

based and differ from the health

- based NAAQS that essentially set a cap on the total emissions for all sources within a region. Commenters said because a NAAQS sets a fixed ambient air qual ity standard that must be collectively achieved by all sources in a given region, it differs77 from the source

- specific BSER analysis that must be applied to set performance standards for existing sources under section 111(d). Commenters said EPA's reliance on the legislative history of Section 112 is equally misguided (See EPA, Legal Memo at 83), and while technology

- based in the first instance, section 112 applies a more stringent MACT standard than the BSER standard applied under section 111. See 42 U.S.C. section 7412(d)(2). Commenters said for existing sources, EPA is required to apply that standard in a rigid and mechanical way by calculating "the average emission limitation achieved by the best performing 12 percent of the existing sources." Id. Section 7412(d)(3). Commenters said courts have held that EPA lacks the discretion to deviate from this formula to address specific challenges faced by individual sources. See Cement Kiln Recycling Coalition v. EPA, 255 F.3d 855, 880 (D.C. Cir. 2001) ("EPA may

no t deviate from section 7412(d)(3)'s requirement that floors reflect what the best performers actually achieve by claiming that floors must be achievable by all sources using MACT technology."). In contrast to this rigidity, commenters stated, section 111(d ) directs states to take a flexible approach in setting standards of performance that permits the application of less stringent standards of performance based on source

- specific challenges. See 42 U.S.C. section 7411(d)(1). Commenters said these important differences suggest that reduced operations or forced retirements are not permitted as standards of performance under section 111(d).
Commenters stated that EPA seeks to justify the rule by asserting that "reduced generation by higher

- emitting sources is o ne of the compliance options available to and used by EGUs to comply with the CAA acid rain program in CAA Title IV, as well as the transport rules that we refer to as the NOx SIP Call and the Clean Air Interstate Rule (CAIR)." 79 Fed. Reg. at 34,889. Comm enters said EPA fails to recognize the critical difference between standard setting and compliance. Commenters said they fully support flexible compliance options that allow regulated entities to engage in voluntary programs to identify least

- cost options

- including the option of reduced generation

- for complying with emission reduction goals; however, in the programs described by EPA, reduced generation was an option available for compliance; it was not a factor used to set the emissions limits established f or those trading programs. Commenters concluded there is no basis for EPA to rely on those programs in order to support the inclusion of reduced generation at the standard setting stage, and that EPA has failed to identify any precedent within the Clean Ai r Act that would allow it to mandate the retirement of coal

- fired EGUs when establishing standards of performance under Section 111(d).

Commenters stated that EPA attempts to backstop its lack of legal authority for blocks 2

- 4 by presenting an alternate l egal argument based on the principle that reduction in generation at the affected EGUs is itself BSER. The commenters said EPA's argument is flawed, because reduction in generation is not the application of any system; it is an effect resulting from other activities. The commenters said EPA cites examples such as the FCAA Acid Rain Program, the NOX SIP Call rule, and CAIR as justification, rationalizing that reduction in generation is one of the compliance options available to and used by EGUs to comply wit h these requirements. The commenters agreed that reduction in generation may be an option for companies to comply with

mass

- based regulatory requirements such as those cited by the EPA, but pointed out that there is a fundamental difference between a reduc tion in generation being an option for compliance with78 a regulatory requirement and being the sole basis for the regulatory requirement. Commenters said the standards under the regulatory requirements which the EPA cites as examples were developed based on application of adequately demonstrated pollution control technology, and, as such, the examples the EPA provides are irrelevant and do not establish the precedent the EPA claims.

Response 13 : For the reasons discussed in section V.A. and V.B. of the pream ble and in the Legal Memorandum, our interpretation of the BSER is reasonable and within the scope of EPA’s authority in light of the statutory text, statutory context, statutory purpose, and legislative history.

Comment 14 : Commenters stated the alternative BSER continues to be based on the beyond

the

- source measures that constitute building blocks 2, 3, and 4. Commenters said reliance on the building blocks as complementary measures, rather than as formal plan components, while nevertheless effec tively mandating their use through the proxy of an operation or emission cap, does not rescue EPA's Proposal. Commenters said those measures remain unlawful components of BSER regardless of the format in which EPA chooses to present them.
Response 14 : For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reasonable and within the scope of EPA’s authority in light of the statutory text, statutory context, statutory purpose, and legis lative history.

Comment 15 : Commenters asked that EPA withdraw the Proposed Rule and initiate a direct dialogue with North Dakota and the states to develop an alternate approach based on governing law, recognition of varying state circumstances and energy make up, state infrastructure and available technologies for existing power generation facilities.

Response 15 : For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reasonable an d within the scope of EPA’s authority in light of the statutory text, statutory context, statutory purpose, and legislative history.

Comment 16 : Commenters supported the alternative BSER stated that many existing programs for reducing electricity

- sector GHG emissions work precisely because high emitting sources reduce generation as low

- emitting sources increase their generation. Commenters gave the example of the New York State Department of Public Service that conducted extensive modeling to predict the economic and environmental effects of that state's RPS and concluded that increased renewable energy generation under the policy would displace gen eration from high

emitting sources, primarily natural gas

- , coal

- , and oil

- fired units. Commenters also referenced a recent white paper that concluded that renewables introduced in states with RPSs in the RGGI region almost entirely substitute for coal bas e load. Commenters also noted EE programs and79 noted freely available tools, such as EPA's AVERT, allow policymakers, utilities, and other stakeholders quantify the CO 2 , NOx, and SO 2 impacts of state and multi

- state renewable energy and energy efficiency pr ograms. Commenters said EPA has long encouraged states to take advantage of energy efficiency
measures to cost

- effectively control EGU emissions such as the 1998 NOx SIP Call Rule that allowed states to set aside allowances in their cap

- and

- trade programs for reductions achieved through RE and EE measures and, in 2007, seven states had set

- asides for these kinds of reductions. Commenters said, implementing the NOx SIP Call with set

- asides for EE reductions, states have noted the economic benefits of achiev ing reductions in this manner. Commenters referenced CAIR RE and EE measures adopted and Connecticut's set aside 10% of its summer ozone season allowances for RE and EE projects.

Commenters stated, in the marketplace, renewable generation and EE displace generation at affected units because they can meet electricity demand at lower marginal cost. Commenters referenced a recent article that described the mechanism by which low

- emitting sources displace higher

- emitting sources in electricity capacity markets

. Commenters stated, the particular generation that a low

- or zero

- emitting resource will replace

- and, consequently, the resultant emissions reductions on the grid

- depend on the resource's location. Commenters said, specifically, the units that set a t ransmission region's marginal price have historically been a primary driver of how low

- or zero

- emitting resources reduced generation at affected units. Commenters said, historical data on these "locational marginal units" demonstrates the ability of clean energy and EE to displace generation from high

- emitting sources. Commenters said, models for estimating the GHG emission reductions from EE programs incorporate data about the hourly marginal emissions rates for local electricity, even when the programs d o not place EE resources on the electricity capacity market.

Response 16 : EPA appreciates these supportive comments.

Comment 17 : Commenters stated BSER should be based on only inside

- the

- fence application and should apply directly to the affected EGU and not be a system comprised of multiple affected EGUs and "entities." Commenters said it is unlawful for EPA to develop a BSER that requires emission increases from existing NGCC units. Commenters said EPA continues to cite concern that HRIs at coal

- fired EGUs might make them more competitive and they will therefore increase their generation making them less effective at reducing CO2 emissions; the "rebound effect." Commenters said EPA uses this to further justify increased utilization of NGCC, which Ohio EPA notes increases their CO2 emissions. Commenters said they are having difficulty with U.S. EPA's concern regarding a potential "r ebound effect." Commenters said they cannot identify another federal or state regulatory requirement that requires significant monetary investment in a control strategy that reduces emissions (such as HRIs) coupled with an expectation that the investment s hould result in reduced operation. Commenters said the principle behind investment in control is that more efficient and well

- controlled facilities will80 operate more than less efficient and controlled facilities. Commenters said under building block 1, EPA is requiring large investments to make coal

- fired EGUS more efficient; however, coupled with building block 2, these same EGU owners are instructed to operate less, or in a cycling manner, which in turn reduces the efficiency of these units. Commenters sa id this is counter to basic engineering principles and common sense, and this is not the manner in which section 111(d) is intended to be implemented. Commenters said "rebound effect" should not be a consideration under this proposal and believes this is a nother reason why this proposal needs to be completely reconsidered. Commenters said EPA acknowledges it is less cost

- effective to implement building blocks 1 and 2 together than to implement building block 1 alone, and this is an additional reason why inc reased utilization of NGCC is not appropriate as the BSER.
Response 17: For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reasonable and within the scope of EPA’s authority in light of the statutory text, statutory context, statutory purpose, and legislative history. We discuss substitute generation under building block 2 in section V. of the preamble.

Comment 18 : Commenters stated EPA may not group coal

- fired and NGCC unit s in a single target. Commenters said EPA's obligation is to provide a guideline document that determines the BSER for the existing stationary sources, by category, if needed. Commenters said EPA's proposed rule establishes no such guideline applicable to a category of sources but instead sets a target for a state while acknowledging that there are substantial differences between EGUs within the state. Commenters said EPA's grouping of such disparate units under a common goal violates section 111 because it is not the BSER for NGCC units when the state Interim and Final Goal greatly exceeds what those units can achieve in practice. Commenters said EPA's state

wide goal violates section 111 for coal

- units in states with low Interim and Final Goals because it is not "adequately demonstrated" for such units. Commenters said EPA's goal violates equal protection because it treats similarly situated units disparately without meaningful basis. Commenters said this is particularly true in Arizona, which must reduce e missions by 52% while most other states have less stringent reduction requirements, and six states have final goals that are higher than Arizona's 2012 baseline emission rate.
Response 18 : In the final rule EPA has adopted separate coal and gas rates.

Com ment 19 : The following commenters said the 111(d) standards cannot be more stringent than the 111(b) standards.

Commenters stated setting goals for existing units that are more stringent than the goals for new units will not survive legal challenge. Commen ters said the CAA requires a Section 111(b) standard before there is a Section 111(d) standard, for good reason. Commenters said the Section 111(b) standard for new units should set a floor for existing units under Section 111 (d).81 Commenters said it is si mply not reasonable to set standards for existing units that are more stringent than the standard for new units.

Response 19 : We disagree that the section 111(d) standards are more stringent than the section 111(b) standards. Further, we explain in the Leg al Memorandum why the section 111(b) and (d) standards are based on different determinations of the BSER. The use of the term “ordinarily” in the 1975 preamble reflects the agency’s long term understanding that standards under 111(d) may differ from those under 111(b). In any case, the statute does not dictate that 111(d) standards must be less stringent in all cases. Rather, Congress recognized that the agency would be faced with different sets of challenges in regulating existing rather than new sources. Congress addressed this in part by establishing a cooperative

- federalism planning regime under section 111(d) similar to section 110. Reflecting this, the guidelines include significant flexibilities, including the ability to trade and relatively long peri ods for compliance

Comment 20 : The following commenters believe that Building Blocks 1 and 2 contain the correct affected units, but disagree with the method proposed.

Commenters stated the alternative of using only the first two building blocks is more realistic and defensible than using all four building blocks; however, neither EPA nor South Dakota have the authority to require one business to operate above its actual capacity and require another business to offset that dispatch by reducing its output, as required by building block 2. Commenters said EPA's building block 1 is also flawed, and South Dakota recommends that both building blocks be withdrawn and replaced with a proposal that allows states to conduct a

case

- by

- case analysis for establishing the BSER for each existing electric generating units.

Response 20 : For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reasonable and within the scope of EPA’s authority in light of the statutory text, statutory context, statutory purpose, and legislative history. The commenter has not provided a sufficient basis for us to conclude that their alternative would be appropriate under 111 or constitute BSER.

1.9. 3 Evaluation of Building Block 1, heat rate improvements, against the BSER criteria

Comment 1 : Commenters stated BSER Building Block 1 is the only component of BSER within the regulatory jurisdiction of EPA and WDEQ. Commenters said even as WDEQ considers this block within its regulatory jurisdiction, there is no precedent for requiring reduced heat rates through a NSPS.82 Response 1 : For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reasonable and within the scope of EPA’s authority in light of the statutory text, statutory context, statutory purpose, and legislative history. As we also explain in sections V.A, V.B, and V.C of the preamble, our emission guidelines simply reflect a n achievable emissions limit through the application of the BSER and do not in themselves require states or sources to implement the BSER. That is, EPA is responsible for determining the level of emission limitation from the source category, while states h ave the responsibility of assigning emission requirements to their sources that will ensure their achievement of that level of emission limitation. States may fulfil their responsibility by establishing emission standards or creating plans consistent with the guidelines. In doing so, states will be able to choose from a wide range of emission reduction measures, including measures that are not part of the BSER. Accordingly, contrary to commenters’ contention, this rule does not “requir[e]” heat rate improve ments.

Comment 2 : The following commenters believe EPA needs to consider states with EGUs that are well

- run and maintained so they operate efficiently.

Commenters stated reducing generation from higher

- emitting affected EGUs can be carried out within the fence

- line of a plant, and is a viable option for achieving CO2 emission reductions; however, several North Carolina EGUs have already shifted to intermediate operations and reduced their CO2 emissions. Commenters said the options for states that have take n action prior to 2012 may not have the flexibility to further reduce generation while continuing to meet the electricity demand in a reliable and affordable manner. Commenters added a multi

- year average should be used in conjunction with the statutory fac tors for developing BSER on a case by case basis.

Commenters stated EPA's approach fails to consider whether an individual source has already adopted best practices and made equipment upgrades. Commenters said this inequitable outcome is a direct result of EPA's decision under building block 1 to select a uniform percentage target for reducing emissions, rather than a uniform emission rate. Commenters said EPA has proven it can adopt a BSER that does not penalize existing low

- emitting sources. Commenters sa id for example, pursuant to 40 C.F.R. 60.31(d), existing sulfuric acid production units must not emit more than 0.25 grams of sulfuric acid mist per kilogram of sulfuric acid produced. Commenters said sulfuric acid production units that were already achiev ing that emission rate when the rule was adopted were not expected to achieve additional emission reductions. Commenters said EPA it fails to justify setting a uniform percent

- reduction target and account for the hardship that would be placed on units that already achieved efficiency improvements.

Commenters stated the 6% HRI proposed is not possible for the plants like the TS Power Plant in Nevada. Commenters said it is one of the most efficient in the country and has only been in service for six years, l imiting its opportunities to make heat rate improvements. Commenters said the TS Power Plant reviewed the measures that EPA proposed as reasonable opportunities for83 improving heat rate and concluded that only one of them

- a neural network

- may be feasibl e at the facility and could result in a heat rate improvement of between 0% and 1.5% based on the predictions in the S&L Report. Commenters said while the S&L Report estimated a heat rate improvement of between 0% and 1.5% for a neural network, Newmont has no basis to believe that this would actually improve the heat rate at the TS Power Plant, much less by anything approaching 1.5%. Commenters said regardless of the availability of heat

- rate improvements at other Nevada facilities, EPA's assumption that a state

- wide average of 6% is reasonable is flawed and cannot form the basis for BSER.

Commenters stated Building Block 1 stands alone as the sole block aiming to accomplish what all BSER is required to do: derive emission improvements from an existing sour ce. Commenters said EPA's emission reduction targets for Block 1 are unrealistic and unsupported by any administrative record put forward to date. Commenters said there is no precedent or record basis for suggesting that emission reductions of 6 percent ar e achievable by any source, let alone

across

- the

- board. Commenters said the 6 percent assumption cannot be squared with the existing landscape of utility assets. Commenters said in order to be in compliance with other regulatory efforts, many existing faci lities have already made substantial investments in emission reductions. Commenters said there is scant evidence to suggest that these facilities can do much more. Commenters said there is no administrative record to support the efficacy of such efforts,

o r their cost

- effectiveness when placed in the context of the remaining life of a given facility. Commenters said it is precisely this unit

- by

- unit assessment that the Clean Air Act requires and that EPA's proposed rule abandons.

Commenters stated Building Block 1 must be adjusted to account for the fact that six percent heat

- rate improvements at coal

- fired EGUs may not be achievable in every state because of several limiting factors, including previous state or private action to i mprove energy efficiency of such units, installation of pollution control technology that limits heat rate improvements, decreased operation due to NGCC redispatch, and low

- capacity factors.

Commenters stated EPA fails to consider the substantial ongoing efforts that companies undertake to maximize heat rate. Commenters said many regulatory authorities have tools and incentives to encourage electric utilities to operate generating plants efficiently, which

means many of the most cost

- effective projects and best practices are already accomplished.

Commenters stated most of the cost

- effective improvements identified in the S & L study have already been implemented in Kentucky, and many of the more significant improvement measures are planned for completion i n association with the installation and replacement of air emission control systems to meet new requirements of the NAAQS and MATS regulations. Commenters said EPA should recognize that the addition of these control systems will decrease unit efficiency be cause of the added parasitic loads and increased flue gas system pressure drops. Commenters said resulting from this remaining efficiency that can be gained at existing coal

fired utilities is minimal. Commenters added many accomplished gains in efficiency will diminish over time as natural degradation occurs.84 Response 2 : For the EPA’s response to these comments, see section V.C of the final rule preamble of the CPP and Chapter 2 of the GHG Mitigation Measures TSD supporting the final CPP. As described in these documents, the EPA’s assessment of average potential heat rate improvement is based on an analysis of historical performance

— i.e. , what actual existing coal

fired EGUs have previously achieved

— and has been lowered since the proposal. This backward

lo oking assessment provides a conservative estimate of the potential heat rate improvement (and accompanying reductions in CO2 emission rates) that affected EGUs can achieve on an average basis, as described in section V.C of the preamble and Chapter 2 of th e GHG Mitigation Measures TSD. The precise amount of heat rate improvement feasible at individual EGUs will vary. The final CPP provides states the flexibility to develop plans with emission standards that more precisely take into account the potential hea t rate improvement of individual EGUs

— should states desire to consider potential heat rate improvement at all. Furthermore, if an affected EGU cannot meet the particular emission standard solely because it has below

- average potential to reduce emissions th rough heat rate improvements, then in instances where the EGU’s state plan allows emissions trading, the EGU can acquire credits or allowances from affected EGUs that have above

- average potential.

Comment 3 : Commenters stated that the EPA is proposing a 6 % heat rate improvement for the state of Minnesota, even amidst the many heat rate improvements Minnesota utilities have already completed. The commenters said EPA overlooked in their TSD analysis the degree of capital based efficiency projects already dep loyed in Minnesota, and how operational efficiency improvements experience degrading performance between outages. Commenters said due to this, when EPA cited utility performance improvement data referenced directly after a maintenance outage, EPA should on ly have recognized about half the performance gained as reflecting average improvements over time. Commenters said since Minnesota utilities are practicing a mature heat rate improvement program, efficiency enhancements on Minnesota coal units for heat rat e and duty cycle preservation practices should be viewed as sustaining unit performance over time.

Commenters stated a State cannot simply mandate that existing coal

- fired EGUs curtail operations or close prematurely, as they have an obligation to ensure t hat there is sufficient electricity generating capacity to meet the demand of their citizens. Commenters said in many States, existing coal

- fired electricity generating capacity is needed to meet electricity demand, and States cannot allow, much less manda te, a significant reduction in coal

- fired electricity generating capacity without adequate assurances that the lost generating capacity can be seamlessly replaced. Commenters said contrary to EPA's suggestion, States cannot simply assume that other low

- car bon sources will step in to fill the void left by forced reduction in coal

fired electricity generating capacity. Commenters said to meet their legal obligation to provide reliable electricity to their residents, States must necessarily couple any mandator y reduction in coal

- fired electricity generating capacity with mandatory increases in other forms of generating capacity. Commenters added the only way that a State can achieve EPA's proposed emission reduction targets while maintaining grid reliability is to adopt a portfolio approach that imposes85 legal obligations on other entities. Commenters said because such a portfolio approach is unlawful, EPA's proposed emission reduction, as developed under EPA's Building Block structure are, by definition, unsuppo rted and, therefore, arbitrary and capricious.

Response 3 : EPA is not finalizing the proposed “portfolio” approach, and will not accept state plans that attempt to impose emission standards or other CAA compliance obligations on entities other than affecte d EGUs. The state measures approach provides a path for a state to achieve the emission performance level as expressed as a state goal in a way that avoids placing enforceable emission standards on affected EGUs (unless and until the backstop is triggered) . States will have a wide range of flexibility in choosing how to demonstrate their affected EGUs are meeting a state goal.

For the EPA’s response to the remainder of this comment, see section V.C of the final rule preamble of the CPP and Chapter 2 of the GHG Mitigation Measures TSD supporting the final CPP. As described in these documents, the EPA’s assessment of average potential heat rate improvement is based on an analysis of historical performance

— i.e. , what actual existing coal

fired EGUs have previously achieved

— and has been lowered since the proposal. This backward

looking assessment provides a conservative estimate of the potential heat rate improvement (and accompanying reductions in CO2 emission r ates) that affected EGUs can achieve on an average basis, as described in section V.C of the preamble and Chapter 2 of the GHG Mitigation Measures TSD. The precise amount of heat rate improvement feasible at individual EGUs will vary. The final CPP provide s states the flexibility to develop plans with emission standards that more precisely take into account the potential heat rate improvement of individual EGUs

— should states desire to consider potential heat rate improvement at all. Furthermore, if an affec ted EGU cannot meet the particular emission standard solely because it has below

- average potential to reduce emissions through heat rate improvements, then in instances where the EGU’s state plan allows emissions trading, the EGU can acquire credits or all owances from affected EGUs that have above

- average potential.

Comment 4 : Commenters stated dispatch on a basis other than reliability and economics, as proposed by the EPA, is likely incompatible with current Utah law. Commenters said reconciling legal in consistencies and responding to a variety of potential legal actions will further increase timelines.
Response 4 : As explained in Section VIII of the preamble, EPA’s recognition that certain states may need time to make changes to state law depending on how they decide to structure their state plans was among the reasons for providing states with the ability to obtain an extension beyond September 6, 2016. Given the extension, the overall three

- year deadline for final submittals is consistent with the three

- year deadline for SIP submittals under section 110(a), and reasonable by comparison with similar or shorter deadlines for submittal of attainment plans, as discussed in Section VIII.E.9.a of the preamble.86 Comment 5 : The following commenters said EPA didn't consider the impacts that controls necessary for other rules with have on the heat rate of EGUs.

Commenters stated that EPA ignored the energy penalties (adversely affecting heat rate) associated with recently completed emission control projects due to EPA rulemakings. The commenters said that affected units will be forced to overcome the energy penalties from addition of these controls and then the additional 4 to 6 percent improvement from this rule. The commenters said that the EPA has failed to provide a reasonable analysis of whether the heat rate improvement targets are achievable, and that EPA's assessment of heat rate improvement potential is arbitrary and capricious.

Commenters stated LG&E and KU have already implemented most of the cost

- effective improvements identified in the S & L study, and many of the more significant improvement measures are planned for completion in association with the installation and replacement of air emission control systems to meet new requirements of the NAAQ S and MATS regulations. Commenters said EPA should recognize that the addition of these control systems will decrease unit efficiency because of the added parasitic loads and increased flue gas system pressure drops. Commenters said as a result, remaining efficiency that can be gained at existing coal

- fired utilities is minimal. Commenters said many accomplished gains in efficiency will diminish over time as natural degradation occurs.

Commenters stated the additional pollution control equipment needed for compliance with the MATS rule will further deteriorate heat rate and overall unit efficiency.

Commenters stated in EPA's proposed portfolio approach, the proposed emission reduction targets are arbitrary and capricious because they cannot be achieved by e xisting fossil fuel

- fired EGUs alone. Commenters said to obtain EPA approval, a State implementation plan must identify an "emission performance level for each plan performance period" that is "equivalent to or better than the level of rate

- based CO2 emiss ion performance goals" established by EPA. See 79 Fed. Reg. at 34,951 (proposed 40 C.F.R. Section 60.5740(a)(3)). Commenters said each emission standard included in the plan must be quantifiable, non

- duplicative, permanent, verifiable, and enforceable with respect to an affected entity. Commenters continued there are no adequately demonstrated emission reduction technologies available to coal

- fired EGUs that can achieve the emission reduction targets proposed by EPA. Commenters said EPA has appropriately ru led out all emission reduction options other than heat rate improvements at coal

fired EGUs, and most EGUs cannot achieve even a six percent improvement in heat rate, see VII.E.1., supra. Commenters added even if a 12% improvement in heat rate the upper ra nge of EPA's BSER projections were possible, coal

- fired EGUs would still fall well short of achieving EPA's proposed emission reduction targets. See 79 Fed. Reg. at 34,859. Commenters said as a practical matter a State implementation plan would have to eit her impose mandatory limits on operating hours or mandate facility closures in order to satisfy EPA's criteria.87 Commenters stated both of these alternative methodologies are superior to the methodology used by EPA in the Proposed Rule in that they account for technical feasibility and equity considerations. Commenters said any standard that is not based on a technically feasible reduction at the individual unit or within the border of a state is arbitrary and artificially produces a more stringent emission reduction for the state. Commenters said the standard violates 111(d) principles in that it is no longer based on BSER but is instead based on a fictional target. Commenters said the alternative methodologies discussed above are more equitable because they do not penalize states by requiring additional HRI where little to no opportunity exists because the states are already leaders in achieving low heat rates.

Response 5 : EPA is not finalizing the proposed “portfolio” approach, and will not accept state pla ns that attempt to impose emission standards or other CAA compliance obligations on entities other than affected EGUs. The state measures approach provides a path for a state to achieve the emission performance level as expressed as a state goal in a way t hat avoids placing enforceable emission standards on affected EGUs (unless and until the backstop is triggered). States will have a wide range of flexibility in choosing how to demonstrate their affected EGUs are meeting a state goal. Furthermore, the fina l CPP provides states the flexibility to develop plans with emission standards that more precisely take into account the potential heat rate improvement of individual EGUs

— should states desire to consider potential heat rate improvement at all. Furthermore , if an affected EGU cannot meet the particular emission standard solely because it has below

- average potential to reduce emissions through heat rate improvements, then in instances where the EGU’s state plan allows emissions trading, the EGU can acquire c redits or allowances from affected EGUs that have above

- average potential. For the EPA’s response to the remainder of this comment, see section V.C of the final rule preamble of the CPP and Chapter 2 of the GHG Mitigation Measures TSD supporting the final CPP.

Comment 6 : The following commenters disagree with EPA's proposed 6% heat rate improvement and suggest an alternative method.

Commenters stated that building block 1 is the only potential approach for reducing carbon emissions from EGUs that is cons istent with section 111(d)'s application to sources. Commenters disagreed with the approach proposed and suggested that rather than a fixed average CO2 emission limit rate for each state, BSER for existing coal

- fired EGUs should be limited to possible heat rate improvements, determined on a case

- by

- case basis and considering the statutory requirements of cost, remaining useful life, and impact on energy reliability. Commenters said EPA's indefensible attempt to define a specific limit as BSER fails to accou nt for the recommendation by Sargent & Lundy to provide flexibility by performing power plant energy audits to determine the availability of cost

- effective equipment upgrades and commensurate improvements in heat rate. Commenters said their suggested appro ach allows for improvements to be achieved at each EGU.88 Commenters stated EPA's conclusions as to efficiency improvements from O&M activities are not based on a review of the potential effectiveness of available O&M practices at Wyoming EGUs at all. Commen ters said EPA's 4% conclusion depends on the untested assumption that reducing the variability of coal unit heat rates is possible through "best practices" and that reducing that variability will lead to better performance. Commenters said EPA relies nearl y exclusively on 'using heat rate variability as an indicator of the application of best practices and potential for improvement." Commenters said although EPA claims it has accounted for all sources of heat rate variability, EPA accounts for only two

- oper ating load and ambient temperature. Commenters said according to EPA's own analysis, these two factors explain only 26% of heat rate variability. Commenters said EPA assumes that the other "residual" 74% of heat rate variability must be within the control of unit operators and so can be improved. Commenters said EPA's assumption ignores numerous causes of heat rate variability that are beyond the ability of coal

- fueled units to control, such as: (1) variability in pollution control efficiency and electricit y demand; (2) variability in coal quality, (i.e., heat content (Btus) and moisture); 3) variability in other ambient conditions and weather; 4) variability attributable to unavoidable cycles in the degradation of components that are designed to wear out ov er time; and 5) variability attributable to changes in heat rate calculation method.

Response 6 : For the EPA’s response to this comment, see section V.C of the final rule preamble of the CPP and Chapter 2 of the GHG Mitigation Measures TSD supporting the f inal CPP.

Comment 7 : The following commenters disagree that the 4

- 6% heat rate improvement is achievable and disagree with the Sargent & Lundy report on which EPA based their data.

Commenters stated EPA's determination that emissions from every affected coal

- fired EGU within a state can be reduced by six percent is arbitrary and capricious. Commenters said EPA arrived at this target by considering the potential heat rate improvement s from adoption of best practices to reduce heat rate variability, as well as reductions available by implementing equipment upgrades. Commenters said EPA relied on a lone 2009 study by Sargent & Lundy as well as inferences derived from hourly data from 90 0 coal

- fired EGUs. Commenters said EPA's approach failed to adequately account for variations between individual sources. Commenters said when EPA set the six percent emission reduction target, they failed to incorporate its own acknowledgment that "indivi dual EGUs would only be able to implement the best practices or upgrades that were applicable to their specific designs or fuel types and that had not already been implemented." Commenters said as a result of EPA's uniform approach, every source within

eve ry state is presumed to be capable of achieving EPA's six percent reduction target. Commenters said this approach fails to consider whether an individual source has already adopted best practices and made equipment upgrades. Commenters said sources that al ready adopted such measures will be penalized for their initiative, as they will be expected to reduce their emissions by an additional six percent after having already exhausted what EPA considers to be the most cost

- effective measures for on

- site emissio n reductions. Commenters said this aspect of the proposed Rule therefore has the perverse effect of penalizing affected EGUs, like89 those in New Jersey, that have already taken significant steps to limit their CO2 emissions. Commenters said EPA's emission r eduction target for coal

- fired EGUs is arbitrary and capricious because it relies on insufficient data to determine what emission reduction opportunities have been adequately demonstrated.

Response 7 : EPA disagrees that building block 1 “penaliz[es]” EGUs in states that have already undertaken substantial heat rate improvements. Those EGUs will generally be closer to achieving the uniform CO2 performance rate, as discussed in section V.C of the final rule preamble of the CPP and Chapter 2 of the GHG Mitigat ion Measures TSD supporting the final CPP. Furthermore, a s we explain in sections V.A. and V.B. of the preamble, our emission guidelines simply reflect an achievable emissions limit through the application of the BSER and do not in themselves require state s or sources to implement the BSER. That is, EPA is responsible for determining the level of emission limitation from the source category, while states have the responsibility of assigning emission requirements to their sources that will ensure their achie vement of that level of emission limitation. States may fulfil their responsibility by establishing emission standards or creating plans consistent with the guidelines. In doing so, states will be able to choose from a wide range of emission reduction meas ures, including measures that are not part of the BSER. This rule does not require states to set emission standards based on heat rate improvements.

Comment 8 : Commenters stated that FDEP arguably has authority to establish standards related to heat rate improvement; however, any such standard would have to be adopted as a rule and, as discussed above, EPA's assumed six percent heat rate reduction is not technically feasible. Commenters said for that reason, any FDEP rule based upon that assumption could b e considered arbitrary and capricious under the Florida APA (See Section120.52(8)(e), Fla. Stat. (defining "invalid exercise of delegated legislative authority to include "arbitrary and capricious" rules"). Commenters said any such rule would cost more tha n one million dollars to implement and, therefore, would require ratification by the Florida Legislature.

Commenters stated while there is a basis for considering a fuel efficiency (heat rate) level or a potential improvement in heat rate as BSER, states h ave the authority in Section 111 to establish standards of performance. Commenters said heat rate level or potential improvements in heat rate are very case specific, and states are in a better position than EPA to develop case

- specific standards that cons ider the Section 111 requirements of achievability, cost, remaining useful life, any nonair quality health and environmental impact, and adequate demonstration.

Response 8 : As we explain in sections V.A. and V.B. of the preamble, our emission guidelines simply reflect an achievable emissions limit through the application of the BSER and do not in themselves require states to implement the BSER. That is, EPA is responsible fo r determining the level of emission limitation from the source category, while states have the responsibility of assigning emission requirements to their sources that will ensure their achievement of that level of emission limitation. States may fulfil the ir responsibility by establishing emission standards or90 creating plans consistent with the guidelines. In doing so, states will be able to choose from a wide range of emission reduction measures, including measures that are not part of the BSER.

For the r esponse to the remainder of this comment, see section V.C. of the final rule preamble of the CPP and Chapter 2 of the GHG Mitigation Measures TSD for CPP. As described in these documents, the EPA’s assessment of average potential heat rate improvement is b ased on an analysis of historical performance

— i.e. , what actual existing coal

- fired EGUs have previously achieved

— and has been lowered since the proposal. This backward

- looking assessment provides a conservative estimate of the potential heat rate improvem ent (and accompanying reductions in CO2 emission rates) that affected EGUs can achieve on an average basis, as described in section V.C of the preamble and Chapter 2 of the GHG Mitigation Measures TSD. The precise amount of heat rate improvement feasible a t individual EGUs will vary. The final CPP provides states the flexibility to develop plans with emission standards that more precisely take into account the potential heat rate improvement of individual EGUs

— should states desire to consider potential heat rate improvement at all. Furthermore, if an affected EGU cannot meet the particular emission standard solely because it has below

- average potential to reduce emissions through heat rate improvements, then in instances where the EGU’s state plan allows emi ssions trading, the EGU can acquire credits or allowances from affected EGUs that have above

- average potential.

Comment 9 : Commenters stated EPA's assumption is unfounded and incorrect. Commenters said since 2011, in preparation for compliance with the MA TS rule, older power plants with higher heat rates that are no longer economically viable have been or are being retired. Commenters said these retirements typically eliminate units with higher potential heat rate improvement possibilities from the fleet. Commenters said those units where investments have already been made to improve operations are less apt to be retired and have less potential heat rate improvement opportunities remaining.
Response 9 : Insofar as this comment concerns EPA’s view on the impa ct of retirements specifically under building block 1, it is addressed in section V.C of the final rule preamble of the CPP and Chapter 2 of the GHG Mitigation Measures TSD supporting the final CPP.

Comment 10 : The following commenters disagree that EPA has proved the proposed Building Block 1 is achievable.

Commenters stated EPA notes stakeholders have suggested a phase

- in of Building Block 1 would be appropriate. [79 FR 64548] Commenters said they reiterate their comments from the June 18, 2014 that U.S . EPA is overestimating both the feasibility and magnitude of heat rate improvements (HRI) available, and the ability of utilities to perform HRI in the time provided. Commenters said failure to incorporate a phase

- in of HRIs in the proposed rule while at the same time considering a phase in of NGCC re

- dispatch again represents U.S. EPA's lack of understanding of the true nature of the operation of coal

- fired power plants, the electricity grid91 itself, and the amount of time, effort, and resources necessary to upgrade the nationwide coal

fired fleet. Commenters said it appears that EPA is choosing a winning fuel, natural gas, over a losing fuel, coal. Commenters said if any regulation is legally allowed, states should be assessing each individual unit, its hi storical HRIs, potential for additional HRIs considering remaining useful life, and the timing such HRIs would necessitate in determining the standard of performance for each individual unit.

Response 10 : As discussed in section I.A of the final rule pream ble, the interim compliance period has been adjusted to begin in 2022, we have provided states with flexibility with respect to the glide path, and “early” emissions reductions achieved between 2012 and 2022 can be accounted for in demonstrating compliance . The EPA believes that the initial 2022 compliance period and glide path flexibility will ensure that EGUs have more than sufficient time to adopt the types of heat rate improvement measures envisioned under building block 1 (if states or EGUs decide that such measures should be implemented at all in order to meet the emission standards in a state plan ) . For the EPA’s response to the remainder of this comment, see section V.C of the final rule preamble of the CPP and Chapter 2 of the GHG Mitigation Measures TSD supporting the final CPP.

Comment 11 : Commenters stated that while building block 1 addresses measures at the affected facility, it still includes measures outside the boundaries of an affected facility. Commenters said building block 1 is le gally impermissible as a basis for BSER determination and is thus legally flawed because it is not technically feasible nor adequately demonstrated.
Commenters stated, EPA's use of certain operating practices and equipment upgrades that serve as the basis of EPA's Building Block #1 is improper. Commenters said, as defined within the regulation, the "affected facility" under Subpart Da is "each electric utility steam generating unit." Commenters said, despite this, EPA attempts to mandate improvements to cer tain equipment not included within this definition and that thus fall outside the sco pe of Subpart Da. Commenters said, such equipment includes: steam turbines, water purification equipment, water

supply systems, air cleaning and cooling apparatus, conden sers, main exhaust and steam piping, water screens, motors, and moisture separators for turbine steam. Commenters said, to the extent EPA includes heat rate improvements to components not included within Subpart Da, EPA exceeds its statutory authority.

Com menters stated, EPA may not regulate equipment that is not within the Subpart Da category. Commenters said, many of the O&M and capital projects identified in the Proposed Rule pertain to improvements in operation of steam turbines. Commenters said, Subpar t Da, however, pertains only to steam generating units. Commenters said, EPA has previously provided a drawing that clearly demarcates the steam boiler equipment as subject to Subpart Da and other equipment at a coal

- fired generating facility, including th e steam turbines, water purification equipment, water

- supply systems, air cleaning and cooling apparatus, condensers, main exhaust and main steam piping, water screens, motors, and moisture separator for turbine steam, as not92 being subject to Subpart Da. C ommenters said, EPA has improperly included many of these facilities in its building block one analysis. Commenters said, EPA can establish performance standards only for a source "to which a standard of performance under this section would apply if such e xisting source were a new source." Commenters said, the proposed rule cannot include equipment that is not part of the Subpart Da source.

Commenters stated, for coal

- fired EGUs, the existing NSPS regulations define the "affected facility" as the "steam ge nerating unit." See 40 CFR 60.40Da. Commenters said, but the Proposed Rule's discussion of potential HRI at the facility fails to differentiate between potential HRI improvements based on component changes or "best practices" at the "source," as compared
t o those relevant for the "affected facility." Commenters said, for units undergoing reconstruction or modification, which are considered new units under Section 111(a)(2), EPA has always defined the "affected facility" as comprising only those within the " boiler island." EPA November 1986 Memorandum from Acting Director, Stationary Source Compliance Division, Office of Air Quality Planning and Standards John Rasnic. Commenters said, Mr. Rasnic makes this clear when addressing the "source" components that ma y be considered part of the "affected facility" for purposes of evaluating whether reconstruction has occurred. Commenters said, he writes, "A steam generating unit includes the following systems: (1) Fuel combustion system (including bunker, coal pulveriz ers, crusher, stoker, and fuel burners, as applicable). (2) Combustion air system. (3) Steam generating system (firebox, boiler tubes, etc.). (4) Draft system (excluding the stack). The affected facility then starts at the coal bunkers, and ends at the
sta ck breeching."
Commenters said, stated differently, only components at the boiler island comprise the "affected facility" for NSPS evaluation. Commenters said, moreover, EPA makes clear that there is no distinction between components that define the "affe cted facility" for "existing units" as compared to those for new, modified, or reconstructed facilities. Commenters said, on this point, EPA states that "the distinction between 'affected facilities' and 'existing facilities' depends on the date of constru ction. Commenters said, the terms are intended to be direct regulatory counterparts of the statutory definitions of 'new source' and 'existing source' appearing in section 111 of the Act." Commenters said, thus, just as for new sources, existing source com ponents defining the "affected facility" exclude components such as those defined by the water treatment and supply systems, the turbine island, main exhaust and main steam piping, and include only components defined by the boiler island, according to EPA' s own longstanding interpretation. Commenters said, therefore, for evaluating HRI under Building Block 1, consideration of improvements to or employment of best practices at components outside of the boiler island are "outside the fence line" and cannot be legally part of EPA's HRI mandates.
Commenters stated, moreover, as the NRECA S&L Study concludes, only minimal HRI can be associated with upgrading components comprising the boiler island. Commenters said, if EPA were to correctly evaluate HRI associated with the affected facility as EPA has historically defined it, in accordance with the NRECA S&L study conclusions, the expected HRI would be so small as to be impossible to quantify or verify.93 Response 11 : We disagree with this comment. Commenters propou nd a “beyond the boiler island” 1 theory of section 111(d)

— that EPA is prohibited from considering any means of reducing emission that are not physically applied against the affected Subpart Da facility. 2 According to commenters, any best practices or equipment upgrades related to components “not included in the Subpart Da facility” are “beyond the purview of this rule,” 3 no matter how adequately demonstrated, achievable, cost

- effective, or integrally rela ted they are to emissions from the affected EGU. With respect to building block 1, accepting this theory would mean that many of the widely accepted, zero

- or low

- cost measures for improving heat rate

— measures that the owners and operators of EGUs already do, and which can actually reduce emissions from the affected coal

- fired EGU

— could not be considered as part of a “system of emission reduction” for that source.
Generally speaking, an affected facility is “any apparatus to which a standard [of performance ] is applicable.” 4 In the context of 40 C.F.R. subpart Da, the affected facility

— i.e.
, the apparatus subject to the standard of performance

— is an “electric utility steam generating unit.” 5 Emissions are generated in the boiler, and are impelled by the indu ced draft fan through piping, into the stack, and up into the ambient air.
Commenters cite no legal precedents, statutory provisions, or regulations to support their constricted reading of section 111(d). Instead, as their sole legal authority, they cit e to a 1986 Memorandum from John B. Rasnic, then Acting Director of OAQPS’s Stationary Source Compliance Division, to James T. Wilburn, then Chief of the Air Compliance Division. Commenters omit the title of this memorandum, “Interpretation of Reconstructi on,” which makes clear that the memorandum concerns the interpretation of the term “reconstruction” in the EPA’s NSPS regulations at 40 C.F.R. § 60.15. Specifically, this memorandum, which we refer

1 See Comments of the Utility Air Regulatory Group, Docket ID No. EPA

- HQ

- OAR

- 2013

- 0602

- 22768 at 212.

2 For the reasons stated in section IV.E of the final rule preamble, the EPA is combining the listing of sources from the two existing source categories for the affected EGUs, as listed in 40 CFR subpart Da and 40 CFR subpart KKKK, into a single location, 40 CFR subpart UUUU, for purposes of addressing the CO 2 emissions from existing affected EGUs. The EPA is also codifying all of the requirements for the affected EGUs in a new subpart UUUU of 40 CFR part 60 and including all GHG emission guidelines for the affected sources

— fossil fuel

– fired electric uti lity steam generating units, as well as stationary combustion turbines

— in that newly created subpart.

3 See Comments of the Utility Air Regulatory Group, Docket ID No. EPA

- HQ

- OAR

- 2013

- 0602

- 22768 at 212

– 13.

4 Id. § 60.2 (defining “affected facility” for pur poses of NSPS); id. (defining “standard” as a “standard of performance proposed or promulgated” under 40 C.F.R. subpart 60).

5 40 C.F.R. § 60.40Da(a) (defining the affected facility).94 to as the 1986 Reconstruction Memorandum, opines on which physical components of an existing facility should be “included in reconstruction costs .” See Memo at 3 (emphasis added). This is an important distinction when determining whether the NSPS for “reconstructed” sources applies to a facility: An existing sou rce becomes a reconstructed source if “the replacement of components of an existing facility” is so extensive that, inter alia , the “fixed capital costs of the new components exceeds 50 percent of the fixed capital costs” necessary to construct an entirely

new source. 6 But defining the physical components of a source has little to do with defining the measures that the source’s owners and operators can engage in to reduce emissions from that source. Contrary to commenters’ contentions, the 1986 Reconstruct ion Memorandum simply does not purport to limit what EPA can consider as part of a “system of emission reduction” when establishing emission guidelines for existing sources under CAA section 111(d). Commenters are thus wrong to claim that the Reconstructio n Memorandum propounds a “long

standing engineering and regulatory understanding” of relevance to identifying the BSER.

Commenters’ mischaracterization of the Reconstruction Memorandum and these emission guidelines highlights two significant flaws in their overall arguments about the BSER

— not only with respect to building block 1, but also regarding building blocks 2 and 3.
First, these commenters have improperly collapsed the definition of an affected source with the means of reducing emissions from an affected source. As illustrated by the Reconstruction Memorandum, ascertaining which pieces of equipment are part of an affected source is important for determining the applicability of a given NSPS ( e.g. , the NSPS for reconstructed sources). By
cont rast, as explained in sections V.A

– B of the preamble, identifying the best “system of emission reduction” entails a broader consideration of the measures that EGU owners and operators can implement to achieve an emission limitation applicable to the affect ed EGU. Whether an emission

- reducing measure is implemented on or off the boiler island is not itself relevant to whether that measure can reduce emissions from equipment in the boiler island. Rather, the key fact here is that because of the extensive equ ipment and systems interconnected with the affected EGU at a power plant, the measures identified under building block 1 are capable of reducing emissions from the affected EGU regardless of whether they physically occur at the part of the power plant defi ned as the “affected EGU.” Indeed, EPA has recognized the interconnected nature of power plant components under Subpart Da itself, by allowing EGU owners and operators to meet requirements on a net output basis , which reflects the auxiliary load from plant components not included within the boiler island. EPA uses net rather than gross standards in this rule as well, further reinforcing the interrelationship between the boiler island and the auxiliary load from other areas of the plant. While a gross standa rd is based only on the amount of electricity actually generated, a net standard is based on the amount of electricity that is sold to the grid, the latter of which accounts for the amount of electricity that is used throughout the facility (on and off the boiler island) for operations, including pollution control equipment.

6 40 C.F.R. § 60.15(b)(1).95 The absurd consequences of commenters’ faulty distinction become clearer still when one considers the example of leak prevention, one of the most common measures used by the industry t o improve heat rate and reduce emissions. EGU owners and operators frequently fix steam leaks in the many pieces of equipment and piping at affected EGUs

— some on the boiler island, and some not. Under commenters’ constricted view of the BSER, the EPA coul d only consider as part of a “system of emission reduction” the efficiency gains that an EGU owner or operator can make by fixing steam leaks on the boiler island itself. An otherwise identical leak located on piping running to or from the boiler

— even one that is inches from a “boiler island” leak

— would be irrelevant for purposes of the BSER. It would not matter how pervasive such leaks are, how cost

- effective it is to fix them, how common it is for EGU owners and operators to fix them, or that fixing tho se leaks can literally reduce the emissions of an affected EGU. Similarly, although the EPA could consider the availability of add

- on pollution controls that attach to the boiler island, any add

- on controls that reduce emissions to the ambient air by
atta ching to the main exhaust would be “beyond the purview” of what EPA could even consider as a system of emission reduction. 7 For these commenters, the practical realities are overruled by the fact that some measures that improve the heat rate of the affect ed EGU do not physically

occur at the boiler island, even if they incontrovertibly can reduce emissions from the boiler island.
Accordingly, as explained in section V.A and V.B of the preamble, a “system of emission reduction” for purposes of CAA section 111(d) means a set of measures that source owners or operators can implement to achieve an emission limitation applicable to their existing source. Fixing steam leaks at an EGU

— whether on the boiler island, in the main steam piping, or near the steam turbi ne

— are measures that source owners and operators can (and do) implement to achieve emission limitations. The same is true for the other measures we describe under building block 1, as well as for the measures included in building blocks 2 and 3. Other mea sures that have the consequence of reducing emissions from an affected EGU, such as coal cleaning, have previously been recognized by EPA as part of the best system underlying a final standard, even though they do not physically occur at the boiler island and, in fact, may occur outside the facility, at a separate facility owned and operated by entities unrelated to the owners or operators of the affected EGU. 8 For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, o ur interpretation of the BSER is reasonable and within the scope of EPA’s authority in light of the statutory text, statutory context, statutory purpose, and legislative

7 See Comments of the Utility Air Regulatory Group, Docket ID No. EPA

- HQ

- OAR

- 2013

- 0602

- 22768 at 212 (identifying the “main exhaust” as one component that would be “beyond the purview of this rule”).

8 See, e.g. , 44 FR 33580, 33593 (June 11, 1979) (evaluated “coal cleaning and the relative economics o f FGD [flue gas desulfurization] and coal cleaning” together as the “best demonstrated system for SO 2 emission reduction). The EPA considered an investigation by the U.S. Department of the Interior regarding the amount of sulfur that could be removed from various coals by physical coal cleaning. Id. at 33593.96 history. By contrast, commenters’ constricted reading belies all these indicia of con gressional intent and, as demonstrated here, would lead to absurd results.
Second, commenters also mischaracterize this rule as an EPA “regulation” of equipment that is not part of the boiler island. This rule does not regulate any affected EGU, and impo ses no requirements on power plant components on or off the boiler island. Nor does this rule require sources to implement the BSER. EPA is responsible for determining the level of emission limitation from the source category, while states have the respon sibility of assigning emission requirements to their sources that will ensure their achievement of that level of emission limitation. States may establish emission standards or create plans consistent with the guidelines, and will be able to choose from a wide range of emission reduction measures, including measures that are not part of the BSER. The degree of heat rate improvement included in the BSER is not a “requirement” that affected EGUs improve their heat rate. Similarly, the heat rate improvement me asures that EPA has provided as examples of the best practices and equipment upgrades that affected EGUs can implement

— whether on or off the boiler island

— are not themselves “require[d] improvements” at any specific EGU, even one implementing the BSER.

C omment 12 : The following commenters expressed concern that Building Block 1 would trigger NSR.

Commenters stated large capital projects designed to assist with unit efficiency improvements are subject to PSD according to EPA and have historically been the subject of litigation that has been filed by EPA and third party environmental groups against some coal

- fired electric utility units. Commenters said EPA and citizen plaintiffs have long targeted efficiency

- improving measures like steam turbine upgrades in NSR enforcement suits alleging that such measures constitute "major modifications" triggering strict PSD permitting requirements. Commenters said EPA acknowledges the issue, but merely states that it expects only a "few instances" in which an NSR permit w ould be required for energy efficiency projects; however, potential NSR concerns will continue to be a major impediment to energy efficiency projects unless EPA provides a clear and unequivocal statement that such energy efficiency projects do not trigger NSR. Commenters said unless EPA provides such a statement, it will fail to demonstrate the achievability of its proposed goals as required by Section 111.

Commenters stated in EPA's simplified view of utility operations, a power plant could easily invest i n equipment upgrades that would result in heat rate improvements. Commenters said this scenario fails to consider the reality that major equipment upgrades take time and must be permitted, and in many cases would trigger the Clean Air Act's NSR permitting requirements. Commenters said EPA raises concern that heat rate improvements could increase generation at some facilities, but EPA appears more concerned about a potential "rebound" effect in which emissions would increase rather than the potential permitt ing implications of efficiency improvements related to equipment upgrades. Commenters said the flexibility afforded states under other building blocks is unlikely to enable them to work with EGUs to avoid triggering97 NSR because the limits are so stringent that states (particularly Nevada) simply don't have any flexibility. Commenters said EPA is engaged in an enforcement initiative that targets exactly the types of heat rate improvement projects proposed for compliance with Building Block 1, including upgra des to components such as soot blowers, boilers, economizers, turbines, heaters, condensers, pulverizers, and condensate pumps, among others. Commenters said if EPA is to rely on equipment upgrades as a means of meeting Building Block 1 targets, EPA should provide that heat

- rate improvement projects undertaken to comply with the existing source emission guidelines are exempt from NSR as routine maintenance. Commenters said EPA should also provide that NSR does not apply to units that undertake heat

- rate imp rovement projects that do not increase emissions.

Commenters stated the consequences of an NSR enforcement action is of particular importance in light of EPA's proposal to set separate standards for "modified" sources under Section 111(b). Commenters said even if a source undertakes a "modification" to improve heat rate that does not trigger the Section 111 definition of a "modification," if the upgrade qualifies as a "major modification" under the NSR program, the floor for a determination of "Best Availab le Control Technology" is the Section 111(b) modified source standard. Commenters said in light of the potentially serious consequences of the Proposed Rule, which in turn reduces the likelihood that EGUs will be willing to undertake the very equipment upg rades on which EPA relies for its determination of BSER, EPA must address directly the interplay of the various proposed Section 111 rulemakings and the Clean Air Act's NSR provisions.

Response 12 : For the EPA’s response to these comments, see section X.A of the final rule preamble and Chapter 7 of this RTC

.

1.9. 4 Evaluation of Building Block 2, re

- dispatch, against the BSER criteria

1.9. 4 .1: Problems with re

- dispatch

Comment 1 : Commenters stated the NGCC 70% capacity factor re

- dispatch for goal

- setting is not an emissions standard, and it increases NGCC emissions and does not consider reliability, cost, or ownership.

Response 1 : The 70% redispatch to NGCC is not part of the BSER determinat ion for NGCC and thus the comment is misplaced. Moreover, for the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reasonable and within the scope of EPA’s authority in light of the statutory text, statutory context, statutory purpose, and legislative history. Application of the BSER, including building98 block 2, will lead to significant overall reductions of CO2 emissions. Also, as explained in section V. of the preamble, we have take n the enumerated considerations of section 111(a)(1) into account, including cost, and have also considered reliability in promulgating this rule.

Comment 2 : Commenters stated EPA may not designate re

- dispatch as BSER because this "system" would lead to an increase in CO2 emissions from some affected stationary sources. Commenters said under section 111(d), states establish "standards of performance" for existing stationary sources. Commenters said the CAA contains two definitions of the term "standard of performance." Commenters said Section 111(a)(1) defines a "standard of performance" as "a standard for emissions of air pollutants which reflects the degree of emission limitation achievable through the application of [BSER]." Commenters said Section 302( l) (a general section of definitions applicable to the entire CAA), meanwhile, defines "standard of performance" to mean "a requirement of continuous emission reduction, including any requirement relating to the operation or maintenance of a source to assu re continuous emission reduction." Commenters said these definitions are not in conflict; therefore, under standard rules of statutory construction, these definitions must be read together. (See Reiter v. Sonotone Corp., 442 U.S. 330, 339 (1979); Brown & W illiamson Tobacco Corp., 529 U.S. 120, 133 (2000); Nat'l Cable & Telecomms. Ass'n v. Gulf Power Co., 534 U.S. 327, 335 (2002)). Commenters said because these definitions must be read together, a standard of performance under section 111(d) must be based on BSER and require "continuous emission reductions." Commenters said although the CAA does not define the term "continuous," it should be given its ordinary meaning: the Merriam

- Webster Dictionary defines "continuous" to mean "marked by uninterrupted extens ion in space, time, or sequence." Commenters said in order to satisfy the plain language of the CAA, state performance standards must require continuous, or constant, reductions in emissions of CO2 from all affected sources. Commenters said EPA's proposal to base BSER on redispatch from coal to natural

- gas fired units would directly contradict this requirement. Commenters said by basing its guidelines on an assumption that existing NGCC units will increase their utilization through redispatch, EPA has effec tively proposed to require states to establish standards of performance that would allow

- indeed, require

- many affected sources to increase their CO2 emissions. Commenters said EPA's proposal to incorporate redispatch into the BSER on which states must base their standards of performance is in direct conflict with the CAA's requirement that performance standards ensure "continuous emission reduction."

Response 2 : The 70% redispatch to NGCC is not part of the BSER determination for NGCC and thus the comment is misplaced. Moreover, the fact that on a mass basis emissions from certain sources increase in generally a possibility under and NSPS, which are generally set on a rate basis.
Application of the BSER will lead to significant overall reductions of CO2 em issions. Also, as we note in section V. of the preamble, even if section 302(l) is interpreted together with section 111, it does not affect our analysis in this rule, including our interpretation that the BSER99 includes building blocks 2 and 3. Nevertheles s, we disagree that the definition of a standard of performance under section 302(l) must be read together with the definition of a standard of performance under section 111(a)(1). “[W]here Congress includes particular language in one section of a statute but omits it in another..., it is generally presumed that Congress acts intentionally and purposefully in the disparate inclusion or exclusion.” Keene Corp. v. U.S. , 508 U.S. 200, 208 (1993) (quoting Russello v. U.S. , 464 U.S. 16, 23 (1983)); see also Bail ey v. U.S.
, 516 U.S. 137, 146 (1995). Moreover, we note that the definition in section 302(l) was added to the CAA in 1977 at the same time that Congress added “continuous” to section 111(a)(1). See Pub. L. 95

- 95, 91 Stat. at 770. However, in 1990, Congress revised section 111(a)(1) and restored the phrase “best system of emission reduction ” (removing “technological” and “continuous” but keeping considerations of “nonair quality health and environmen tal impact and energy requirements”). In contrast, Congress expressly used the phrase “best system of continuous emission reduction” for purposes of section 406 of the 1990 CAA Amendments. See Pub. L. 101

- 549, 104 Stat. at 2633 (defining a standard of perf ormance for purposes of section 406 of the 1990 CAA Amendments as “a standard which the Administrator determines is applicable to that source and which reflects the degree of emission reduction achievable through the application of the best system of conti nuous emission reduction which (taking into consideration the cost of achieving such emission reduction, and any nonair quality health and environmental impact and energy requirements) the Administrator determines has been adequately demonstrated for that category of sources.”). Thus, we disagree that the term “continuous” must be applied to section 111(a)(1).

Comment 3 : Commenters referenced this 2011 report by The National Petroleum Council (NPC) which states on page 27 that: "in some regions where there is substantial NGCC capacity, the capacity factors of the NGCC plants are quite low. This low utilization is a result of the relatively higher dispatch cost of NGCC units relative to existing coal

- fired power plants (since coal prices tend to be lowe r than natural gas prices). The higher dispatch costs are partly due to existing regulations in which the units with the highest GHG emissions (coal units) are not penalized."

Commenters stated EPA's determination that existing NGCC units can and should as sume the electric generation role of existing coal and oil units and are capable of sustaining 70 percent utilization rates was arbitrary and capricious. Commenters said in order to achieve its target emission rate, New Jersey's remaining coal

- fired EGUs w ould need to be shut down. Commenters said EPA's assessment of the BSER, as applied to New Jersey, fails to adequately account for the substantial reliability risks created by over

- dependence on any particular fuel source. Commenters said natural gas is hi storically subject to both price and supply volatility and EPA's mandated dispatch rates have the impermissible effect of imposing potentially unreliable electricity supply and unjustifiably high energy costs upon ratepayers.100 Commenters stated Building Blo ck 2 must provide for a "glide path" for implementation that allows for a state to gradually achieve the ultimate NGCC capacity factor by 2030 because local natural gas delivery and transmission constraints may interfere with the capacity factors of NGCC u nits during the interim compliance period.

Response 3 : For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reasonable and within the scope of EPA’s authority in light of the sta tutory text, statutory context, statutory purpose, and legislative history.

EPA recognizes that each state has unique factual circumstances that will shape the development of a state’s plan. We look forward to working with the states to account for these factual circumstances in developing satisfactory state plans.

As discussed in section I.A of the final rule preamble, the interim compliance period has been adjusted to begin in 2022, we have provided states with flexibility with respect to the glide path, and “early” emissions reductions achieved between 2012 and 2022 can be accounted for in demonstrating compliance.

1.9. 4 .2: EPA authority

Comment 1 : The following commenters say EPA doesn't have the authority to displace fuel generation.

Commenters stated EPA does not have the authority to require one generation source displaces another generation source as required by the CPP. Commenters said the CPP assumes as BSER the displacement of coal by other generation, the addition of renewable energy and d emand side management programs (building blocks 2

- 3) which are not control technologies and should not be considered to establish the BSER.

Commenters stated EPA may be able to require a stationary source to emit less, but mandating that a stationary sourc e operate less cannot be part of establishing an emissions standard. Commenters said previous rules have also been focused on emissions reductions, not operation reductions. Commenters said this is because forced retirements and down

- dispatching are simply not contemplated or allowed for in the CAA. Commenters said the "slippery slope" potential of EPA being allowed to mandate reduced operations is staggering and could potentially be applied in every major rulemaking before the EPA.

Commenters stated forcin g a coal

- fired unit to operate less may drive down total CO2 emissions from the source, but it will likely increase the rate of emissions. Commenters said a coal

- fired power plant, like other sources that generate CO2 through combustion, emits the lowest r ate of101 emissions at full operation. Commenters said requiring a coal

- fired EGU to operate at less efficient reduced loads or requiring a coal

- fired unit to repeatedly shut down and startup will likely increase the CO2 emissions rate from these units. Comme nters said this contravenes the purpose and intent of Section 111(d), as well as the Rule Proposal itself. Commenters said in the same way that Section 111 does not provide EPA the authority to restrict the operation of source categories, it also does not allow EPA to choose winners or losers amongst fuel types. Commenters said EPA cannot regulate a generation technology out of existence, as proposed by EPA's Block 2's reduction of coal

- fired generation. Commenters said this is a policy decision that EPA is not allowed to make, and conflicts with the intent of Congress.

Commenters stated while EPA cannot mandate a decrease in operation within a source category, it also likewise cannot mandate an increase to a source category. Commenters said EPA is mandatin g an increase in the use of NGCC. Commenters said while this could potentially lower the emissions rate from NGCC units (due to similar gains in efficiency, as noted above), it would ultimately lead an increase in total emissions from NGCC. Commenters said this is a result at odds with the goals and purpose of the CAA. Commenters said mandating the retirement of coal

fired EGUs without any explicit or implicit authority to do so constitutes an unlawful taking of utility's (and others) property. Commenters s aid this is because these retirements are being imposed long before the end of many of these unit's useful lives and subsequent to significant investments.

Commenters stated they disagree EPA's attempt to reduce emissions from coal

- fired EGUs by imposing significant reductions in the operation of these EGUs. Commenters said this is not allowed by the CAA. Commenters said with proper legal foundation, EPA may require a stationary source to emit less, but it cannot mandate a stationary source to operate less

. Commenters said this is not allowed for, or contemplated in, the CAA and would be an extreme abuse of EPA's authority. Commenters said EPA's action would actually increase the rate of emissions from coal

- fired EGUs by requiring more shutdowns and down

- di spatched operation. Commenters said virtually every generation source that operates below its maximum operating level (e.g. a down dispatched coal

- fired EGU), will operate more inefficiently, thereby increasing the rate of CO2 emissions.

Commenters stated in the NODA, EPA briefly discusses the concept of using a regional approach to the redispatch of coal generation to natural gas generation under Building Block 2. Commenters said EPA provides absolutely no specifics on how such a regional approach would

wo rk, what the regions would be, how the approach would impact individual state goals, or how regional NGCC resources would be allocated in the context of individual state compliance determinations. Commenters said they cannot meaningfully comment on the ben efits or dis

benefits of this concept. Commenters said because EPA lacks the authority to require re

dispatch, it is precluded from setting standards in any final rule utilizing this approach.

Commenters stated EPA's lack of authority to order sources to shutdown partially or completely is fully consistent with Congress' charge to the Agency. Commenters said Congress has tasked102 EPA with reducing emissions, not sources. Commenters said Congress had contemplated that EPA should attempt to reduce emissions by eliminating sources that produce those emissions (and so implicating the Takings Clause of the Fifth Amendment) it surely would have said so. Commenters continued if EPA had thought it had authority to reduce emissions by eliminating sources that produce those emissions, it surely would have exercised such authority, or at least considered exercising such authority, at some point since the passage of the 1970 CAA; however, there is no congressional indication that EPA is authorized to shut down emission

so urces in order to reduce emissions, and we have found no prior instance where EPA has considered using such authority as the means of compliance in any rulemaking. Commenters pointed towards EPA's words, "sources have shut down as a result of CAA regulatio ns;" however, such shutdowns have only occurred in two instances not present here. Commenters said sources may choose to shut down because the cost of compliance with an emissions standard is uneconomic to the source. Commenters said such was the case on a fairly large scale when EPA issued its EGU MATs rule. Commenters said in these instances, the source's shutdown decision is an economic one because the prescribed means of compliance (usually pollution control equipment) is too expensive. Commenters said the source's choice is to pay to come into compliance, or cease operating to avoid the cost of compliance. Commenters said this is the first time that EPA offers no alternative to the source but to shutdown, partially or completely, as the sole means of co mpliance.

Commenters stated EPA cites its power plant New Source Review settlements as evidence of its authority to compel plant shutdowns as the means of compliance under the CAA, but these settlements prove nothing. Commenters said as EPA notes, the set tlements give sources the same choice they always have when faced with properly promulgated standards: control the source or retire it. Commenters concluded none of these settlements provide any authority for the proposition that EPA may mandate source shu tdowns as the sole means of compliance with an emissions standard. Commenters continued EPA's reliance upon the fact that reduced generation "is one of the compliance options available to . . . EGUs to comply with the Clean Air Act acid rain program in CAA title IV, as well as the transport rules that we refer to as the NOx SIP Call and the Clean Air Interstate Rule (CAIR)" fails to acknowledge that a technology option was expressly available there. Commenters said under the Proposed Rule, coal

- fired source s have no option to do anything but shutdown. Commenters said EPA's rule does not work at all unless coal sources shutdown, and neither increased energy efficiency, renewable generation, nor gas generation provide substantial carbon dioxide emissions reduc tions on their own. Commenters said the CO2 emission reductions come almost exclusively from coal unit shutdowns (complete or partial), and absent such shut downs, EPA's rule cannot achieve the CO2 reduction goals it seeks. Commenters said in contrast to a ll prior rulemakings, there is no control equipment choice that is provided in this rule to coal units so that they can choose from as an alternative to shutting down.

Response 1 : For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reasonable and within the scope of EPA’s authority in light of the statutory text, statutory context, statutory purpose, and legislative history.103 As discussed in section V.B., we are not basing the BS ER on reduced utilization alone. We address reduced utilization in more detail in the Legal Memorandum.

As we explain in sections V.A. and V.B. of the preamble, our emission guidelines simply reflect an achievable emissions limit through the application of the BSER and do not in themselves require states or sources to implement the BSER. That is, EPA is responsible for determining the level of emission limitation from the source category, while states have the responsibility of assigning emission requiremen ts to their sources that will ensure their achievement of that level of emission limitation. States may fulfil their responsibility by establishing emission standards or creating plans consistent with the guidelines. In doing so, states will be able to cho ose from a wide range of emission reduction measures, including measures that are not part of the BSER.

Comment 2 : Commenters stated the set of circumstances EPA mistakenly cites as evidence of congressional recognition of its shutdown authority pertains to achievement of heath

- based standards. Commenters said EPA first cites to section 110, where Congress acknowledged that, "in order to assure reductions in NAAQS pollutants to meet attainment requirements, [SIPs] may need to impose emission limits on ind ustrial sources that those sources could meet only by retiring." Commenters said while it is not clear that the cited legislative history was not simply referencing circumstances where SIP limitations adopted for a source category were uneconomic for some sources to adopt, which is an acceptable basis for shutdown because the source has a choice between installing control equipment or shutting down, it is not meaningful evidence with respect to EPA's authority under section 111. Commenters said Section 110 is intended to require achievement of ambient air quality standards (NAAQS), and NAAQS are specifically health

based standards, and consequently EPA and implementing States have been held to be generally obligated to take measures to meet those standards w ithout regard to economics. Commenters said that is simply not the case with section 111, which, while not specifically a technology

based provision, is most decidedly not a health

- based provision. Commenters said section 111 contains an economic reasonabl eness provision, which does not exist as a basis for EPA's determination of the NAAQs or a State's promulgation of a SIP with respect to NAAQS. Commenters said EPA also cites the legislative history of old section 112, which required, as EPA observes, stan dards to be applied to sources of hazardous air pollutants to a level of stringency that provides an "ample margin of safety to protect the public health." Commenters added that in such circumstances, the statutory language itself compels the authority to shut down sources to meet the stringent heath

- based standard, but again that has no bearing on section 111 standards, which do not have a purely health

- based focus. Commenters said as EPA observed when issuing section 111 standards for municipal solid wast e landfills, "section 111 standards deal with emissions of concern through establishing technology

- based, not risk

- based, standards." Commenters said it is also notable that Congress completely revamped old section 112 in the 1990 amendments to the CAA to replace the exclusive health

- based focus of section 112 with a primarily technology

- based focus in the form of MACT standards. Commenters continued despite reviewing precedent from over forty years of CAA history to support its104 position that Congress envis ioned the possibility of source shutdowns as the sole basis for issuing an emissions standard, all that EPA can come up with are statutory provisions that require that health

- based pollution goals be met without regard to cost (and only when there is no al ternative means of addressing the health

- based concern through technology). Commenters said this health

- based precedent confirms that Congress knew how to authorize EPA to shut down sources when it wanted to, and the fact that it has provided no indication of such authority for section 111 (or any other non

- health

- based standards), and indeed has included cost reasonableness standards in section 111, including remaining useful life considerations, is convincing evidence that no such authority has been grant ed. Commenters said further evidence that Congress carefully circumscribed EPA's authority to order source shutdowns to circumstances where health

- based standards are implicated is also found in section 126. CAA section 126(c)(2) specifically authorizes EP A to order the shutdown of existing sources, but only after EPA has made a source

- specific finding that the source or sources would contribute significantly to nonattainment, or interfere with maintenance of, applicable NAAQS. Commenters said this specific grant of shut

- down authority and its careful limitation to circumstances where a violation of a health

- based standard has been attributed to the offending source provide further evidence that Congress did not provide EPA with a broad grant of authority to order shutdowns in other non

- health based circumstances. Commenters added section 303 of the CAA specifically grants EPA authority to shut down any pollution source provided EPA finds that the source presents an imminent and substantial danger to public h ealth or welfare or the environment. Commenters summed that EPA also posits that new factors, such as the integration of the electric grid, provide it with new opportunities to consider source shutdowns that were not available before, but that is simply no t the case. Commenters pointed out that in both CAIR and CSAPR, EPA could have, but did not, consider mandated source shutdowns as a possible basis for regulation.

Response 2 : For the reasons discussed in section V.A. and V.B. of the preamble and in the L egal Memorandum, our interpretation of the BSER is reasonable and within the scope of EPA’s authority in light of the statutory text, statutory context, statutory purpose, and legislative history. As discussed in section V.B., we are not basing the BSER on reduced utilization alone. We address reduced utilization in more detail in the Legal Memorandum.

As we explain in sections V.A. and V.B. of the preamble, our emission guidelines simply reflect an achievable emissions limit through the application of the BSER and do not in themselves require states or sources to implement the BSER. That is, EPA is responsible for determining the level of emission limitation from the source category, while states have the responsibility of assigning emission requirements to their sources that will ensure their achievement of that level of emission limitation. States may fulfil their responsibility by establishing emission standards or creating plans consistent with the guidelines. In doing so, states will be able to choose f rom a wide range of emission reduction measures, including measures that are not part of the BSER.105 Comment 3 : Several commenters stated that EPA does not have the legal authority to force re

dispatch.

Commenters stated that building block 2 is impermissible, because it demands that coal

- fired EGUs operate less instead of improve their emissions. Commenters said this approach shifts the burden of generating to units lacking common ownership and compatible contractual obligations, which belongs to RTOs, not EPA. Commenters said reduced utilization of a source is not BSER, and EPA has never promulgated a NSPS regulation requiring such action.

Commenters stated that RTO operations are based on agreements of system owners and operators, and are subjec t to oversight by FERC, but even FERC has no ability to compel any particular technique of coordination. Commenters said there are no provisions of state or federal law that have been identified that would allow EPA or the states to alter those arrangement s and dictate a specific generation technique to achieve an arbitrary level of dispatch. Commenters supported specific excerpts from EEI's and UARG's comments pertaining to the operations and regulations of bulk electric system, including the potential lim itations on natural gas supply. Commenters continued that even if a mechanism existed through which NGCC facilities could be required to dispatch at capacity factors in excess of their historic rates, no certainty exists that increased utilization of those units would offset higher CO2 emitting generation from existing facilities. Commenters said the transmission grid is still largely based on connecting local loads to nearby generating assets, and is constrained in its ability to transmit power in ways tha t EPA never studied. Commenters added the proposed rule ignores the realities of multi

- state utilities whose generation is shared by retail and wholesale customers in multiple states, and it also ignores the fact that multiple RTOs have control over transm ission systems within the same
state.

Commenters stated the proposed rule creates a direct conflict with FERC's obligations under the FPA to ensure the reliable operation of the nation's electric system at rates that are just and reasonable, further reinfo rcing that Section 111(d) does not authorize the proposed rule. Commenters said the EPA's proposed "re

- dispatch" of generation resources, i.e., "carbon dispatch," under building block 2 would directly conflict with FERC

- approved tariffs utilizing a securit y constrained economic dispatch model, turning the current system on its head and potentially resulting in market disruptions. Commenters said the EPA's proposal is a complete restructuring of the FERC

- approved energy markets, requiring resources to be dis patched based on a least

- emission, rather than a least

- cost, basis. As FERC Commissioner Moeller recently explained: "Building block two relates to increasing natural gas generation dispatch up to 70 percent. Assuming this is even operationally possible, a s noted in my testimony, this appears to be a fundamental shift from 'economic dispatch' to 'environmental dispatch' and has the potential to completely undermine the market principles that underpin dispatch of the system." Commenters said a state complian ce plan that attempts to utilize building block 2's carbon dispatch approach to meet its emissions goal will require FERC's approval for any changes to the governing system tariffs and, in particular, will require FERC's approval for any changes to the dis patch algorithms. Commenters said the EPA acknowledges that its proposed carbon dispatch106 model will result in increased costs over the current security constrained economic dispatch model. Commenters said as a result of those increased costs

- and for other reasons

- it is entirely possible that FERC will determine that the EPA's carbon dispatch model is not just and reasonable, particularly if it "undermine[s] the market principles that underpin dispatch." Commenters referred to FERC Commissioner Clark has opi ned, "[t]o the degree an EPA rule directly attempts to change FERC jurisdictional market dispatch rules, there could be a clear conflict between the Federal Power Act and the Clean Air Act." Commenters said in the event of such a conflict, States and trans mission system operators may not be able to utilize building block 2 to meet the EPA's emissions goals and therefore may not be able to comply with overall emission goals of the proposed rule.

Commenters stated EPA does not consider the limitations on its own jurisdiction and the jurisdiction of the state agencies that will have to prepare plans to comply with any final rule stemming from the proposed rule. Commenters said this issue is particularly problematic in the context of Building Block 2. Commenter s continued FERC, not EPA, has jurisdiction over, among other things, wholesale electricity markets, interstate transmission rates, natural gas pipeline siting and rates, and natural gas and electric sector coordination. Commenters said while FERC regulate s the wholesale rates for electric utilities and market rules for regional transmission organizations, that authority has never been interpreted to allow FERC to dictate to those entities what generation units they should dispatch and when or how to do so.

Response 3 : We disagree with commenters. As we explain in sections V.A. and V.B. of the preamble, our emission guidelines simply reflect an achievable emissions limit through the application of the BSER and do not in themselves require states or sources to implement the BSER. That is, EPA is responsible for determining the level of emission limitation from the source category, while states have the responsibility of assigning emission requirements to their sources that will ensure their achievement of th at level of emission limitation. States may fulfil their responsibility by establishing emission standards or creating plans consistent with the guidelines. In doing so, states will be able to choose from a wide range of emission reduction measures, includ ing measures that are not part of the BSER. Additionally, we disagree with commenters that the final rule require s environmental dispatch. Instead, the potential to shift generation identified in building block 2 is consistent with the existing economic dispatch protocols. Environmental policies can shift generation in two ways. The first is operational restrictions, such as permit limits on the number of hours that an EGU can operate in order to limit emissions. The second is changes in the relative costs of generation among different types of affected EGUs related to pollution reduction measures. For example, a regul ation that necessitates the use of a control technology that requires the application of a reagent in a certain kind of EGU will increase the variable cost of operating that plant, which in turn may reduce the amount of generation it is called upon to deli ver to the grid through security

- constrained economic dispatch procedures. This is consistent with economic dispatch.

Further, we disagree that we are expanding our authority to include wholesale energy market regulation. Our emission guidelines simply ref lect an achievable emissions limit through the107 application of the BSER and do not in themselves require states or sources to implement the BSER. Moreover, these emission guidelines provide states with the flexibility to establish, implement, and enforce st andards of performance and do not intrude on the regulatory domain of FERC or the states. It cannot be said that because environmental requirements may have an effect on the wholesale energy market that the EPA is therefore intruding into energy regulation

. Certainly, in the legislative history of the 1970 CAA Amendments, Congress expressly identified power plants as a priority source category for regulation under CAA section 111.

Comment 4 : Commenters stated that new NGCC could be considered as a basis f or support for the BSER, but the proposal does not indicate how new NGCC can be incorporated. Commenters noted the BSER for Michigan in Building Block 2 is more stringent than the emission limit for a new NGCC in the Section 111(b) proposal. Commenters sug gested the two proposals do not comport and should be aligned, because existing NGCC plants should be less stringent that the proposed Section 111(b) new source proposal, not more stringent.

Response 4 : We address new NGCC units for purposes of the BSER i n section V.A.2.

1.9. 4 .3: State

- specific issues

Comment 1 : The following commenters discuss complications for states to regulate dispatch.

Commenters stated absent from the proposed rule is any consideration of the ability of individual states to requir e redispatch to the extent contemplated by Building Block 2. Commenters said the Mississippi Public Service Commission (MPSC) is authorized by state law "to encourage and promote harmony between public utilities...and the environment." Commenters said the Commission has authority to regulate public utilities "[t]o foster the continued service of public utilities on a well

- planned and coordinated basis that is consistent with the level of service needed for the protection of public health and safety and for the promotion of the general welfare." See Miss. Code Ann. Section 77

- 3

- 2(1)(f). Commenters said while the MPSC interprets its authority expansively, the MPSC, like most state regulatory commissions, has not exercised authority to order utilities under its jurisdiction to dispatch specific units in any specific order or manner. Commenters said those decisions have always been left to utilities with the relevant technical expertise. Commenters said while dispatch is addressed through RTOs, Mississippi is loc ated only partially within an RTO (MISO). Commenters said the MPSC is uncertain whether it could control MISO's dispatch of generating units located in Mississippi.

Commenters stated that the states that must ultimately develop the state plans to implemen t a final rule may or may not supply what authority EPA lacks, as EPA appears to at least recognize.108 [24 below] Commenters continued, stating that the MPSC does not purport to predict the actions that the Mississippi legislature or the Governor may take in developing and enacting new legislation. Commenters noted, as a prudent regulator, the MPSC must make the conservative assumption that its authority and funding will remain unchanged until such time as the duly

elected government of Mississippi decides ot herwise. Commenters observed that while the MPSC has broad statutory authority "to encourage and promote harmony between public utilities...and the environment" [25 Miss. Code. Ann. Section 77

- 3

- 2(1)(e).] and interprets its jurisdiction expansively, the im plementation of Building Block 2, in particular, would require the MPSC to assert authority of an unprecedented scope over utility dispatch of resources on the grid, and this is not an area in which the MPSC has previously sought to dictate such specific

r esults. And commenters stated it is unclear that the MPSC could dictate dispatch to MISO, which controls some of the resources in Mississippi. [24 See U.S. E.P.A. Office of Air & Radiation, Technical Support Document, State Plan Considerations 15

- 16, Docke t No. EPA

- HQ

OAR

- 2013

- 0602 (June 2014), available at www2.epa.gov/sites/production/files/2014

- 06/documents/20140602tsd

- state

- plan

- considerations.pdf ("[A]n enforceability consideration is whether an [integrated resource plan ("IRP")], and related public u tility commission orders, must include additional requirements to implement certain actions, beyond denial of rate recovery or a change to utility tariffs if a utility fails to meet specified obligations in the IRP. If so, this may require state legislatio n to provide additional authority to state public utility commissions in some states, or confer additional authority to other agencies (e.g., a state environmental agency).")] Commenters stated neither FDEP nor the FPSC have authority over the dispatch of EGUs in Florida. Commenters said the FPSC only indirectly oversees the dispatch of investor

owned (not municipal or cooperative) generating units through the "fuel and purchased power cost recovery clause" proceedings by which investor owned utilities obta in pass

- through recovery of their fuel and purchased power costs. Commenters said legislative action would be required before this building block could be implemented on a state

- wide basis.

Commenters stated EPA states the "reduced utilization in specified amounts" from specified EGUs can be achieved because a "reduction of, or limitation on, the amount of generation is already a well

- established means of reducing emissions of pollutants in the electric sector." Commenters said EPA provides examples such as Title IV, NOx SIP call, and CAIR as systems of emission reductions that have been "adequately demonstrated." Commenters said EPA is suggesting states establish synthetic minor limitations or operational restrictions on coal

- fired EGUs in order to force re

- dispatch, presumably either through the authority of Title IV or Title V permits. Commenters said this suggestion is flawed on several different levels. Commenters said EPA cites the Title IV market

- based program for the reduction of sulfur dioxide and ni trogen oxide emissions as an example of reducing emissions from a permit based program. Commenters said the Title IV provision was approved by Congress and did not include CO2. Commenters said EPA cannot assume that either states or EPA have similar author ities to regulate CO2 emissions from power plants under Title IV, when none exist. Commenters said the Title V program cannot be used to "create" new emission limitations or force generating restrictions on a plant. Commenters said the only requirements th at are to be included in the Title V permit are those that are included in the federally approved SIP. Commenters said besides the fact that this109 suggestion lacks any legal foundation, it is also technically flawed. Commenters said states cannot force NGCC to operate at 70% or greater capacity. Commenters said EPA's suggestion could lead to this absurd result: A state requires an NGCC to operate at 70% capacity but finds itself below the annual capacity factor and must run even if there is no demand for the electricity thereby wasting natural gas and producing excess CO2 emissions.

Response 1 : For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reasonable and within the scope of EPA’s authority in light of the statutory text, statutory context, statutory purpose, and legislative history.

EPA recognized that states may have to change state law to comply with the requirements to submit an approvable state plan. This was one of seve ral reasons that the Agency provided in allowing states to ask for extensions beyond September 6, 2016. The available extension provides sufficient time for such changes.

As we explain in sections V.A. and V.B. of the preamble, our emission guidelines si mply reflect an achievable emissions limit through the application of the BSER and do not in themselves require states or sources to implement the BSER. That is, EPA is responsible for determining the level of emission limitation from the source category, while states have the responsibility of assigning emission requirements to their sources that will ensure their achievement of that level of emission limitation. States may fulfil their responsibility by establishing emission standards or creating plans co nsistent with the guidelines. In doing so, states will be able to choose from a wide range of emission reduction measures, including measures that are not part of the BSER. EPA recognizes that each state has unique factual circumstances that will shape the development of a state’s plan. We look forward to working with the states to account for these factual circumstances in developing satisfactory state plans.

Comment 2 : Commenters stated the only "existing" NGCC generation in Kentucky is LG& E's and KU's Cane Run 7 unit, which is currently under construction to replace coal

- fired resources retired as a result of the MATS regulations. Commenters said any other increased utilization from existing NGCC units would have to be imported into the sta te. Commenters said reliance
on out

- of

- state generation is concerning given the competition for energy resources between generating states and other importing states (as contemplated under Building Block 2). Commenters said transmission planning must be co mpleted across import and export seams between the Transmission Planning and Balancing Authorities to verify enough Available Transfer Capability (ATC) exists to facilitate firm transmission transactions. Commenters said without sufficient firm transmissio n contract paths, congestion and reliability concerns will be created and/or exacerbated and could require transmission line construction. Commenters said EPA should analyze and seek further information on potential reliability constraints from a generatio n and transmission line perspective prior to determining NGCC capacity and the appropriate NGCC re

- dispatch capability. Commenters questioned the legality of including re

dispatch as a component of determining BSER. Commenters said if this component ultima tely110 survives legal scrutiny, they support allowing State Compliance Plans to utilize existing NGCC, CTs and New NGCC as an offset of existing coal

- fired CO2 emissions.
Response 2 : For the reasons discussed in section V.A. and V.B. of the preamble and in t he Legal Memorandum, our interpretation of the BSER is reasonable and within the scope of EPA’s authority in light of the statutory text, statutory context, statutory purpose, and legislative history. Also, we discuss substitute generation as a component of the BSER in more detail in the Legal Memorandum.

As we explain in sections V.A. and V.B. of the preamble, our emission guidelines simply reflect an achievable emissions limit through the application of the BSER and do not in themselves require states or sources to implement the BSER. That is, EPA is responsible for determining the level of emission limitation from the source category, while states have the responsibility of assigning emission requirements to their sources that will ensure their achieveme nt of that level of emission limitation. States may fulfil their responsibility by establishing emission standards or creating plans consistent with the guidelines. In doing so, states will be able to choose from a wide range of emission reduction measures , including measures that are not part of the BSER. EPA recognizes that each state has unique factual circumstances that will shape the development of a state’s plan. We look forward to working with the states to account for these factual circumstances in developing satisfactory state plans.

1.9. 4 .4: Takings argument

Comment 1 : Several commenters stated, the Proposed Guidelines violate the Fifth Amendment because uncompensated takings of property will result.

- Commenters said, the Proposed Guidelines a re unconstitutional because they will result in the taking of property without just compensation. Commenters said, EPA acknowledges that numerous coal

- and oil

- fired EGUs will need to shut down to comply with this rule, and many coal

- fired EGUs that do rem ain open will have their operations so severely curtailed that it will result in a partial taking.

- Commenters said, the premature retirement of coal

- and oil

- fired EGUs constitutes a total taking because it will completely deprive the owners of these EG Us of all economically beneficial use of their property.

- Commenters said, the severe restriction in operations of coal

- and oil

- fired EGUs will also constitute a taking under the test set forth in Penn Central Transportation Co. v. City of New York, 438 U.S. 104, 124 (1978). Commenters said, the character of the Proposed Guidelines,111 their severe economic impacts, and their interference with reasonable investment

- backed expectations all weigh in favor of finding a taking.

If Lawful, The Proposed Guideline s Would Violate the Fifth Amendment Because Uncompensated Takings of Property Will Result.

Commenters stated, assuming arguendo that the Proposed Guidelines were consistent with the CAA and other federal statutes (which they are not), they would constitut e an unconstitutional taking of property without just compensation. Commenters said, as EPA acknowledges, to meet the goals set forth in the Proposed Guidelines, numerous coal

- fired EGUs throughout the country will need to be shut down. 79 Fed. Reg. at 34, 933 (estimating retirement of 46

- 49 GW of coal

fired EGUs and 16 GW of oil/gas steam EGUs under EPA's Building Block Option 1, and retirement of 24

- 32 GW of coal

- fired EGUs and 3

- 5 GW of oil/gas steam EGUs under its Option 2 approach); see also EPA, Goal C omputation Technical Support Document (June 2014), Docket ID No. EPA

- HQ

- OAR

- 2013

- 0602

- 0460 ("Goal Computation TSD"); id. at App. 1, Docket ID No. EPA

- HQ

- OAR

- 2013

- 0602

- 0255. Commenters said, and for those coal

- fired EGUs that do remain open, many will have their operations so severely curtailed that it will result in a partial taking.

Commenters stated, the Fifth Amendment of the Constitution prohibits the taking of "private property . . . without just compensation." U.S. CONST. amend. V. Commenters said, t he Supreme Court long ago extended the takings concept to regulation that goes too far: "The general rule . . . is that while property may be regulated to a certain extent, if regulation goes too far it will be recognized as a taking." Pa. Coal Co. v. Maho n, 260 U.S. 393, 415 (1922). Commenters said, a total, or per se, taking occurs where regulations "completely deprive an owner of "all economically beneficial use" of her property." Lingle v. Chevron U.S.A. Inc., 544 U.S. 528, 538 (2005) (emphasis in origi nal) (quoting Lucas v. S.C. Coastal Council, 505 U.S. 1003, 1019 (1992)). Commenters said, partial takings, like total takings, must be compensated under the Fifth Amendment. Commenters said, courts evaluate partial takings claims by making "essentially ad hoc, factual inquiries" into three primary factors: (1) the character of the government action; (2) the economic impact of the regulation on the claimant; and (3) the extent to which the regulation interferes with distinct investment

- backed expectations. Penn Cent., 438 U.S. at 124.

Commenters stated, the constitutional concept of "property" is broad enough to encompass the EGUs affected by the Proposed Guidelines, the generating capacity of those EGUs, and their remaining useful life (and corresponding f uture generating capacity). See United States v. Gen. Motors Corp., 323 U.S. 373, 378 (1945) ("[Property] deals with what lawyers term the individual's "interest" in the thing in question . . . . [T]he constitutional provision is addressed to every sort of interest the citizen may possess."); see also Kaiser Aetna v. United States, 444 U.S. 164, 179 (1979) (stating that the government must give just compensation for taking "sufficiently important" "expectancies embodied in the concept of "property") (emphas is added). Commenters said, takings claims may be brought for the taking of real property, see Lucas, 505 U.S. at 1019,112 tangible property, see Andrus v. Allard, 444 U.S. 51, 65 (1979), and intangible property, see Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1003

- 04 (1984). Commenters said, the EGUs at issue here are, themselves, obviously tangible property, their generating capacity is intangible property, and the remaining useful life (and associated future generating capacity) of the EGUs represent investm ent

- based expectations in the property, all of which are encompassed by the protections of the Fifth Amendment. Commenters said, the economic value of an EGU lies in the generation of electricity. Commenters said, thus, eliminating or curtailing the genera ting capacity or remaining useful life of an EGU, as the Proposed Guidelines would do, directly interferes with an owner's primary "interest" in the thing in question." Gen. Motors Corp., 323 U.S. at 378. Commenters said, accordingly, if the Proposed Guide lines are otherwise lawful

- which they are
not

- their promulgation would require just compensation for all owners of EGUs that are forced to shut down or severely curtail operations because of EPA's regulatory action.

Commenters stated, in sum, the Prop osed Guidelines would result in a total taking of those coal

and oil

- fired EGUs that are required to shut down in order for the states in which they are located to meet the goals set forth in the Proposed Guidelines. Commenters said, and for those EGUs wh ose operation would be significantly curtailed as a result of the Proposed Guidelines, after examining the three Penn Central factors, it is clear that a partial taking would result. Commenters said, the impact of the Proposed Guidelines on these EGUs woul d be severe and that burden would be unfairly distributed by focusing exclusively on coal

- and oil

- fired EGUs. Commenters said, the Proposed Guidelines would also impose severe economic impacts on the owners of those EGUs and would significantly interfere with those owners' investment backed expectations. Commenters said, if EPA decides to proceed with the Proposed Guidelines and if those Guidelines could be lawfully promulgated, which for the many reasons presented in these comments they cannot, then EPA w ould have to justly compensate the owners of those EGUs that are forced to shut down or to restrict their operations significantly. Commenters said, otherwise, the owners of these EGUs will be forced "alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole." Tahoe

- Sierra, 535 U.S. at 336 (quoting Penn Cent., 438 U.S. at 123

- 24).

A. The Proposed Guidelines, if Lawful, Would Result in a Total Taking of Any EGU Forced To Shut Down To Ensure Compliance with the Guidelines.

Commenters stated, EPA admits that the Proposed Guidelines will result in the forced retirement of coal

- and oil

- fired EGUs based on EPA

- established state emission goals that can be met only by shifting generating capacity away from these EGUs to other sources of generation. 79 Fed. Reg. at 34,933; Goal Computation TSD, App. 1. Commenters said, if EPA were authorized to issue the Proposed Guidelines, the premature retirement of these EGUs would constitute a total taking because it would complet ely deprive the owners of these EGUs of all economically beneficial use of their property. See Lingle, 544 U.S. at 537. Commenters said, because EGUs will be required to shut down to meet the state goals set forth in the Proposed Guidelines, the owner of t he EGU would lose its capital investment in the EGU, the generating capacity of the EGU, and the remaining useful life of the EGU (and its associated future generating capacity).113 Commenters stated, although the Supreme Court has permitted the government, without compensation, to restrict lawful property from being put to unlawful uses, see Mugler v. Kansas, 123 U.S. 623 (1887) (breweries banned under Prohibition Era law), or to restrict the use or sale of a previously legal product to the extent that it is nearly valueless, see Andrus v. Allard, 444 U.S. 51 (1979), the Court has not allowed government appropriation of property without compensation where there is no showing that the property is a nuisance or creates an impending harm to others, see Mugler, 1 23 U.S. at 669 ("In the one case, a nuisance only is abated; in the other, unoffending property is taken away from an innocent owner."); cf. Lucas, 505 U.S. at 1030. Commenters said, there is no nuisance or impending harm here. Commenters said, indeed, the EGUs that would be shut down under the Proposed Guidelines are heavily regulated facilities that operate subject to numerous permits, including Title V permits under the CAA. Commenters said, moreover, which EGUs would shut down has no relationship to the features of or environmental controls in place at the EGUs themselves. Commenters said, in fact, older, less environmentally

- controlled EGUs may continue to operate while newer EGUs with state

- of

- the

art environmental controls may shut down, simply by vir tue of which state the EGU is located in and how much "excess" natural

- gas fired, renewable, or other low carbon

- emitting capacity the state possesses. Commenters said, in other words, factors that have nothing to do with the environmental characteristics of the EGUs themselves would determine which EGUs must shut down to comply with the rule. Commenters said, the shutting down of these EGUs under the Proposed Guidelines would result in a total loss of all economically beneficial use to their owners and thu s constitute a total regulatory taking in the event that EPA's Proposed Guidelines were found otherwise to be lawful.

B. The Proposed Guidelines, if Lawful, Would Result in a Partial Regulatory Taking of Any EGU That Must Significantly Curtail its Operation or Remaining Useful Life To Ensure Compliance with the Proposed Guidelines' Emission Goals.

Commenters stated, unde r Building Blocks 2, 3, and 4 of the Proposed Guidelines, as reflected in the EPA state emission goals, many coal

- and oil

- fired EGUs that are not shut down entirely would experience serious curtailment of their operations as the Proposed Guidelines result in natural gas

- fired generation being dispatched before coal

- or oil

- fired generation (Building Block 2), increased use of renewable energy that will also be dispatched before coal

- or oil

- fired generation (Building Block 3), and the implementation of dem and

- side energy efficiency programs that are expected to result in less demand for electricity (Building Block 4). Commenters said, although these actions would not rise to the level of a total taking under Lucas, partial takings claims may be brought unde r Penn Central, which established a set of factors that courts consider to determine whether a regulation results in a compensable partial taking: (1) the character of the government action; (2) the economic impact of the regulation on the claimant; and (3 ) the extent to which the regulation interferes with distinct investment

- backed expectations. Penn Cent., 438 U.S. at 124. Commenters said, the Penn Central factors are "designed to allow 'careful examination and weighing of all the relevant circumstances. '" Tahoe

Sierra Pres. Council, Inc. v. Tahoe Reg'l Planning Agency, 535 U.S. 302, 322 (2002) (quoting Palazzolo v. Rhode Island, 533 U.S. 606, 636 (2001) (O'Connor, J., concurring)). Commenters114 said, the factors focus "directly upon the severity of the bur den that government imposes upon private property rights." Lingle, 544 U.S. at 539. Commenters said, analysis of these three factors demonstrates that the Proposed Guidelines, if otherwise lawful, would result in a partial taking for coal

- and oil

- fired EG Us that would be forced to significantly curtail their operations as a result of the Proposed Guidelines.

1. The Character of the Proposed Guidelines Weighs in Favor of a Takings Claim.

Commenters stated, under the Takings Clause of the Fifth Amendment, courts look not to the effectiveness of the regulation or legitimacy of the public purpose, but instead to the magnitude or character of the burden a particular regulation imposes upon private property rights and how that regulatory burden is distributed a mong property owners. Lingle, 544 U.S. at 541. Commenters said, a regulation causes a taking where it forces "some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole." Tahoe

Sierra, 535 U.S. at 336 (quoting Penn Cent., 438 U.S. at 123

- 24). Commenters said, where a regulation has a severe or an "unduly harsh impact upon the owner's use of the property," it weighs in favor of a takings claim. Penn Cent., 438 U.S. at 127; see also Lingle, 544 U.S. a t 539. Commenters said, likewise, where a government regulation is of an "extraordinary" character and destroys "one of the most essential sticks in the bundle of rights that are commonly characterized as property," it weighs heavily toward a takings claim . See, e.g., Hodel v. Irving, 481 U.S. 704, 716 (1987) (quoting Kaiser Aetna, 444 U.S. at 176).

Commenters stated, for the owner of an EGU, one of the "most essential sticks" in the owner's bundle of property rights is the right to use the EGU for its law ful, economically beneficial, and only intended use: the generation of electricity. Commenters said, the Proposed Guidelines would require significant reductions in the operations of many coal

- and oil

- fired EGUs. Commenters said, in particular, reflecting EPA' Building Block 2, the EPA

- required state emission goals would shift generation from coal

- fired EGUs, which currently provide baseload generation, to NGCC units. Commenters said, requiring severe curtailments in the operation of an EGU would prevent t he owner of that property from realizing its sole purpose

- the generation and sale of electricity.

Commenters stated, Penn Central is instructive here. Commenters said, in Penn Central, which involved regulations affecting Grand Central Station in New Yo rk City, the Supreme Court found that regulations restricting the ability to build above the train terminal in historic Grand Central Station in New York City did not interfere with owner "Penn Central's primary expectation" because it did "not interfere i n any way with the present uses of the Terminal . . . . [A]ppellants may continue to use the property precisely as it has been used for the past 65 years." 438 U.S. at 136. Commenters said, the Court further determined that the law "not only permit[ted] re asonable beneficial use of the landmark site but also afforded appellants opportunities further to enhance not only the Terminal site proper but also other properties" by permitting Penn Central to: (1) "profit from the Terminal but also to obtain a 'reaso nable return' on its investment," (2) expand into the air space as long as the new construction "would115 harmonize . . . with [the Terminal]"; and (3) to transfer its "pre

- existing air rights . . . to at least eight parcels in the vicinity of the Terminal." Id. at 136

- 38.

Commenters stated, by contrast, the Proposed Guidelines would prevent the use of EGUs in accordance with their intended purpose. Commenters said, the severe curtailment of operation of an EGU would prevent it from generating electricity, wh ich is its sole purpose. Commenters said, the Proposed Guidelines would destroy the value of these sources by confiscating their generating capacity and preventing the owners of these EGUs from obtaining a reasonable return on their investment. Commenters said, indeed, because many of the owners of these EGUs have obligations to provide electricity to their customers, the Proposed Guidelines would not only prevent the reasonable return on their investment but could require certain owners to build capacity t o replace the severely curtailed operation of their existing coal

- fired units or to purchase electricity from other electric generators on the open market to ensure that their customers' power remains on

- even though the owner could provide such electrici ty to its customers from the affected EGUs if their operation was not restricted as a result of EPA's rule.

Commenters stated, in sum, for those EGUs whose operation is severely restricted as a result of the Proposed Guidelines, EPA will have confiscated the "most essential sticks" in their bundle of property rights, assuming the Proposed Guidelines were otherwi se lawful. Commenters said, the fact that these measures would be taken for the "public good" of reducing GHGs is of no relevance to the takings question. Commenters said, owners of certain coal

- and oil

- fired EGUs should not be forced to bear this societa l burden alone. Commenters said, thus, the extraordinary character and severe impact of the Proposed Guidelines on those EGUs weigh heavily in favor of finding that a taking would occur if EPA were able to lawfully finalize its proposal.

2. The Proposed G uidelines Would Cause Severe Economic Impacts.

Commenters stated, the second factor in the Penn Central analysis focuses on the economic impact of the regulation. 438 U.S. at 124. Commenters said, the inquiry is whether the regulation "impair[s] the value or use of [the] property" according to the owner's general use of its property. PruneYard Shopping Ctr. v. Robins, 447 U.S. 74, 83 (1980); see also Penn Central, 438 U.S. at 136

- 38. Commenters said, EPA admits that there would be significant economic impa cts associated with the Proposed Guidelines. 79 Fed. Reg. at 34,935

- 36; EPA, Regulatory Impact Analysis for the Proposed Carbon Pollution Guidelines for Existing Power Plants and Emission Standards for Modified and Reconstructed Power Plants at ES

- 7 to ES

- 9 (June 2014), Docket ID No. EPA

- HQ

- OAR

- 2013

- 0602

- 0391 ("RIA"). Commenters said, for those coal

- and oil

- fired EGUs that would be forced to curtail their operations substantially, economic impacts would be severe. Commenters said, those EGUs would no longe r be able to run at the capacity at which they were constructed to run. Commenters said, this would result not only in the generation of less electricity

- and thus fewer profits

- but also higher operating costs and inability to recover investments that w ere made in anticipation of continued operations. Commenters said, coal

- and oil

- fired EGUs are not designed to operate as peaking units, and the costs associated with doing so are significant. Commenters said, failing to operate these units fully results in their needing to116 burn more fuel per MWh generated (which perversely results in greater CO2 emissions). Commenters said, this "is not a case in which the Government is exercising its regulatory power in a manner that will cause an insubstantial devaluati on of petitioners' private property," Kaiser Aetna, 444 U.S. at 180, but is instead a case where the government regulation would be "functionally equivalent" to a direct appropriation, Lingle, 544 U.S. at 539. Commenters said, both the value and the use of these EGUs as electric generating facilities would be significantly impaired by the Proposed Guidelines, and their owners would lose significant control over the manner of operation of their sources. Commenters said, these major economic impacts weigh hea vily in favor of finding a taking assuming the Proposed Guidelines are otherwise lawful.

3. The Proposed Guidelines Would Significantly Interfere With Reasonable Investment

- Backed Expectations.

Commenters stated, the Proposed Guidelines would interfere s ignificantly with the reasonable investment

- backed expectations of the owners of those coal

- and oil

- fired EGUs whose operation will be significantly restricted. See Penn Cent., 438 U.S. at 124 (establishing as a primary factor in a regulatory takings anal ysis the extent of interference with "distinct investment

- backed expectations"); see also Palazzolo, 533 U.S. at 618 (adopting reasonableness requirement); Ark. Game & Fish Comm'n v. United States, 133 S. Ct. 511, 522 (2012) (adopting reasonableness requir ement). Commenters said, although the Supreme Court has indicated that the extent to which an industry is regulated plays a role in evaluating the reasonableness of investment

- backed expectations, see Monsanto, 467 U.S. at 1008

- 09, this does not mean that prior regulation of an industry per se forecloses the reasonableness of investment

- backed expectations, cf. Palazzolo, 533 U.S. at 633 ("Today's holding does not mean that the timing of the regulation's enactment relative to the acquisition of title is imm aterial to the Penn Central analysis. Indeed, it would be just as much error to expunge this consideration from the takings inquiry as it would be to accord it exclusive significance.") (O'Connor, J., concurring); see also Tahoe

- Sierra, 535 U.S. at 336 ("A ccordingly, we have eschewed any set formula . . . . The outcome instead depends largely upon the particular circumstances in that case.") (internal quotation marks and citations omitted). Commenters said, as the Supreme Court has noted, whether a regulati on has gone "too far" is instead " a question of degree" and therefore cannot be disposed of by general propositions." MacDonald v. Yolo Cnty., 477 U.S. 340, 348 (1986) (quoting Pa. Coal, 260 U.S. at 416). Commenters said, thus, the appropriate question fo r a regulated industry like the electric generation industry is the degree to which, when the affected sources were developed and constructed, the EGUs had a reasonable investment

- backed expectation that they would be able to operate the source as the type of source it was designed to be and at a certain level of generating capacity in light of the existing regulatory climate, among other factors.

Commenters stated, although this determination will require an "essentially ad hoc, factual inquir[y]," Penn C ent., 438 U.S. at 124, regarding how exactly the Proposed Guidelines would affect the EGU in question, the date that the investment decision was made for the EGU, and the laws and regulations existing at that time, the Proposed Guidelines, if valid, would lead to a number of strong takings claims by the owners of the coal

- and oil

- fired EGUs that are having117 their operations severely curtailed. Commenters said, the Proposed Guidelines would require drastic reductions in generating capacity for many sources. Commenters said, despite the fact that EGUs are heavily regulated, their owners had no reason to expect that their operations would be curtailed as a result of section 111(d) of the CAA. Commenters said, first, most, if not all, of the investment decisions for these EGUs were likely made before the Supreme Court decided Massachusetts v. EPA, 549 U.S. 497 (2007), and held that GHGs could be regulated under the CAA. Commenters said, prior to that time, EPA had not regulated GHGs under the Act and said it had no authority to do so. 68 Fed. Reg. 52,922, 52,925

- 29 (Sept. 8, 2003). Commenters said, furthermore, all of the investment decisions were made well before EPA proposed to adopt its novel "building blocks" approach of determining BSER, which it set forth fo r the first time in the Proposed Guidelines. Commenters said, nothing in EPA's prior rulemakings under section 111(d)

- r indeed under section 111(b)

- would give the owners of EGUs reason to anticipate that section 111(d) would be used to require reduced utilization of a source. Commenters said, in sum, the owners of those coal

- and oil

- fired EGUs that would have significant restrictions placed on the operation of those EGUs as a result of the Proposed Guidelines had no reason to expect at the time that th e investment decisions were made that this could occur. Commenters said, the owners instead constructed these EGUs with the reasonable investment

- backed expectation that, although the sources would be subject to some regulation under the CAA and other stat utes and regulations, the EGUs would operate for their remaining useful lives and at a certain level of generation and profitability.

Commenters stated "Because of its excessive overreach, the proposed rule also raises significant takings issues under the Fifth Amendment of the United State Constitution." Commenters stated "EPA's rule admits that achieving the proposed CO2 reduction goals will require the shutdown (or partial shutdown) of existing coal

- fueled EGUs." Commenters continued, "Coal reserves

owne d by mining companies could also be rendered worthless." Commenters noted, "The Fifth Amendment prohibits the taking of 'private property . . . without just compensation.' and "as the Supreme Court has long observed, '[t]he general rule . . . is, that whil e property may be regulated to a certain extent, if regulation goes too far it will be recognized as a taking.'"[Penn. Coal Co. v. Mahon, 260 U.S. 393, 415 (1922).] Commenters stated "The constitutional concept of 'property' is broad enough to encompass th e EGUs affected by the proposed rule and any coal reserves." [See United States v. Gen. Motors Corp., 323 U.S. 373, 378 (1945) ('[Property] deals with what lawyers term the individual's 'interest' in the thing in question . . . . [T]he Constitutional provi sion is addressed to every sort of interest the citizen may possess.").] Commenters noted that "Eliminating or restricting the generating capacity or remaining useful life of an EGU or coal mining operation would directly interfere with an owner's primary 'interest in the thing in question' and constitute a taking."

Commenters stated that the EPA Power Plan Violates Fifth Amendment Due Process and the Takings Clause by Threatening to Upset Well

- Settled Investment

- Backed Expectations Developed in Reliance o n Long

- Standing Federal Policy and by Singling Out a Few to Bear Burdens that in Fairness Should Be Borne by Society as a Whole. Commenters said the Proposed Rule represents a radical shift in federal policy that upsets settled, investment

- backed118 expectati ons, with no attempt by EPA to quantify the climate or environmental benefits from the Proposed Rule. Commenters said EPA Administrator Gina McCarthy testified before the Senate Environment and Public Works Committee on July 23, 2014: "The great thing abou t this [EPA Power Plan] proposal is that it really is an investment opportunity. This is not about pollution control." Commenters said the Regulatory Impact Analysis (RIA) for the Proposed Rule states that the impact of "reduced climate effects" has been "monetized" but not "quantified." Commenters said that, in other words, EPA does not claim that the Proposed Rule would affect the climate. Commenters said the mismatch and lack of social benefit distinguish the Proposed Rule from other actions by EPA und er the Clean Air Act.

Commenters stated that the federal government has long encouraged responsible coal production, while being fully aware of the potential risks now cited by EPA. Commenters said in exchange, the federal government has profited enormousl y from coal and has received billions of dollars in royalties from its production. Commenters said royalty revenue collected by the U.S. Department of the Interior is an important part of both federal and state budgets. Commenters said under the Mineral Le asing Act of 1920, the federal government collects royalties on every ton of coal that is mined on federal lands. Commenters said the Department's Office of Natural Resources Revenue (ONRR) subsequently forwards approximately half of these royalty revenues to states, which in turn distribute the money toward road construction, schools, universities, communities affected by energy development and general funds. Commenters said states received nearly $2.1 billion from oil, gas, coal and other energy royaltie s in FY2012, according to ONRR. Commenters said more than 460.3 million tons of coal mined on federal lands was sold in FY2012, with a total sales value of $8.1 billion. Commenters said this coal generated more than $875.8 million in royalty revenue. Com menters said the federal government collected more than $6.8 billion in royalties between FY2003 and FY2012.

Commenters stated that the Fifth Amendment's Due Process and Takings Clauses aim "to prevent the government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole." [Eastern Enters. v. Apfel, 524 U.S. 498, 522

- 23 (1998); see also Armstrong v. United States, 364 U.S. 40, 49 (1960).] Commenters said this is precisely the purp ose of the Proposed Rule: forcing the United States' power plants and energy industry to bear the global burden of lessening CO2 emissions. Commenters said the Proposed Rule demonstrates the risk of allowing an unaccountable administrative agency to "make" law and attempt to impose the burden of global climate change on an unlucky and unfortunate few. Commenters said EPA's singling out of a mere handful of emitters and limiting (or curtailing) their property is exactly the type of overreaching the Fifth Ame ndment seeks to prevent. Commenters cited Justice Jackson: "The authority [vested by the Constitution in a federal branch] must be matched against words of the Fifth Amendment that 'No person shall be ... deprived of life, liberty, or property, without due process of law.' ... One gives a governmental authority that reaches so far as there is law, the other gives a private right that authority shall go no farther. These signify about all there is of the principle that ours is a government of laws, not men, and that we submit ourselves to rulers only if under rules."119 Commenters stated that because the Proposed Rule would reverse decades of federal policy after private industry has already committed to its investments, it operates in retroactive fashion to
st rand the very investments the federal government has encouraged and raises grave constitutional concern. [Penn Cent. Transp. Co. v. New York, 438 U.S. 104, 107 (1978), and Eastern Enters. v. Apfel, 524 U.S. 498, 522

- 23 (1998) (a regulation "may so frustrat e distinct investment

- backed expectations as to amount to a 'taking'").] Commenters said that the proposed rule is open to comment does not dispel or otherwise lessen the constitutional concern. [See Bentzion S. Turin, Eastern Philosophy: A Constitutional Argument for Full Stranded Cost Recovery by Deregulated Electric Utilities, 36 HOUS. L. REV. 1411, 1453 (Winter 1999) ("Although it is certainly true that the government ... will often open its decision

- making process for comment, in the final analysis, re gulation by sovereignty proceeds unilaterally, with the government imposing its will on the regulated party, with or without the latter's consent.").]

Commenters stated that in Eastern Enters, a plurality of the Supreme Court distilled from prior case law three factors of "particular significance" to the Fifth Amendment inquiry: "the economic impact of the regulation, its interference with reasonable investment backed expectations, and the character of the governmental action." Commenters said the remaining Justices applied similar reasoning, although they would have framed the inquiry in terms of the Fifth Amendment's Due Process Clause rather than its Takings Clause.

Commenters stated that EPA's Proposed Rule raises serious concerns under all three factor s: first, the economic impact is severe. Commenters said the Proposed Rule is unquestionably designed to drastically cut and eventually eliminate the use of coal. Commenters said the economic impact of the rules on consumers, communities, and businesses th at rely on coal would be substantial. Commenters said the impact would also be discriminatory. Commenters said it would fall harshly on the Midwestern United States and on other selected regions throughout the country, while largely bypassing the coastal a reas. Commenters said the Proposed Rule would not affect Vermont and Washington, D.C. at all.

Commenters stated that the sheer depth of impact and harshness of the Proposed Rule is significant. [See Lingle v. Chevron U.S.A., Inc., 544 U.S. 528, 538 (2005) ("inquiry turns in large part ... upon the magnitude of a regulation's economic impact and the degree to which it interferes with legitimate property interests.").] Commenters said the unprecedented scope of the Proposed Rule raises Fifth Amendment "regula tory takings" concerns, in that "while property may be regulated to a certain extent, if regulation goes too far it will be recognized as a taking." [Pa. Coal Co. v. Mahon, 260 U.S. 393, 415 (1922).]

Commenters stated that, second, the Proposed Rule would interfere with reasonable investment

backed expectations. Commenters said to be sure, the federal government in the past has provided financial support to various kinds of energy sources. Commenters said the Proposed Rule is qualitatively different from pr evious policies. Commenters said that rather than simply encouraging alternative sources of energy, the EPA Power Plan is aimed squarely at stamping out coal.120 Commenters stated that the phase

- out of coal use intended by the Proposed Rule would injure
not o nly coal companies, but their employees, customers, and communities. Commenters said the Proposed Rule unduly penalizes them for following the government's past directive and encouragement to invest in coal. Commenters said this about

- face in policy punish es those who relied upon the government, in the same way as the regulation held to be an impermissible taking in Ruckelshaus v. Monsanto, 467 U.S. 986 (1984) (finding a constitutional infringement when the government frustrated statutorily created expectat ions that trade secrets submitted to the government would be kept confidential). Commenters said Government policies shape business decisions and help determine the reasonableness of investment

- backed expectations. [See Palazzolo v. Rhode Island, 533 U.S. 606, 618 (2001); Tahoe

- Sierra Preservation Counsel Inc. v. Tahoe Regional Planning Agency, 122 S. Ct. 1465, (2002).] Commenters said here, the Proposed Rule represents a 180

- degree turn in energy policy.

Commenters stated that, third, the Proposed Rule is highly discriminatory. Commenters said it forces a select set of victims

- including coal

- reliant consumers, communities, regions, businesses and utilities

- to bear a substantial share of the economic burden for a worldwide public policy objective. Commen ters said the stated objective of the Proposed Rule is global in nature. Commenters said forcing a narrowly selected set of victims to make the proposed reductions in CO2 emissions would have an imperceptible effect on worldwide greenhouse gas levels but a t an inordinate cost to those of whom the most would be demanded.

Commenters stated that the Proposed Rule thus raises serious constitutional questions under the Fifth Amendment.

Commenters stated that EPA's interpretation raises grave questions under Arti cle I and Article II. Commenters said the Proposed Rule hides political choices and frustrates accountability. Commenters said it forces states to adopt policies that will raise energy costs and prove deeply unpopular, while cloaking those policies in the garb of state "choice"

- even though in fact the polices are compelled by EPA. Commenters said the Supreme Court has strongly condemned such arrangements, because "where the Federal Government directs the States to regulate, it may be state officials who w ill bear the brunt of public disapproval, while the federal officials who devised the regulatory program may remain insulated from the electoral ramifications of their decision." [New York v. United States, 505 U.S. at 169; see also Printz v. United States , 521 U.S. at 923 (citing need for "accountability" as a reason to prohibit federal government from forcing state officials to implement federal policy).] Commenters said the EPA thumbs its nose at democratic principles by confusing the chain of decision

- m aking between federal and state regulators to avoid political transparency and accountability.

Commenters stated EPA cannot require reduced utilization or shutdown of existing EGUs as a "standard of performance" under section 111. Commenters said however, to the extent that the proposed guidelines would result in the shutdown or reduced utilization of an existing unit with remaining useful life, particularly those units that have made substantial investments to comply with other recent rulemakings from the Administrator, the proposal would constitute an unlawful121 taking without just compensation, prohibited by the Fifth Amendment to the U.S. Constitution. Commenters said the economic value of an EGU lies in its ability to generate electricity. Commenters said the government must protect the investment

- backed expectations that are embodied in the concept of "property," and provide just compensation if regulation goes so far as to rob citizens of the beneficial use of their property. (See Lingle v. Chevron USA, Inc., 544 U.S. 528,537 (2005); Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 1019 (1992)).

Commenters stated that many of the conservative measures proposed by EPA will make plants economically unsustainable. Commenters said many units owned and operated by NRECA's members would be prevented from operating with sufficient frequency to generate the revenues required to service their existing debt. Commenters said even if a unit were not altogether prohibited from operating during specified periods, it is likely that diminished productivity caused by EPA's definition of BSER would make it commercially infeasible to maintain a particular unit. Commenters said the result is a standard that not only disregards the "remaining useful life" of the unit, bu t also prescribes requirements that, by definition, are not achievable by many units. Commenters said courts consider three factors to determine whether a regulation constitutes a compensable governmental taking: (1) the economic impact of the regulation o n the property owner; (2) the extent to which the regulation interferes with the property

- owner's distinct investment

- backed expectations; and (3) the character of the government's invasion of the property owner's property interest. See Lingle v. Chevron U .S.A. Inc., 544 U.S. 528, 538

- 39 (2005); Connolly v. Pension Benefit Guarantee Corporation, 475 U.S. 211, 224

- 25 (1986). Commenters said it is possible that the effects of the Proposed Rule are so severe that all three factors would support a finding that the proposed rule is a compensable taking. Commenters said the regulation could force many facility owners to shut down their plants altogether, leaving them with parcels of worthless land blighted by useless power plants and pollution

- control equipment. C ommenters said the Proposed Rule would also completely upset utilities' investment

- backed expectations by denying them the use of their investments. Commenters said their member utility companies have each spent hundreds of millions of dollars on their fac ilities, making improvements and installing the latest pollution

- control technologies. Commenters stated they have made these investments for the sole purpose of continuing to sell electricity in compliance with EPA rules that were promulgated pursuant to Section 112. Commenters said the Proposed Rule could make it impossible for a number of even the most modern, up

- to

- date facilities to continue doing business, squandering the money invested in these facilities, and this deprivation could be so severe as t o be equivalent to a physical appropriation of the owners' property interests. Commenters said even if the land retains some of its residual value, hundreds of millions of dollars invested in the pollution controls and technological improvements will be

re ndered just as worthless as if they had been physically appropriated. Commenters said EPA should thus carefully consider the risk of takings liability the Proposed Rule might trigger.

The Proposed Rule's Allocation of Renewable Energy Credits Potentially R aises Constitutional Concerns Under the Fifth Amendment Takings Clause.122 Commenters stated, the Fifth Amendment to the Constitution states: "[N]or shall private property be taken for public use, without just compensation." Commenters said, that Clause is m ade applicable to the States by the Fourteenth Amendment. Commenters said, the Proposed Rule's approach of allowing states to use utility

- owned renewable energy and renewable energy credits (RECs) to meet a state CO2 goal creates the potential for an uncon stitutional taking of property without just compensation. Commenters said, specifically, it would allow "' for renewable energy measures, consistent with existing state RPS [Renewable Portfolio Standards] policies, a state' [to] take into account all of th e CO2 emission reductions from renewable energy measures implemented by the state, whether they occur in the state or in other states'."

Commenters stated, furthermore, by suggesting that a state with a renewable measure in place that causes renewable inv estment in another state has the right to claim those out

- of

- state renewables as a CO2 offset in its plan, the Proposal doubles down by reaching across state borders to confiscate renewable energy and RECs of utilities and developers. Commenters said, the state

- driven portfolio approach is one which EPA identifies as a structure for states to use to develop their compliance plans. Commenters said, under such a plan, individual states must assume the responsibility for meeting their specific CO2 reduction go al established by EPA, which is based on the generation located within each state's borders. Commenters said, under the proposal, states are encouraged to use renewable energy as one of four building blocks to meet the compliance goal. Commenters said, ind eed, on average, EPA relies on renewable energy for more than 30 percent of the CO2 reduction to be achieved.

Commenters stated, while the Proposal touts flexibility and offers "options" to states in developing compliance plans, the fact is that it sets u p a structure in which states are empowered to confiscate for their own regulatory goals renewable energy and RECs

- which are the property of utilities and developers

- and use them to satisfy their individual CO2 goal. Commenters said, under a state

- driv en portfolio approach, state plans which include renewable energy for compliance will open the door for states to simply count all the renewable energy generated in the state and the accompanying RECs to meet the compliance goal. Commenters said, as a resu lt, the utility that owns the renewable energy/RECs will be prohibited from using those resources elsewhere because the Proposal expressly prohibits "double counting." Commenters said, this is especially true in states that have a renewable energy mandate that already requires Renewable Energy Credit (REC) retirement for compliance with that separate state goal. Commenters said, for example, in Minnesota, the state has imposed a Renewable Energy Standard (RES). Commenters said, it is served by a variety of fossil and renewable generation, both in

- state and
out

- of

- state, and by a variety of utilities based in and outside of Minnesota. Commenters said, however, Minnesota's CO2 goal is based on the generation located only in the state. Commenters said, the pro posal allows Minnesota to structure its state plan to count toward compliance all of the RES RECs used in the state by out

- of

- state entities. Commenters said, this is problematic for an APPA member, MRES, a joint action agency that provides power to Minnes ota public power utilities and has no generation contributing to the CO2 emissions located within the state. Commenters said, MRES does, however, provide RE to their member utilities based on the state's mandate. Commenters said, that RE and the associated RECs come from contracts123 between MRES and wind developers, and has been bought and paid for by MRES members in not only Minnesota, but also Iowa, North Dakota, and South Dakota. Commenters said, furthermore, that RE is located in several states, including Minnesota, Iowa, and North Dakota. Commenters said, allowing the state of Minnesota to offset the emissions of its in

- state EGUs with RE from a utility like MRES that does not even emit any CO2 in the state appears to constitute a taking of MRES property for a public purpose without any compensation.

Commenters stated, while MRES may have an RES compliance obligation in Minnesota, that does not entitle EPA to authorize the state of Minnesota to take the RE paid for by MRES members and their customers (wh ich has not been used to meet Minnesota's RES, i.e. excess RECs) to meet its state goal to offset the CO2 emitted by others. Commenters said, furthermore, if neighboring states such as Iowa and North Dakota where MRES has contracts for RE and RECs take a s imilar approach, the same renewable energy and RECs could be claimed by multiple states to meet their state compliance plan under EPA's flawed reasoning that a state policy that encourages the construction of renewables can claim credit for those renewable s even if they are located out

- of

- state. Commenters said, this sets up disputes between states regarding which state's policy effectively induced the construction of the RE. Commenters said, under either case, this element of the Proposed Rule is appears t o be unconstitutional taking of private property without compensation, in violation of the Fifth Amendment.

Response 1 : The EPA’s response regarding regulatory takings under the Just Compensation Clause can be found in the Legal Memorandum accompanying the final rule. Additionally, to the extent commenters object to the portfolio approach, which the EPA is not finalizing , the comment is moot. Finally, commenters have not clearly articulated their theory for how regulation of air emissions under the Clean Air Act violates the due process rights of non

- EGUs. Commenters cite Eastern Enterprises v. Apfel , 524 U.S. 498 (1998), a case in which a coal company argued that it should not be required to pay certain medical benefits to its former coal mine employees. But neither this rule nor CAA section 111(d) impose retroactive liability of the sort described in Eastern Enterprises
, and they are rationally related to a legitimate government interest. See, e.g. , Williamson v. Lee Optical of Okla. , 348 U.S. 483 (1955).

1.9. 5 Evaluation of Building Block 4, increased demand

- side energy efficiency, against the BSER criteria

Comment 1: The following commenters generally agree with the inclusion of Building Block 4 in the BSER.

Commenters stated reducing energy should be the most prominent strategy.124 Commenters said states should embrace this opportunity to invest in energy efficiency programs that empower their ratepayers with tools that will lower their monthly bills by reducing energy consumption.

Commenters stated since demand response provides so much benefit regarding carbon emissions reductions, the salient question is whether u nder applicable law EPA should clarify that demand response is included in Building Block 4 in the Final Rule. Commenters said since demand response satisfies all of the criteria for being a Best System of Emissions Reduction ("BSER") adequately demonstrat ed, which is the legal standard under the Clean Air Act and applicable case law, demand response should be included in EPA's Final Rule. Commenters said demand response meets all five of the criteria for the BSER set forth in EPA's Legal Memorandum based

o n the Clean Air Act and applicable case law; therefore, in order to promulgate the BSER for carbon emissions from fossil

- fueled EGUs, EPA should clarify that demand response is included in Building Block 4. Commenters said as done with respect to energy ef ficiency in the Proposed Rule, EPA should calculate the carbon emissions from demand response based on feasible acceleration of demand response in each state for purposes of the Final Rule's determination of the state's required level of carbon emissions.

Commenters stated demand response is technically feasible, as it has been implemented by utilities through the country in various degrees for many years to protect the electricity system from brownouts and blackouts during times of peak demand. Commenters said the amount of emissions reductions that the system would generate is met by demand response. Commenters said the Navigant study highlighted this point and showed a 2% reduction from fossil fuel EGUs. Commenters said demand response has reasonable cost s and that implementation of demand response on the national level would reduce the costs of electricity and stimulate the environment. Commenters referenced the PJM's recent annual electricity supply capacity auction as evidence of electricity cost reduct ion from demand response. Commenters said demand response can be an effective tool to promote the development and implementation of technology. Commenters said as utilities implement smart grid and automated metering infrastructure systems, demand response must evolve to be compatible with these systems. Commenters said it also facilitates the development and implementation of renewable energy and electricity storage technologies. Commenters said demand response has a positive impact on energy impact, since its used during peak demand and reduces the need for additional fossil fuel

- fired plants.

Commenters stated Building Block 4 is legally and technically justified as an element of BSER. Commenters said like renewable energy, energy efficiency is a cost

- eff ective system of emission reduction that is adequately demonstrated, as evidenced by the experience of states and utilities that have implemented these policies and programs for years. Commenters said EE also imposes minimal environmental costs and reduces overall energy requirements, and it is an appropriate element of BSER.

Response 1: We appreciate these comments, however, as we explain in section V.B. of the preamble, the BSER does not include building block 4.125 Comment 2: The following commenters prov ide support to the adequate demonstration of Building Block 4.

Commenters stated that many states and utilities have already taken action to realize the enormous opportunity for consumer savings and climate protection. The commenters noted that twenty

- six states around the country have adopted energy efficiency standards or targets for their utilities. The commenters reported that investment in consumer

- funded EE programs has increased 28% in just three years and incremental electricity savings reported by the states reached 22 million MWh in 2012, equivalent to about 0.6% of retail sales. The commenters said a recent report by the Georgetown Climate Center contains numerous case studies of states and utilities that have successfully implemented EE programs to reduce greenhouse gas emissions and save customers money.

Commenters stated that EE is a proven resource with significant potential to dramatically reduce power plant emissions at low cost. The commenters said energy efficiency has been adequately demon strated and that the savings are real because utilities, state regulators, independent system operators, businesses and energy service companies have relied on these investments to provide savings for customers and avoid the need for generation, transmissi on and distribution for more than 30 years. The commenters quoted a paper by the Harvard Law School Environmental Law Program arguing that energy efficiency constitutes an "adequately demonstrated" system of emission reduction: "Energy efficiency is ripe f or inclusion as part of the "best system of emission reduction" for existing power plants because it is adequately demonstrated and cost

effective, imposes minimal environmental costs, and reduces overall energy requirements." The
commenters pointed out th e goal of specific regions that have planned to continue EE measures, as implementing these measures decreases electricity demand and ensures reliability at reasonable costs.

Response 2: We appreciate these comments, however, as we explain in section V.B. of the preamble, the BSER does not include building block 4. We agree that there are significant potential reductions associated with EE and anticipate that many states will include them as a compliance measure.

Comment 3: Commenters stated that states an d regions have gained much experience with EE programs, including measuring and evaluating energy savings. The commenters said there have been many protocols and partnerships developed that have matured during this time. The commenters noted that these eff orts have led to programs and other initiatives to develop best practices and standardized protocols to help with implementing EE measures.

Commenters stated that EPA has also developed a "Roadmap" to support the use of EE and provide tools for states on how to integrate renewable energy and EE programs into their SIPs.126 The commenters said that states are currently pilot

- testing this and building on emission reductions from renewable energy. The commenters also indicated that EPA is developing modeling too ls to allow for detailed projections of power sector emission reductions resulting from EE and RE investments.

Response 3: We appreciate these comments. We agree that there are significant potential reductions associated with EE and anticipate that many st ates will include them as a compliance

measure.

Comment 4: Commenters stated there is a potential for EE to have a large impact on avoided CO2 emissions. The commenters referred to a study by McKinsey & Company that evaluated EE options that would pay for themselves over time and found that total end

- use energy consumption could be reduced by 23% by 2020. The commenters referred to another study by the National Academy of Sciences that indicated 25

- 30% energy savings is possible over the next 25

- 30 years w ith cost savings. The commenters said neither of these reports evaluated in

depth options such as building retrofits or design.
Response 4: We appreciate these comments. We agree that there are significant potential reductions associated with EE and antici pate that many states will include them as a compliance

measure.

Comment 5: Commenters stated that there are many policies, programs, and projects that sufficiently satisfy the legal requirements of Section 111(d) of the Clean Air Act were excluded from the determination of the BSER for building block 4.

Commenters stated EPA has readily recognized that energy efficiency is the most cost

- effective resource to reduce emissions, but the block four formula falls well short of quantifying states' energy effic iency savings potential, overestimating the costs, and underestimating the benefits. Commenters said states could do more to increase efficiency deployment at lower costs than EPA's reduced energy targets. Commenters said the biggest missed opportunity in the approach is that it underestimates the potential for energy efficiency as well as renewable generation to reduce coal and gas plant pollution. Commenters said the Agency must address these issues in its final rule and adjust block four and the others a ccordingly.

Response 5: For the reason explained in section VA and VB of the preamble we are not including building block 4 as part of the BSER. We agree that there are significant potential reductions associated with EE and anticipate that many states wi ll include them as a compliance

measure.127 Comment 6: Commenters stated that EPA should adopt a consistent compliance approach requirement where the state that implements an energy efficiency measure will claim the resulting emission reductions in its state compliance plan. Commenters stated Oregon agreed th at expanded energy efficiency measures provide an important and cost

- effective component of the BSER and fully supports its inclusion in the BSER calculation. However, commenters stated, Oregon has significant concerns about the proposed approach for credi ting energy efficiency in state compliance plans. In particular, the Proposal as described in the preamble presents insurmountable challenges for states like Oregon that are net importers of fossil generation yet are characterized in the EPA's BSER calcula tion as net exporters of electricity overall. Commenters stated under the proposed approach, Oregon would not be able to develop a cost

effective compliance plan because the state would only be able to credit a small fraction of the investment in energy ef ficiency that can be tracked to fossil

- fuel generation in the state. Commenters stated this would effectively render as unusable otherwise cost

- effective investments in energy efficiency that were assumed in setting the BSER, and force Oregon to rely on mu ch more expensive and potentially infeasible over

- compliance with measures contemplated in the other three building blocks. Commenters stated it is of utmost importance that EPA allows Oregon to take credit for the full breadth of emission reductions resul ting from energy efficiency investments in its state compliance plan. The commenters provided much detail on Oregon's EE and recommended that EPA should adopt a consistent compliance approach requirement where the state that implements energy efficiency me asures will claim the resulting emission reductions in its state compliance plan. The commenters disagreed with the EE "track back" to the EGU compliance approach in the preamble. The commenters said they support the compliance approach outline in the Stat e Plan Consideration TSD whereby the state that implements energy efficiency measures will claim the resulting emission reductions in its state compliance plan.
Response 6: We appreciate these comments. We agree that there are significant potential reduct ions associated with EE and anticipate that many states will include them as a compliance

measure.

Comment 7: The following commenters don't agree that EPA has the ability to regulate demand

- side.

Commenters stated that Section 111 does not authorize EPA to extend its jurisdiction beyond stationary sources by attempting to regulate demand for a good, service, or product, as proposed in building block 4, which requires increases in end

- user energy efficiency and other efforts to reduce demand for electricit y. Commenters said building block 4 looks to derive emission reductions from something over which utilities have no control: efficiencies that might be gained through consumer efforts. Commenters said this would give EPA authority over all electricity
usag e, this expands EPA's authority beyond anything Congress ever intended to grant the Agency in the Clean Air Act. Commenters said the Supreme Court warned in UARG that such expansion cannot proceed without clear congressional authorization. Commenters added Section128 111 authorizes EPA to regulate emissions of pollutants from existing units within an identified source category, not societal behavior in general.

Commenters stated that CAA Section 111 provides EPA with the authority to base a standard of perform ance on end

- use efficiency or renewable energy, or other measures that reduce emissions primarily by reducing the demand for electricity from the affected fossil fuel

- fired electric generating unit (EGU) and expanding deployment of either renewable energy

- based electricity generation or of end

- use efficiency, usually cited by EPA as "building blocks 3 and 4" (BB3, BB4). Commenters provided a number of comments and questions related to the data and methodology used by EPA in arriving at the emission reductio n requirements implied by BB4. Commenters said for each of these issues regarding data or EPA's analytic methods, CURC believes that the statute requires EPA to identify how the issue was factored into the Agency's determination of BB3 and BB4, and where i n the regulatory docket this rationale and supporting information are documented.

Response 7: As we explain in section V.B. of the preamble, the BSER does not include building block 4.

Comment 8: Commenters stated EPA lacks legal authority under section 111(d) to determine BSER in whole or in part on the basis of emission reductions attainable through demand

- side energy efficiency measures. Commenters said demand

- side measures are by definition implemented and achieved outside of covered sources and the g rid. Commenters said whatever role utilities play, energy efficiency savings are ultimately achieved through the planning, purchasing, building, operating, and financial activities of states, businesses, and the public at large.

Commenters stated concern t hat the threat of federal enforceability will make it more difficult for states to pass legislation authorizing energy efficiency programs. Commenters said such programs are a matter of state policy and regulatory decision

- making, and the potential to lose control over these programs once incorporated into a state implementation plan submitted to EPA for approval provides an obstacle to moving forward on these programs.

Response 8: The federal enforceability considerations raised in the comment arose prima rily under the proposed portfolio approach for state plans. As explained in section VIII.C of the preamble, the EPA is not finalizing the portfolio approach, which would have allowed state plan submittals to include federally enforceable measures that appl y to entities that are not affected EGUs. However, as further explained in section VIII.D, if the state is adopting the state measures type plan, the state plan submittal will need to specify, in the supporting materials, the state enforceable measures tha t the state is relying upon in conjunction with any federally enforceable emission standards for affected EGUs to meet the emission guidelines. The final rule provides considerable discretion to the states in setting emission standards and related plan re quirements for its affected EGUs. Consistent with longstanding practice under the Clean Air Act, if a129 regulated entity does not meet a requirement, the EPA will address the matter on a case

- by

- case basis, to determine the appropriate response and resoluti on.

Comment 9: Commenters stated given Florida's existing statutory framework, and EPA's failure to take this into account, its application of BSER in Florida is unlawful. Commenters said for Building Block 4, the FPSC periodically adopts DSM goals for el ectric utilities with annual sales over a certain threshold. See Section 366.80

- 366.85, F.S. Commenters said this includes Florida's five investor

- owned utilities and two large municipal utilities, but no other municipal utilities or electric cooperatives. Commenters said legislative action would be required before DSM goals can be established for all electric utilities in Florida.

Commenters stated states must continue to have the freedom and flexibility to use their full

range of energy resources in the m ost cost

- effective manner and reduce demand in a cost

effective manner. Commenters said Ohio EPA does not, nor has the authority, to implement federally enforceable state mandated EE programs. Commenters said while many stakeholders urged EPA to allow dema nd

- side EE policies be a part of compliance options under the proposal for new sources, it was never the intent that it would be a component of BSER, resulting in a standard of performance for EE further lowering state goals. Commenters said regardless, EP A has proposed a "best practices" demand

- side EE they believe represents a "feasible policy scenario", requiring "accelerated use of EE policies in all states consistent with a level of performance that has already been achieved or required by policies...o f the leading states." Commenters said Ohio EPA wishes to point out that rushing states to develop and implement a demand

- side EE program that meets EPA requirements to be quantifiable, non

- duplicative, permanent, verifiable, and enforceable injects the fe deral government into an area that is under state purview. Commenters said states have had the ability for a number of years to incorporate demand

- side EE reductions into SIPs under Section 110 but very few states have ever taken advantage of this opportun ity due to requirements that make it incredibly challenging (Ohio expresses additional concerns regarding this implementation issue under the Compliance Plan comments below). Commenters said EPA acknowledges this component of BSER is "based upon the experi ence and success of states in developing and implementing energy efficiency policies that they undertake primarily for the purpose of providing economic benefits to electricity consumers in their state." Commenters said EPA is requiring all states to obtai n additional reductions in CO2 emissions equivalent to those achieved by "the leading states" policies intended to aide consumers. Commenters stated leading states with demand

- side EE programs that Ohio EPA is sure would not meet U.S. EPA's rigorous requir ements to be quantifiable, non

duplicative, permanent, verifiable, and enforceable. Commenters said Ohio EPA anticipates typical EM&V (evaluation, measurement and validation) protocols often used for these programs would not be sufficient for EPA. Commente rs said the target that has been set cannot be attained under these constraints.

Commenters stated EPA improperly assumes that Wyoming can implement additional demand

side EE, such that customers reduce energy use by as much as 12% by 2030 to offset coal

- fueled130 EGU generation. Commenters said EPA presumes to dictate "best practices" to states for energy conservation programs provisions, but, as with renewable energy, EPA neither has the expertise nor the authority to dictate to Wyoming what "best practices " are for adopting programs that conserve energy. Commenters said the Proposed Rule does not meet the statutory standard of showing that its EE projections have been "adequately demonstrated." Commenters said EPA projects that in 2030, electricity usage wi ll be 10% below the business

- as

- usual case, and according to EPA, electric consumption in 2030 will be little more than it is today and will actually decline between 2020 and 2030. Commenters said according to the U.S. Census, population is expected to ris e to 358,471,000 people by 2030, an increase of 37,108,000 from the projected 2015 level of 321,363,000, or an average of more than 2 million people per year. Commenters said EPA has not evaluated this issue relative to Wyoming. Commenters said EPA's
propo sal thus arbitrarily assumes that Wyoming's population and economy can grow, much less thrive, without electricity growth. Commenters said EPA's conclusion is unsubstantiated. Commenters said Wyoming ratepayers (including WIEC's members) have already inves ted in EE programs and renewable energy. Commenters said currently they would receive little credit for the beneficial impact that these investments may have. Commenters said allowing Wyoming to count pre

- 2020 emission reductions would recognize these cont ributions and would avoid sending a distorted signal to states to wait until 2020 to implement emission reductions. Commenters said the most reasonable approach to providing early action credit would be to allow any emission

- reducing actions that take plac e after the baseline year to count toward compliance with state goals. Commenters said such emission reductions would not already be included in state goal calculations, so there would be no risk of double counting. Commenters suggested that EPA provide ea rly action credit for at least those pre

- 2020 actions that states can demonstrate took place any time after the date of the Proposed Rule.

Response 9: To the extent these comments address either building block 4 or the portfolio approach, they are moot, b ecause the EPA is not finalizing those elements of the proposal. The federal enforceability considerations raised in the comment arose primarily under the proposed portfolio approach for state plans. As explained in section VIII.C of the preamble, the EPA is not finalizing the portfolio approach, which would have allowed state plan submittals to include federally enforceable measures that apply to entities that are not affected EGUs. However, as further explained in section VIII.D, if the state is adopting the state measures type plan, the state plan submittal will need to specify, in the supporting materials, the state enforceable measures that the state is relying upon in conjunction with any federally enforceable emission standards for affected EGUs to m eet the emission guidelines. T he existing guidance documents pertaining to enforceability include: (1) September 23, 1987 memorandum and accompanying implementing guidance, “Review of State Implementation Plans and Revisions for Enforceability and Legal S ufficiency;” (2) August 5, 2004 “Guidance on SIP Credits for Emission Reductions from Electric

- Sector Energy Efficiency and Renewable Energy Measures;” and (3) July 2012 “Roadmap for Incorporating Energy Efficiency/Renewable Energy Policies and Programs in to State and Tribal Implementation Plans, Appendix F. The final rule provides considerable discretion to the states in setting emission standards and related plan requirements for its affected EGUs.131 EPA recognizes that each state has unique factual circu mstances that will shape the development of a state’s plan. We look forward to working with the states to account for these factual circumstances in developing satisfactory state plans.

Comment 10: Commenters stated Building Block 4 encompasses reductions achieved through end

- use energy efficiency measures which have not been demonstrated in Kentucky anywhere close to the scale contemplated by EPA. Commenters said a study commissioned by the company and submitted to the Kentucky Public Service Commission i ndicates that LG&E's and KU's potential for implementation of energy efficiency measures is less than 25% of the level assumed by EPA.
Response 10: As discussed in section V.B. of the final rule preamble of the CPP, we are not including building block 4 as part of the BSER.

Comment 11: Commenters stated the purpose of the TS Power Plant is to provide a reliable source of electricity to Newmont's operations in rural Nevada, which require substantial amounts of electricity for processing equipment that cannot be cycled on and off based on power availability. Commenters said the intermittent nature of renewable energy is not consistent with these objectives and therefore Newmont does not rely on these sources of power. Commenters said grafting aggressive statewide renewable energy standards onto an emission limit applicable to the TS Power Plant is inappropriate. Commenters said EPA's assumptions for demand reduction through energy efficiency are not applicable to the TS Power Plant. Commenters said electr icity is the largest expense for Newmont, after payroll, and therefore Newmont has every incentive to improve energy efficiency at its mines, but the 1.5% year

- over

- year annual electricity savings proposed for Building Block 4 is based on EPA's assessment of what utilities can achieve at the state

- wide retail level, taking into account a broad range of energy efficiency measures. Commenters said this company is not structured like a regulated utility and does not sell power directly to a broad consumer base from which such energy savings can be gained. Commenters said it is unreasonable to require the TS Power Plant to comply with an emission limit that considers an outside

- the

- fence requirement that is inapplicable to its operations.
Response 11: For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reasonable and within the scope of EPA’s authority in light of the statutory text, statutory context, statutory purpose, and l egislative history. Also, as we explain in section V.B. of the preamble, the BSER does not include building block 4.

1.9.6 Other132 Comment 1: Commenters quoted EPA's statement signifying that the building blocks are severable should a court invalidate a pa rticular building block, then the remaining building blocks would be the BSER. The quote continued by addressing that these state goals considering any combination of building blocks could be calculated by the resources provided. The commenters stated EPA should clarify its position on the aforementioned quote. The commenters agreed with EPA if the statement means that an emissions limit will be recalculated with the remaining building blocks and, as a result, the emissions limit will increase; however, the y disagree and believe its unlawful if the statement means that the emissions limit is in essence fixed and will not change.
Response 1: We discuss severability in section VI of the preamble.

1.10 DETERMINATION O F THE BSER

1.10.1 Statutory and regulatory provisions related to determination and application of the BSER

Comment 1: Commenters stated, on the basis of these two facts

- (1) it can show no single state that has ever "adequately demonstrated" its BSER and (2) actual implementation of this so called "system of control" would cost the nation up to $1.1 trillion over the course of the first 10 years of implementation

- the Agency's only rational choice is to withdraw its proposed rule. Commenters said, should EPA choose to ignore the law and forg e ahead, it must recognize that the Agency lacks the expertise and the authority to develop a coherent program that is based upon the four Building Blocks it describes. Commenters said, even a modest effort to repair this proposal would require the Agency to acknowledge and correct errors, change assumptions, jettison unrealistic deadlines, and revise flawed data. Commenters provided technical analysis of each of the four Building Blocks. Commenters said, while improvements can be made in any one of the fou r Blocks, commenters can envision no circumstances in which an effective, lawful, and consistent regulatory policy aimed at CO2 can be derived from the use of the current Blocks or even improved versions of the Blocks. Thus, commenters stated, their effort is designed to meet their obligation to their regulator to inform and correct wherever possible in the spirit of cooperation and constructive engagement, even when in fundamental disagreement.

Response 1: The EPA is not finalizing the portfolio approach t o BSER in the manner in which it was proposed and is not finalizing proposed building block 4. The approach to BSER in the final rule is described in section V. of the preamble to the final rule.133 Comment 2: Commenters said that the proposed rule is cons istent with past practices in which the EPA establishes emission targets and states develop the compliance plan under section 111.

Response 2: We agree with these comments.

Comment 3: The statute gives EPA ample authority to oversee the determination of BSER for emission guidelines under section 111(d).

Commenters said section 111(a)(1) and the definition of "standard of performance" elucidates that it is EPA, not the states, that identifies the best system of emission reduction considering the statutory factors. Commenters said that the definition specifically refers to "the Administrator" as the entity that "determines" what constitutes the best system of emission reduction based on the statutory factors such as optimal environmental performanc e ("best") and cost, and it is the Administrator who "tak[es] into account the cost of achieving such reduction and any nonair quality health and environmental impact and energy such reduction and any nonair quality health and environmental impact and ener gy requirements." Commenters said that definition is explicitly made applicable to the entirety of section 111, and the statutory criteria direct EPA's review of state plans.

Commenters said that EPA noted in its 1975 implementing regulations that section 111(d) is silent on the criteria by which state plans might be judged "satisfactory," and that therefore those criteria must be inferred from the context of section 111. See 40 Fed. Reg. at 53,342. Commenters said the criteria were located in section 111(a )(1)'s definition of "standard of performance," mirrored in EPA's definition of "emission guideline." Compare Pub. L. No. 91

- 604, section 4(a), 84 Stat. 1676, 1683 (1970), with 40 Fed. Reg. at 53,346. Commenters said the agency suggested that the criteria for state plans served the same function as the criteria for standards of performance issued under section 111(b). 40 Fed. Reg. at 53,342 ("it seems clear that some substantive criterion was intended to govern not only the Administrator's promulgation of s tandards but also his review of State plans" (emphasis added)). Commenters concluded that EPA's emission guidelines have always been closely tied to the statutory definition of "standard of performance" in section 111(a)(1).

Commenters said exclusive state authority over the substance of existing source standards would be inconsistent with the language of section 111 and would be contrary to the purpose of the 1970 Clean Air Act, "to provide for a more effective program to improve the quality of the Nation' s air" because air quality could worsen if state plans were not subject to any enforceable substantive standards. Commenters said evidence of the central role for protective federal standard setting is found throughout the Clean Air Act, including in secti on 116, which prohibits the states from adopting or enforcing emission standards less stringent than those set by EPA. Commenters also stated that preserving the basic role for EPA in protecting the nation's air quality was a central theme of the regulatio ns EPA adopted in 1975 to implement section 111(d). Commenters concluded that both the language of section 111 and the overall purpose of the 1970134 Clean Air Act amendments require a strong substantive role for EPA in ensuring that standards for existing so urces meet the statutory requirements.

Response 3: We agree with these comments.

Comment 4: Commenters argued that prior judicial interpretations of CAA section 111(d) indicate that EPA is not required to treat the states uniformly with regard to standar ds of performance. Commenters argued that, in fact, Section 111 encourages the EPA to adjust standards of performance on a state

- by

- state basis and gives states broad discretion and flexibility to design plans to meet EPA's regulations.

Commenters argued that the Clean Air Act prescribes a flexible standard for what will be "satisfactory" by taking into account both the present emission levels and the likely cost of any reduction.

Commenters argued that, while courts have held that uniform standards can be appropriate in certain cases and are not necessarily "arbitrary and capricious,", the D.C. Circuit has observed that "[t]here is no requirement in [the Clean Air Act] of uniformity of specific standards for all industries." Commenters stated, as one distr ict court noted, the Clean Air Act "recognized that there cannot be a uniform treatment of all pollution sources, and the acts do not seek to achieve such. Nonuniformity is built in."

Commenters argued that section 111(d) was drafted to be intentionally f lexible so as to allow the EPA and individual states to work together to reduce emissions in a cost effective way, and as reviewing courts have noted, forcing a single standard to be applied uniformly would defeat that purpose. For these reasons, commenter s argued that EPA has the authority to decide whether to treat the states uniformly in regulating under the Clean Air Act and that its decision not to do so here will be given discretion by reviewing courts.

Response 4: We appreciate these comments. The fi nal rule applies the applicable building blocks uniformly to steam EGUs and to combustion turbines within the three Interconnections, and establishes uniform source subcategory

- specific emission performance rates for steam EGUs and for combustion turbines.

Comment 5: Section 111(d) Allows Flexible Approaches to Regulating Pollutants.

Commenters stated, section 111(d) is a highly flexible section of the Act that can accommodate various approaches to emissions reductions, depending on the type of pollutant being regulated. Commenters said, for example, the rule regulating fluoride emissions from primary aluminum plants is highly specific and narrow because of the nature of the danger posed by fluoride emissions. Commenters said, on the other hand, the rule r egulating NOx emissions from135 municipal waste combustors (MWCs) allows states to use emissions averaging plans because the dangers posed by NOx from MWCs can be effectively reduced under such plans.

Commenters stated, thus, prior section 111(d) rulemakings demonstrate the provision's flexibility and EPA's ability to apply the statute in ways that recognize the specific circumstances before the agency, including the nature of the emissions at issue, the harms at stake, and the sources to be regulated. Commen ters said, EPA's Proposed Rule properly considers these factors, as well as the economic and environmental gains that will result from a flexible, broad

- based rule. See 79 Fed. Reg. at 34,833

- 34, 34,880

- 81 (discussing the diffuse, non

- localized dangers of carbon pollution and the interconnected and diverse nature of the U.S. electricity sector).

Response 5: We agree with these comments.

Congress gave EPA the clear authority to determine the BSER.

Comment 6: EPA may determine the BSER

Commenters indicated that Congress gave EPA the clear authority to determine the BSER. Commenters noted that EPA is directed to evaluate whether state plans are "satisfactory," and that case law supports that courts will defer to agencies' assessment of wh at measures are "adequately demonstrated" provided the agency can demonstrate they are available. See, e.g., Portland Cement v. Ruckelshaus , 486 F.2d 375 (D. C. Cir. 1973).

Commenters provided an overview of BSER, noting that the same statutory definition of "standard of performance" applies to existing source standards under section 111(d) as applies to new source standards under section 111(b), including the phrase "best system of emissions reduction." Commenters noted that there are no court decisions pr oviding further interpretation of the statutory term BSER in the 111(d) context, but there are cases evaluating how a standard of performance is to be set under section 111(b) for new sources, and those cases find that EPA has significant authority in sele cting a BSER. Commenters said EPA does not have authority, however, to ignore older affected sources in the standard setting process if they are planned for retirement. Commenters noted that EPA's authority is not unbounded

- the BSER must be "adequately d emonstrated" and the [performance] standard itself "achievable." Nat'l Lime Ass'n v. EPA , 627 F.2d 416, 430 (D.C. Cir. 1980).

Commenters noted that in the 1990 Clean Air Act Amendments, Congress repealed the requirement added to section 111(a)(1) in 1977 that the best system of emission reduction for new sources be "technological," going back to the original requirement enacted in 1970 that required the standard of performance to be based on the application of the "best system of emission reduction," which must take into account costs, non

- air quality health and environmental impacts, and energy requirements, and must be adequately demonstrated. Pub. L. No. 101

- 549, sec. 403, 104 Stat. 2399 (1990). Commenters concluded that the "best system of emission redu ction" is not limited to technological controls implemented directly at the affected136 sources, and the commenters argued that the BSER allows for reliance on a "system" that may include measures to decrease emissions by reducing the utilization of those sou rces, so long as EPA adequately considers the required statutory factors.

Response 6: These comments are generally supportive of this rule and we appreciate them. We agree that in promulgating a standard of performance for existing sources pursuant to CAA section 111(d)(2) that the Administrator is required to take into consideration, among other factors, the remaining useful lives of sources in the source category to which a standard of performance applies. On the other hand, pursuant to CAA section 111(d )(1), states have the discretion to consider, among other factors, the remaining useful life of an existing source to which a standard of performance is being applied.

Comment 7: Congress and the Supreme Court recognize EPA's authority to establish bindin g emission guidelines that reflect BSER and reflects EPA's longstanding interpretation of section 111(d).

Commenters indicated that EPA has authority to establish binding emission guidelines that identify the "best system of emission reduction" and the re sulting emissions reductions that each state plan must achieve. Commenters stated that while Congress did not detail the process by which EPA would evaluate and approve state plans, there is considerable evidence that Congress subsequently recognized and a pproved the guidelines process that EPA established in its 1975 regulations. Commenters said, in 1977, when Congress modified the definition of "standard of performance," the House committee explained that under Section 111(d) "[t]he Administrator would es tablish guidelines as to what the best system for each . . . category of existing sources is." 85: H.R. Rep. No. 95

- 294, at 195 (1977). Commenters said, in 1990, in Section 129 of the Clean Air Act, Congress directed EPA to adopt standards for solid waste combustion that would mirror the Section 111 process, expressly referring to the "guidelines (under section 7411(d) of this title . . .)." 42 U.S.C. section 7429(a)(1)(A). Commenters provided further analysis of the section 129 language and concluded that section 129 expressly mandates that EPA's role in undertaking joint 111(d)/129 regulatory action is to establish emission limitations for solid waste incineration units whereas the state's role is to establish a plan to implement those emission limitations , and that this division of regulatory authority is the same as the division established by EPA's 1975 implementing regulations for 111(d). Commenters said both the 1977 and 1990 amendments demonstrate that Congress has recognized and legislated in relianc e upon EPA's guidelines process under Section 111(d).

Commenters noted that the EPA regulations for the general implementation of section 111(d) have not been challenged since they were promulgated in 1975 nor in the specific and recent application of the regulations to power plants in the Clean Air Mercury rule. Commenters concluded that EPA's authority to issue emission guidelines is settled.137 Commenters also noted that the Supreme Court recognized that states issue Section 111(d) standards "in compliance with [EPA] guidelines and subject to federal oversight." Am. Elec. Power Co. v. Connecticut , 131 S. Ct. 2527, 2537

- 38 (2011).

Response 7: These comments are supportive of this rule and we generally agree with them.

Support for a Broad Definition of BSER and the building block Approach to BSER.

Comment 8 : Several commenters agreed with the EPA's interpretation that the phrase "best system of emission reduction" in section 111(d) allows the approaches in building blocks 2, 3, and 4.

Commenters believed that it was "not merely permissible for EPA to rely on such system

- wide pollution reduction methods; rather, a rule that ignored these available reduction methods could not be defended as the "best system of emission reduction."

Commen ters argued that additional support for a system

- based approach is found in Section 111(d)'s adoption by reference of a "procedure similar to that provided by section [110]" of the CAA. 42 USC Section 7411(d). Commenters noted that Section 110 allows for u se of system

based measures including "economic incentives such as fees, marketable permits, and auctions of emissions rights." 42 USC Section 7410(a)(2)(A). Commenters argued that through its reference to section 110, Congress indicated that these system

- based measures may also be used under Section 111(d). Commenters believed the reference to Section 110 means that section 111(d) provides a hybrid approach to emissions reduction based on proposed emissions reduction at the source, as contemplated by Secti on 111(b), but also extreme flexibility and state autonomy in selecting such reductions as contemplated for states meeting the NAAQS limits as required by Section 110. However, commenters were also concerned that despite the apparent overall flexibility of the proposed rule, the technical support documents and the proposal seem to forbid the possibility of true flexibility by noting that emissions reductions must come from the "affected units."

Response 8: We appreciate these comments.

Comment 9: Commenter s argued that under the doctrine of Chevron review, EPA's authority to interpret statutory provisions is constrained, both by the text of the statute determined by "applying the ordinary tools of statutory construction," and by the reasonableness of the Ag ency's interpretation. Commenters argued that applying those tools of construction here indicates that EPA's interpretation of "system of emission reduction" to include measures beyond affected EGUs is not consistent with the plain language of section 111.138 Commenters argued that EPA's primary interpretation of BSER appears to be that, for an interconnected system such as the electric power system, "system of emission reduction" may include any measure that impacts the system and that may reduce emissions at affected EGUs. Commenters noted that the EPA's interpretation relies on a broad reading of the term "system" and a reading of the word "system" from the Oxford English Dictionary as "a set of things working together as parts of a mechanism or interconnec ting network." According to the EPA, commenters argued, so long as the system identified is interconnected, any measures within that system that affect EGU emissions

- including ones outside the control of the owners of individual regulated facilities

- ca n be considered part of BSER, but this is inconsistent with the language of the CAA.

Commenters argued that in order to achieve its extreme emission goals, EPA's Proposal seeks to impose compliance obligations on entities other than the sources within the listed source category, and nothing in section 111 or the CAA authorizes EPA to target for regulation an undefined class of "affected entities." Commenters noted, on the contrary, only sources that fall within a listed source category are subject to secti on 111 controls, and the CAA does not authorize EPA to pursue aggregate emission reductions from a designated source category through standards of performance.

Response 9: We disagree with this comment. For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reasonable in light of the statutory text, statutory context, statutory purpose, and legislative history.

Broad Definition of BSER and the Congressional Intent of Section 111 of the CAA

Comment 10: Commenters stated, the legislative history supports Congress's intent to allow EPA broad authority to define a combination of emission reduction opportunities beyond a specific technology installation at a power plant. Commenters said , the 1970 statutory language defined a "standard of performance" for both new and existing sources as "a standard for emissions of air pollutants which reflects the degree of emission limitation achievable through the application of the best system of emi ssion reduction which (taking into account the cost of achieving such reduction) the Administrator determines has been adequately demonstrated." Commenters said, in the 1977 revisions, Congress added "technology" to the definition to require standards for new sources to reflect "the best technological system of continuous emission reduction" while the language for existing source was amended to require the "best system of continuous emission reduction," which, as clarified by the Conference Report, did not need to be a technological system." Commenters said, however, in 1990, Congress removed the requirements that standards for new sources be based on "technological" systems restoring use of broad "system" language for both new and existing source standards. Commenters said, these revisions make clear that EPA is not required to impose a system based on a particular technology. Commenters said, rather, BSER can reflect the best system of emission reduction opportunities for the source category, as EPA reflect s in this proposed rule.139 Response 10: We appreciate these comments.

Broad Definition of BSER and the Plain Language of Section 111 of the CAA

Comment 11: Multiple commenters argued that the plain language of section 111 of the CAA supports the idea that the BSER should be applied to individual sources and not to entities beyond the control of the source.
Commenters argued that the EPA has authority to require emission reductions that can be achieved only from measures applied inside the fence line, and no t from other sources or from other source categories. Commenters suggested, therefore, building blocks two through four cannot be part of BSER, and Section 111(d) provides the EPA with only the narrow authority to set emission standards based solely on emi ssion reductions that can be achieved inside the fence line and under the control of the EGU. Commenters asserted that Congress did not authorize EPA to enact beyond the fenceline requirements such as those found in Building Blocks 2, 3 and 4.

Commenters n oted that aside from EPA's proposed building block 1, the measures in blocks 2 to 4 fall outside the scope of EPA's authority under the Clean Air Act. Commenters argued that, in the 40

- year history of the Section 111 performance

- standards program, the agen cy has always formulated Section 111 standards based on "inside

- the

- fence" measures that are cost

- effective and that can be undertaken at the regulated facility itself, such as installing pollution controls. Commenters said, however, for controlling carbon dioxide emission from coal generators, the EPA has conceded that the only feasible inside

- the

- fence measure for reducing coal

- plant carbon dioxide emissions is improving the efficiency of the combustion process, so the EPA has now sought to include other measures outside the control of the facility, because even under EPA's aggressive assumptions as to the efficiency gains existing generators can hypothetically make, the result is only a six percent reduction in carbon dioxide emissions, which is far short of the President's carbon goals. Commenters argued that that EPA's beyond

- the

- fence

- line approach is unlawful

- is shared by 18 states. Commenters argued that the proposal, offered as a way of providing "flexibility," does not conform to the limitations Con gress has placed on EPA in the CAA and EPA lacks statutory authority and is limited by its own regulations to issue emission guidelines seeking reductions of CO 2 emissions from coal

- based EGUs based on something other than an adequately demonstrated reduct ion system for such EGUs.

Response 11: We disagree with this comment. For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reasonable in light of the statutory text, statutory context, statutory purpose, and legislative history.140 Comment 12: Commenters argued that EPA can only establish standards of performance for existing sources under Section 111(d) after it makes a determination that the source category "causes, or contribut es significantly to, air pollution which may reasonably be anticipated to endanger public health or welfare" and then establishes standards of performance for new sources in that source category. 42 U.S.C. section 7411(b), (d). Commenters argued that here, EPA has neither made an endangerment determination nor established standards of performance under Section 111(b) for any of the entities that it seeks to regulate through a beyond the fence line approach. Commenters said, thus, by basing its BSER analysis on actions that can only be accomplished by these entities, EPA is effectively incorporating them into the regulated source category. Commenters argued that as EPA recognizes, opportunities to reduce CO 2 emissions at existing coal

- fired EGUs are limited, and regulatory obligations must be imposed on other entities in order to achieve the proposed emission reduction targets. Commenters stated, thus, by expanding its BSER analysis beyond the fence line and authorizing a "portfolio approach" for compliance, E PA's proposal would ensure that sources other than fossil fuel

- fired EGUs can

- and almost certainly will

- be subject to legally enforceable compliance obligations.

Commenters argued that the broader context of the Clean Air Act suggests that EPA's autho rity to create subcategories of sources under Section 111 is a one

- way ratchet, and there is no corresponding authority in the text of Section 111 that permits EPA to aggregate diverse classes of sources into mega

- categories for purposes of regulation. Com menters noted that the EPA has already created subcategories of EGUs under other regulations within section 111 (e.g., for coal and natural gas

- fired units). Commenters argued that as a result, even EPA's proposal to conduct a single BSER analysis for all fossil fuel

- fired EGUs is unlawful.

Response 12: The EPA is not finalizing the portfolio approach to BSER in the manner in which it was proposed and is not finalizing proposed building block 4. The approach to BSER in the final rule is described in section V. of the preamble to the final rule. The EPA's rationale for the applicability to the final rule to fossil fuel fired EGUs is discussed in section IV.D of the preamble to the final rule.

Comment 13: Commenters said, while no court has interpreted the definition of "standard of performance" in the context of Section 111(d), several cases have addressed standards of performance under Section 111(b). Commenters stated that under Section 111, EPA may "look[] toward what may fairly be projected for the regu lated future, rather than the state of the art at present," but these projections are necessarily constrained by the effective date by which the performance standards go into effect. Portland Cement Ass'n v. Ruckelshaus , 486 F.2d 375, 391

- 92 (D.C. Cir. 197 3). Commenters said, thus, standards of performance may not be based on emission control technologies that are "purely theoretical or experimental," Essex Chem. Corp. v. Ruckelshaus , 486 F.2d 427, 433 (D.C. Cir. 1973), 486 F.2d at 434, nor "based on a "cry stal ball" inquiry." Portland Cement Ass'n , 486 F.2d at 391; see Costle , 657 F.2d at 362 (emission limit could not be achievable based on test data from "non

- lime/limestone processes" because they "are not widely available").141 Commenters stated that in the proposed rule, EPA applies a BSER analysis that looks beyond the fence line of the fossil fuel

- fired unit and that this "Building Block" approach is unlawful and contrary both to the plain meaning of Section 111 and the broader context of the Clean Air Act
, which require a BSER analysis that is focused solely on the existing source that is subject to regulation under Section 111(d). Commenters said, further, EPA cannot salvage its approach through an alternative BSER analysis that replaces the beyond the fe nce line emission reductions with mandatory reductions in coal

- fired electricity generation.

Commenters stated, in prior Section 111(d) rulemakings, EPA has consistently taken the position that BSER analyses and the ensuing emission guidelines must be appl ied in a source

- based manner that focuses on individual sources that can be retrofitted with pollution control technology. Commenters said, for example, EPA asserted that some systems of emission reduction may be excluded under Section 111(d) because "phys ical limitations may make installation of particular control systems impossible or unreasonably expensive." Id. at 53,344. Commenters said, EPA also contrasted "the cost of controlling existing facilities" with "those for controlling new sources." Id. at 5 3,341. Commenters said, finally, EPA explained that "the degree of control reflected in EPA's emission guidelines will take into account the costs of retrofitting existing sources." Id. at 53,341. Commenters said, nowhere in that rulemaking does EPA sugges t that its emissions guidelines could be based on emission reductions undertaken by unrelated third parties or through reduced operation of affected facilities. Commenters provided examples from the emission guidelines for sulfuric acid plants, phosphate f ertilizer plants, kraft pulp mills, primary aluminum plants, and municipal solid waste landfills where EPA has relied exclusively on systems for emission reduction that can be implemented onsite by each existing source subject to the regulation.

Commenter s stated that EPA fails to provide a reasoned basis for changing its interpretation, and cited Jicarilla Apache Nation v. Dep't of the Interior , 613 F.3d 1112, 1119 (D.C. Cir. 2010). Regarding the three reasons EPA provides for expanding its BSER analysis to include Building Blocks 2, 3, and 4, commenters said EPA is arguing that it can expand its BSER analysis to look beyond the fence line of individual facilities because doing so will result in greater reductions of CO 2 emissions than a source

- based appro ach alone could achieve. Commenters said even if that were true, these results

- oriented reasons offer no insight as to why such an approach is legally permissible under Section 111(d).

Response 13 : We disagree with this comment. For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reasonable in light of the statutory text, statutory context, statutory purpose, and legislative history.

Broad Definition of BSER and EPA's Prior Regu lation of Specific Source Categories Under Section 111142 Comment 14 : Commenters noted that over the past four decades, EPA has interpreted "system of emission reduction" to cover only measures that are within the control of owners at affected facilities. Co mmenters argued that it has done so for over 85 categories and subcategories of sources regulated under section 111. See 40 C.F.R. part 60. Commenters argued that in these rulemakings, a system of emission reduction has meant a system put in place at an af fected facility that reduces emissions from that facility. Commenters argued that, pursuant to section 111(b), EPA has interpreted this same phrase over 85 times, including as part of numerous regulations concerning this same source category of EGUs.

Comm enters argued that section 111(d) itself has been rarely used, leaving little significant regulatory precedent regarding its scope, but even so, this is the first time the EPA has determined BSER to include measures affecting utilization or demand for elec tricity that occur outside the fence

- line of regulated units in the relevant source category. Commenters argued that those few guidelines have focused on source level controls by respecting states authority to establish stricter emission limits, to change compliance plan dates upon a required demonstration, and have allowed "designated facilities" to petition for longer or different schedules if the unit will be upgraded or emissions have been decreased to an appropriate level.

Commenters argued that p revio usly enacted emissions guidelines under Section 111(d) have been technology

- based standards applied to specific source categories. See, e.g., 40 C.F.R. Part 60, Subpart Cb (Large municipal waste combustors), Subpart Cc (Municipal solid waste landfills), Su bpart Cd (sulfuric acid production units), Subpart Ce (Hospital waste incinerators); these emission guidelines allow physical or operational changes made to comply with the rule to be exempt from NSR or NSPS. Commenters argued that these existing source gu idelines conform to traditional NSPS regulations and do not include the significant state plan requirements that EPA is proposing in the CPP and suggested that this is further evidence that the proposed standard is not authorized by Section 111(d).

Comment ers noted that the primary justification that EPA provides for this novel approach for existing sources relies on the "interconnected nature of the electric system," but argued that new sources will be part of the same inter

- connected system, and noted tha t the EPA did not even evaluate a system

- wide approach for new sources. See 79 Fed. Reg. at 1,430. Commenters noted, in addition, EPA published a proposal to establish standards of performance for modified and reconstructed EGUs concurrently with this prop osed rule, also under section 111(b), and did little more than mention a Building Block approach to BSER for modified and reconstructed units without giving it any substantive consideration. Commenters said, yet, the proposed guidelines contain no argument that there is something unique about section 111(d) or about existing sources that necessitate or distinguish the term "system of emission reduction" in such a way as to support EPA's divergent approaches. Commenters stated, to the contrary, "best system of emission reduction" has the same meaning under both section 111(b) and section 111(d), although the system that is "best" may differ for new and existing sources.

Commenters argued that this "sudden and unexplained change" may be arbitrary, capricious o r an abuse of discretion." Commenters argued that the EPA must justify its departure from past143 and concurrent interpretive practice and explain why adopting different interpretations of "best system of emission reduction" simultaneously is not arbitrary an d unreasonable.

Response 14 : We disagree with this comment. For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reasonable in light of the statutory text, statutory context, sta tutory purpose, and legislative history.

Comment 15 : Commenters argued that this source

- based approach continues to the present, with the exception of the proposed EGU guidelines. Commenters cited a separate proposed NSPS rulemaking on June 30, 2014, in w hich EPA reaffirmed that section 111 standards of performance "apply to sources" and must be "based on the BSER achievable at that source."

Response 15 : We disagree with this comment. For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reasonable in light of the statutory text, statutory context, statutory purpose, and legislative history.

Comment 16 : Commenters argued that numerous past and recent examples from EPA's NSPS and e missions guideline rule making, and the EPA's established process for developing those rules, support the concept that the BSER should be a technology or measure that can be applied at the source itself, rather than a broad definition of system that EPA ha s adopted in the proposed EGU guidelines.

Commenters noted that in a 1989 Federal Register notice, EPA described the process of developing emissions guidelines for existing sources as the product of a series of decisions related to certain key elements fo r the source category that are consistently focused on narrowly defined sources of emissions, sometimes at the process or process unit level, and the identification of controls and emission limits, monitoring requirements, performance test methods and comp liance procedures, and reporting and recordkeeping requirements, that can be applied to those sources.

Commenters noted that EPA has routinely repeated its understanding that a "system of emission reduction" (for purposes of determining BSER) is a technology and cited several examples:

2005: "As with any NSPS analysis, EPA evaluated the controls that effect the best emission reduction of the pollutant in question."

2008: "[S]tandards of performance promulgated under section 111 are based on 'the be st system of emission reductions' which generally equates to some type of control technology."144 2012: "NSPS are based on the effectiveness of one or more specific technological systems of emissions control, unless certain conditions are met."

Commenters ar gued that EPA has continued to construe BSER in the traditional fashion, and cited examples from the July 2014, proposed revisions to its NSPS for grain elevators in which EPA looked at "control techniques" such as "application of mineral oil as a dust sup pression technique," but identified "[n]o other [new] emission control technologies or work practices."

Commenters noted that in the preamble to EPA's proposed NSPS for GHG emissions from new electric utility generating units, EPA commented that it has "f requently referred to [BSER] as the 'best demonstrated technology' (BDT)." Commenters agreed and stated that EPA has traditionally explained the process by which it crafts emission guidelines as one in which it first defines the specific kind of apparatus to which the guidelines will apply, identifies the "best demonstrated technology" for that apparatus, and then develops guidelines based on the performance of that "best demonstrated technology."

Commenters argued that in its rulemaking to establish NSPS f or GHG emissions from EGUs, EPA commented that BSER is "generally, but not required to be always, a technological control." Commenters noted that EPA quoted the legislative history for the 1977 CAA Amendments, which described Congress's adoption of the BSE R requirement in 1970 as "the first time [Congress] imposed a requirement for specified levels of control technology." Commenters said EPA took the position that the definition of "standard of performance" "makes clear that the standard of performance must be based on controls that constitute "the best system of emission reduction ... adequately demonstrated" (BSER)." Commenters stated, ultimately, after "consider[ing] three alternative control technology configurations as potentially representing the BSER, " EPA proposed that "efficient generating technology implementing partial [carbon capture and storage] is the BSER adequately demonstrated for [new fossil fuel

fired boiler and IGCC EGUs]."

Response 16 : We disagree with this comment. For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reasonable in light of the statutory text, statutory context, statutory purpose, and legislative history.

Miscellaneous Comments

Comment 17 : Commenters suggested that a source

- based set of emission reduction guidelines can achieve significant emission reductions in a legally robust manner, especially when combined with voluntary State programs for incorporating activities that avoid additional emissions. Commenters argued that this is important because EPA and the states do not have legal authority to go beyond the source to define BSER. Commenters argued that GHG reduction opportunities that may be available outside the fence line lie outside t he source's control, and the means do not yet exist to consistently evaluate and measure emissions reductions due to these145 activities, nor to transfer credit for those reductions efficiently to sources so they can meet their compliance obligations.

Respon se 17 : We disagree with this comment for the reasons described in the preamble.

Broad Definition of BSER and its Implementation in State or Federal Implementation Plans

Comment 18 : Commenters argued that since the definition of BSER is contained in the definition of "standard of performance" that is shared between sections 111(b) and 111(d), the proposed BSER implemented through 111(d) could also be applied to 111(b) actions. Commenters said this would remove states from their lead role in the deployment of generation and conservation resources and could make these matters subject to citizen lawsuits under the CAA.

Response 18 : We discuss the applicability of the BSER for this section 111(d) rule to new sources in the Legal Memorandum.

1.10.2 The interc onnected nature of the U.S. electricity sector

Comment 1: Commenters supported the EPA’s decision to take into account the integrated nature of the electricity grid when setting BSER.

Commenters supported the EPA’s decision to take into account the integr ated nature of the grid when determining BSER. Commenters gave the following reasons for supporting this approach:

1. Experience in various states and regions (e.g., the RGGI region) shows low or zero emitting electricity generation sources do displace generation from high emitting EGUs. 2. Interconnected nature of the grid allows implementation of cost effective reduction measures that can reduce and/or displace the generation of higher emitting sources. 3. Interconnectedness and diversity of the grid provides unique opportunities for cost

effective emissions reductions while ensuring demand and reliability needs of consumers
are met. 4. Represents a commonsense response to the fact that affected sources can reduce emissions cost

- effectively (through a wide variety of means) by reducing generation as low

- emitting sources and energy efficiency satisfy the demand for electricity se rvices.146 5. RE and EE programs have been used by states to comply with other EPA rules (e.g., 1998 NOx SIP Call Rule, CAIR, etc).

Response 1: We agree with these comments . We note, however, that as discussed in section V.B. of the final rule preamble of the CPP, we are not including building block 4 as part of the BSER.

Comment 2: The interconnected nature of the power sector has been recognized and harnessed by Congress, EPA, and individual states when designing pollution control programs under the Clean Ai r Act

Commenters stated, as EPA effectively describes in the preamble and legal TSDthe unique features of the Clean Power Plan arise from

- indeed, are driven by

- the distinctive characteristics of carbon pollution from the power sector. Commenters said other source categories for which EPA has issued performance standards under section 111, including the five source categories which are subject to section 111(d) standards, are characterized by functionally independent facilities that emit pollutants with primarily local or regional effects. Commenters stated, for such source categories, EPA has appropriately issued performance standards that reflect the application of cleaner processes, technologies, or techniques to emissions from individual sources. Com menters said this approach responds to the need to protect local and regional air quality from emissions associated with such sources, and is well

- suited to sectors in which standardized technologies and practices are available to reduce pollution from ind ividual

sources.
Commenters stated, the characteristics of carbon pollution from the power sector, by contrast, call for the distinctive regulatory approach reflected in the Clean Power Plan

- an approach that, as they argue elsewhere in these comments, al so fits comfortably within the broad language of section 111; comports with other Clean Air Act regulatory programs affecting the power sector; and reflects policies that utilities and states around the country are already employing to reduce carbon pollut ion. Commenters stated, unlike other industrial sectors regulated under section 111(b) and (d), the power sector does not consist of functionally independent facilities

- rather, it consists of an interconnected network of facilities that operate as a cont inuously

- balanced and centrally

- coordinated machine, or system. Commenters said key distinguishing features of this system include:

1. Real

- time balancing of supply and demand via centralized dispatch. Commenters stated, due to the lack of large

- scale electri city storage facilities, the electric grid has always required continuous matching of electricity supply and demand

- a process that is carried out in practice by balancing authorities or system operators that centrally manage the resources on the grid. Co mmenters stated, depending on the region, these functions can be carried out by vertically integrated utilities, RTOs/ISOs, transmission operators, or other entities. Commenters said these entities continuously "dispatch" available147 generating resources (an d in many cases, demand

- side resources as well) to meet demand in a cost

- effective way and ensure reliability, either through a real

- time energy market or other centralized method of ordering and coordinating power supply from the various resources on the grid. Commenters stated, through these mechanisms, the portfolio of generating resources that serves the grid changes from hour to hour in response to changes in cost, reliability considerations, environmental constraints, and other dynamic factors. Commen ters said producing electricity on the interconnected grid also means that other basic aspects of a generator's operations are determined by the needs of the grid; for instance, generators must produce electricity at the same nominal frequency in synchroni zation.

2. Fungible and commingled product. Commenters stated, although electric generating resources do have diverse operating characteristics that influence the rate and timing of their output, the generation from any given EGU can be seamlessly substitute d with that of any other

- and is thoroughly commingled with generation from all other sources connected to the grid. Commenters said this makes electricity one of the most thoroughly fungible of industrial products. Commenters noted, from a supply standpo int, this fungibility is reflected in the fact that utilities and grid operators routinely and continuously coordinate output from different resources to optimize the availability and cost of power. Commenters noted another unique result is that utilities whose transmission networks are connected by "tie lines" buy power from one another to satisfy demand; for instance, companies buy electricity when it is cheaper to procure than generate or when their generation resources cannot satisfy demand alone. (As i s described further below, the vast majority of the power generation sources in the country are interconnected on two massive grids.) Moreover, commenters stated, due to the commingling of power on the grid, minute

- to

- minute changes in the composition of t he electric generating portfolio take place in a way that is largely invisible to the consumer. Commenters said, indeed, even if a consumer preferred power from a particular source, it would be impossible for the generator or power system operators to dire ct the energy from a particular generator to a particular user. Commenters said energy flowing onto the power grid energizes the entire grid, and consumers draw undifferentiated energy from the grid.

3. Substitutability of demand and supply. Commenters state d, related to the fungibility of electricity is the extent to which reduction in electricity demand serves as a substitute for supply. Commenters stated, thanks to an array of cost

- effective energy efficiency and demand response technologies, there are a l arge number of ways in which consumers can use less electricity while maintaining the same (or greater) level of utility or "electricity services." Commenters noted, from the standpoint of the interconnected power system, which is continuously balanced at every moment in time, such demand

- side measures are effectively equivalent to supply resources: every megawatt in demand reduction translates automatically and immediately into a megawatt reduction in needed supply. Commenters said this phenomenon is most vividly illustrated in the energy and capacity148 markets operated by regional transmission operators and independent system operators, many of which allow demand response and/or energy efficiency to compete directly with generation to meet energy and capacit y needs. Commenters said it is also illustrated in the extensive modeling that EPA and others have undertaken to quantify the effects of energy efficiency programs and measures on hourly dispatch and overall emissions from the power sector. Commenters note d, there are few, if any other products where a reduction in demand leads automatically to changes in output and supply; a refinery, for example, might respond to local changes in demand for gasoline by exporting a greater share of its products or storing product in anticipation of future demand. Commenters said such responses are generally unavailable to electric generating units.

4. Dispersed nature of carbon pollution. Commenters stated, carbon dioxide is a globally dispersed pollutant whose harmful effects on our atmosphere are virtually identical regardless of where it is emitted. Commenters stated, accordingly, the climate benefits of mitigating carbon pollution depend entirely on the aggregate level of reductions from the power sector, rather than the di stribution of those reductions.

5. Lack of source

- specific control technologies. Commenters stated, due to the limited readily

- available technologies that can be implemented at individual fossil fuel

- fired EGUs to mitigate carbon pollution, states and power c ompanies that have sought to decrease carbon pollution in recent years have almost exclusively relied on system

- based approaches that leverage the capacity of the power system to reduce aggregate emissions through flexible changes in the generating portfol io and cost

- effective efficiency measures. Commenters noted, as described elsewhere, these states and companies have successfully reduced carbon pollution cost

- effectively, without creating any reliability problems, and while securing concomitant reduction s in other harmful air pollutants emitted by fossil fuel

- fired power plants.

Commenters stated, the proposed Clean Power Plan responds to these distinctive aspects of the power sector by establishing state

- wide performance targets that will ensure aggregat e reductions in carbon pollution over time, and that give states flexibility to leverage the dynamic nature of the power system in various ways to achieve these aggregate targets. Commenters stated that the level of aggregate reductions required are based on a system

- wide analysis that recognizes that all existing fossil fuel

- fired EGUs are part of a large, coordinated system for generating and delivering electricity. Commenters noted, for this reason, EPA appropriately considers the various mechanisms that are available to states to reduce emissions as a whole from existing EGUs

- including shifts in dispatch from high

- emitting units to low or zero

- emitting units, or to demand

- side efficiency. Commenters said, indeed, as EPA recognizes, an approach that fai led to account for the actual behavior of the interconnected power system could undermine the emission reduction goals of section 111 by increasing the economic competitiveness of higher

emitting EGUs relative to other resources.

Commenters stated, as they note elsewhere in these comments, this is a time

- tested approach to reducing emissions from the power sector under the Clean Air Act, and one that states and149 utilities themselves have recognized and demonstrated. Commenters noted, and provided examples (e .g., Acid Rain program, NOx SIP Call, CSAPR) to show that, in practice, the interconnected nature of the power sector has been recognized and harnessed by Congress, EPA, and individual states when designing pollution control programs under the Clean Air Ac t. Commenters said the proposed Clean Power Plan is consonant with this long tradition.

Response 2: We agree with these commenters, although as discussed in preamble section V.B. of the final rule preamble, we are not including building block 4 as part of the BSER. These comments contain useful information that we incorporate into the record of this rulemaking.

Comment 3: Commenters agreed that the EPA has the authority to consider the integrated nature of the electricity grid when setting BSER.

Commente rs stated that the EPA is required to consider demonstrated systems that reduce emissions and believed that by taking into consideration the integrated nature of the grid, the EPA’s proposal had met this requirement.

Other commenters stated there was nothi ng in the CAA that prohibits EPA from using its discretion to harness the attributes of the integrated electricity grid.

Response 3: We agree with th is comment, although as discussed in section V.B. of the final rule preamble of the CPP, we are not includ ing building block 4 as part of the BSER.

Comment 4: Commenters argued that the EPA lacks the authority to consider the integrated nature of the electricity grid when setting BSER.

Commenters believed the approach fails legally, even though theoretically from a policy perspective it might make sense. Commenters said even though EPA discusses less carbon

intensive ways of providing electricity services, the Agency has failed to consid er dozens of other relevant policy

- related issues. Commenters said the EPA has not considered the effect of the proposed rule separately and in combination with other EPA measures on the reliability of electricity in the U.S. and its/their effect(s) on ele ctricity prices as noted by Standard and Poor's, the North American Electric Reliability Council Study, and a FERC Commissioner. Commenters noted (1) the North American Energy Reliability Corporation (NERC) and Standard & Poor's predict reliability issues and significant increases in consumer's cost of electricity: Standard & Poor's warned of the retirement of 40 to 78 Gigawatts of coal

- fired and other power plants by 2020; (2) NERC's Initial Reliability Assessment Report issued on Nov. 6, 2014 predicted ou tages and other reliability problems will result from implementation of the utility Mercury and Air Toxics Standard and Proposed Existing Source Performance Standard also by 2020 ( http://www.nerc.com/news/Pages/Reliability

- Review

- of

- Proposed

- Clean

- Power

- Plan

- Identifies

Areas

- for

- Further

- Study,

- Makes

- Recommendations

- for

- Stakeholders.as px ); and (3) FERC150 Commissioner Moeller agreed in an October 24 interview and noted, "We are really in for a wild ride for five to six years because of the amount of coal shutting down in such a short amount of time and the transformation toward more gas being used to generate electricity."

Response 4: We disagree with the commenters . Preamble section V comprehensively discusses our reasoning in setting the BSER in the final rule. Further, preamble section VIII.G.2. discusses our consideration of reliabili ty in the development of the final rule. Additionally, we note that we are not including building block 4 as part of the BSER.

Comment 5: Commenters stated that without recourse to a nationally

- applied comprehensive carbon plan, it is preferable to remain sector

- specific in application of reduction allowances as is crafted in the current proposed rule. Commenters said while several examples of cap

- and

- trade programs to reduce national or regional emissions of O2 and NOX are cited, these take "advantage of the integrated nature of the electricity system when designing programs to allow the industry to meet the pollution control objectives in a least

- cost manner." Commenters said these reductions apparently remain specific to the power

- generation industry.

Re sponse 5: We thank the commenter for their support, although as discussed in section V. B. of the final rule preamble of the CPP, we are not including building block 4 as part of the BSER.

Comment 6: Commenters stated that the EPA inaccurately described R TO capacity markets at 79 FR 34881and overstated their potential to help states meet goals.

Commenters disagreed with the following excerpt from the proposal:

"In most states where generation is no longer subject to price regulation, [RTOs] . . . ensure t he adequacy of future generation supplies by administering auctions for forward capacity. In these auctions, owners of existing EGUs (with consideration of building blocks 1 and 2), developers of new EGUs including renewable generating capacity (building b lock 3), and developers of demand

- side resources (building block 4) all compete to provide potential resources for meeting the projected demand for electricity services." 79 Fed. Reg. at 34,881.

Commenters said, the Proposed Guidelines suggest that RTO ca pacity markets can serve as the functional equivalent of traditional state integrated resource planning mechanisms and that the BSER for CO2 emissions should account for this. Commenters stated, the Proposed Guidelines' description of RTO capacity markets is inaccurate because only two FERC

- jurisdictional RTOs, ISO

- NE and PJM, have what are generally considered to be "forward capacity markets." Commenters said, the NYISO is currently evaluating a possible move to a forward capacity market design but has con cluded on two prior occasions that such a change was not needed in New York. Commenters said, three FERC

- jurisdictional RTOs, namely CAISO, MISO, and SPP, do not have any form of mandatory capacity markets. Commenters said, as noted above, the151 ability of demand

- side resources to continue to participate in FERC

- jurisdictional capacity markets is also in doubt in light of the EPSA decision.

Commenters stated that the proposal overstate the potential of the capacity markets that actually exist in ISO

- NE, th e NYISO, and PJM to function as de facto approximations of traditional integrated resource planning systems. Commenters said, RTO capacity markets were not intended or designed to play such a role. Commenters said, their principal purpose is to "ensure

res ource adequacy at just and reasonable rates through a market

- based mechanism that is not unduly discriminatory or preferential as to the procurement of resources." See, e.g., Commission Staff Report, Centralized Capacity Market Design Elements, FERC Docket No. AD13

- 7

- 000 at 11

- 15 (Aug. 23, 2013), available at http://www.ferc.gov/CalendarFiles/20130826142258

- Staff%20Paper.pdf (included in UARG's separately filed Supplemental Materials for the Rulemaking Record).

Commenters said, FERC is considering a numbe r of complex and controversial issues related to this goal, such as the types of payments to be made to different kinds of resources and the extent to which new resources should be subject to market power mitigation measures if they are deemed to be "uneco nomic." Commenters said, consequently, EPA has unreasonably overstated the potential for RTO

- administered capacity markets to support the Proposed Guidelines' objectives.

Response 6: We agree that in some areas of the country, forward capacity markets are one way EGU’s can defray the costs of implementing the building blocks. Our analysis shows, that even where forward capacity markets are not available, the costs of the building blocks is reasonable. See the Technical Support Document “Resource Adequacy an d Reliability Analysis”. Additionally, as discussed in section V. B. of the final rule preamble of the CPP, we are not including building block 4 as part of the BSER

Comment 7: EPA correctly recognizes the interconnected nature of the grid.

Commenters stated, EPA correctly uses existing carbon reduction frameworks and recognizes the interconnected nature of the grid for reducing carbon emissions. Commenters said, EPA's reliance on existing carbon reduction frameworks and the interconnected nature of the electric grid creates an effective means to reduce carbon emissions from existing fossil EGUs. Commenters said, EPA has appropriately provided a flexible framework for compliance with carbon emissions reduction plans and builds upon existing company, stat e, and regional approaches. Commenters said, as such, these plans can continue to rely on the interconnected nature of the grid to reduce carbon reductions from fossil fuel

- fired EGUs, including by flexible state approaches such as market

- based instruments , interstate trading, and regional approaches.

Response 7: We thank the commenter for their support, although as discussed in section V. B. of the final rule preamble of the CPP, we are not including building block 4 as part of the BSER.152 1.10.3 Addition al considerations related to inclusion of building blocks 2, 3, and 4 as part of the basis supporting the BSER: "system of emission reduction"

Comment 1: Commenters stated that the proposed building blocks 2, 3, and 4 are not legal because the regulation can apply only to the “affected source” and not to non

- emitting entities that are not defined as being part of the affected source. Commenters noted, und er section 111(d), states may submit plans "establish[ing] standards of performance for any existing source for any air pollutant...to which a standard of performance under this section would apply if such existing source were a new source." Put another wa y, commenters stated, section 111(d) can apply only to stationary sources of pollutants in a category for which EPA has promulgated an endangerment finding and an applicable NSPS. Commenters also argued that the rule is not legal because it would require s tates to regulate the entire power system and users of electricity instead of individual affected facilities.

Response 1: We disagree with these comments. As we explain in the preamble (section V.B and VIII.C) or Legal memorandum, we base the BSER on me asures within the affected EGUs’ ability to undertake, and we are not adopting the portfolio approach. S ome of commenters’ specific concerns have been mooted by the fact that this final rule does not include nuclear energy or demand

- side energy efficiency in the BSER. In addition, in the final rule, the EPA is not subjecting non

- affected EGUs to regulatory r equirements. We also disagree that the rule regulates the electric power system rather than individual EGUs. A state is required to submit plans that establish an emission rate for each existing plant (unless the state adopts the state measures approach). While the emission guidelines that form the basis for the source sub

category specific emission performance rates are based on the BSER, each state has flexibility in assigning standards of performance to its sources.

The following are summaries of specif ic public comments under this comment:
Commenters stated, in promulgating the Proposed Rule, the Administrator issued state standards that cannot be achieved by the existing sources to which the standard must apply under Section 111(d). Commenters said, th e EPA stated, "Each of the building blocks establishes a reasonable level of reductions, but not necessarily the maximum amount that could be achieved if that building block, and no other, were the basis supporting the BSER." C ommenters said, the state
go als are based on a combination of all four building blocks. Commenters said, building block 1, heat rate improvement, is the only aspect of the proposed BSER that can be accomplished by the existing source. Commenters said, through building block 1 alone e xisting sources cannot achieve the level of reductions required by the Proposed Rule. Commenters said, the Proposed Rule offers no other source specific means of achieving the proposed standard of performance.153 Commenters said, because the standard of perfo rmance cannot be achieved by existing sources, the proposed standard is contrary to statutory requirements in Section 111(a)(1).

Commenters stated, in making its BSER determination, EPA incorrectly considered emission reductions beyond those that are achie vable by individual sources within the affected source categories. Commenters said, section 111(d)

- by its own terms

- requires EPA to develop a BSER based on emission reductions that are attainable at each affected source. Commenters said, EPA has demonstrat ed the unambiguous nature of Section 111(d) by promulgating emission reduction standards for almost 40 years with an understanding that such standards must be achieved by individual sources.

Commenters stated, the EPA in this rule

- making sets mandatory emi ssion performance standards based on measures outside of the affected sources' control and leaves it to the state to identify which entities (EGUs or not) should be obligated under the rule. Commenters asserted that this reverses the regulatory process and is outside the scope of EPA's authority because three of the four proposed building blocks on which EPA based its mandatory state performance standards assume that reductions will come from beyond

- the

- fence entities over which EPA lacks the authority to r egulate and over which the EGUs have no control.

Commenters stated, despite the clear requirements of Section 111(d), the Proposed Rule includes emission reduction standards based almost entirely on measures that cannot be incorporated or achieved by ind ividual units. Commenters said, specifically, three of the four Building Blocks that comprise EPA's proposed BSER

- increased gas

- fired generation dispatch, renewable energy generation, and demand

- side energy management

- are not directed at existing coal

- fire d EGUs. Commenters said, such an approach drastically departs from previous Section 111(d) rules, instead invoking a system

- wide approach that inappropriately commingles all elements of electricity production and distribution into a single "source category ." Commenters said, crucially, EPA's "outside

- the

- fence" measures in the final three Building Blocks rely on regulatory authority that EPA does not have.

Comment 2: Commenters stated that the proposed building blocks 2, 3, and 4 are not legal because t he proposed building blocks do not qualify as a “system of emission reduction” as that term has ever been understood or historically applied under section 111 of the Act. Commenters said, a "system" under section 111 has always consisted of specific work p ractices or controls that an emission unit owner can implement to achieve a known reduction in a pollutant. Commenters stated that because the control measures of building blocks 2, 3, and 4 are not under the coordination and control of the affected sourc e, these measures are not legally valid “systems of emission reduction.”

Response 2: We disagree. For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reasonable in light of rele vant judicial precedent, the statutory text, statutory context, statutory purpose, and legislative history. Also, we explain and in the Legal Memorandum that Title IV can inform our interpretation of154 CAA section 111 and that the control options identified under Title IV can be considered in our determination of the BSER.

Comment 3: Commenters supporting EPAs interpretation of "system of emission reduction."

Response 3: We appreciate these comments. We discuss in the preamble (section V.A and V.B) how em issions trading relates to the BSER.

The following are summaries of specific public comments under this comment:
Commenters argued that the statutory language does not constrain the BSER to technology

- based systems. Commenters noted the 1997 amendments spe cifically required the EPA to determine a "best technological system of emissions reduction" for new sources. See Clean Air Act Amendments of 1977, Pub. L. No. 95

- 95, section 109(c)(1)(A), 91 Stat. 685, 699

- 700. Commenters said, this "technological" stand ard never applied to existing sources, which were subject instead to performance standards that reflected the "best system of continuous emission reduction." Commenters said that the Conference Report emphasized that this was a deliberate choice on the par t of the committee, explaining that the 1977 amendments "mak[e] clear that standards adopted for existing sources under section 111(d) of the act are to be based on available means of emission control (not necessarily technological)." H.R. Rep. No. 95

- 564, at 129 (1977) (Conf. Rep.). Commenters said, and, in 1990, Congress reverted to the original formulation of BSER, removing the "technological" qualifier to broaden the scope of tools that might be used to achieve greater emission reductions for both new a nd existing sources. Clean Air Act Amendments of 1990, Pub. L. No. 101

- 549, section 403(a), 104 Stat. 2399, 263.

Commenters supported the EPA's observation that because the Act does not define the term 'system,' the term should be given its ordinary, every day meaning: 'a set of things working together as parts of a mechanism or interconnecting network; a complex whole' and that this definition is broad

- it encompasses virtually any 'set of things' that reduce emissions.

Commenters also noted that "system of emission reduction," as used in section 111(a) does not have any modifiers that would limit methods of compliance to only Block 1 measures. The commenters noted that in 1977 Congress added special language that required standards for new EGUs only to em ploy the "best technological system of emission reduction," but this limitation

- which Congress deleted in 1990

- never applied to standards of performance for existing sources (including EGUs) under section 111(d).

Commenters believed including beyond

- th e

- fence

- line compliance approaches is not only a permissible reading of the CAA, but is also a logical approach. Commenters noted that the interpretation of "system" to include beyond

- the

- fence approaches recognizes that modern electric systems are not sta nd alone production facilities, but rather an integrated network of energy supply and demand that is composed of a variety of generation resources with varying emission profiles, dispatched by regional system operators and connected by a transmission grid155 to consumers, who themselves hold the key to demand reduction. Commenters also argued that the measures in building blocks 2, 3, and 4 are demonstrated to reduce emissions in a cost effective manner.

Commenters noted that o ther provisions of the 1990 Clean Air Act Amendments use the term "system" to refer to market

- based pollution control mechanisms. Commenters noted, for example, that the 1990 Amendments refer to the Acid Rain Program as an allowance "allocation and transfer system," and elsewhere, the 199 0 Amendments authorize EPA to develop a "system or systems of regulation" that may employ "economic incentives" to control emissions of volatile organic compounds from consumer or commercial products. Commenters noted that it is ordinarily presumed "that i dentical words used in different parts of the same act are intended to have the same meaning," Atl. Cleaners & Dyers v. United States , 286 U.S. 427, 433 (1932), and there is nothing to rebut this presumption here. Hence, commenters argued that the EPA may reasonably conclude that the term "system" as used in section 111(a)(1) and reflected in section 111(d) encompasses the same type of market

- based approaches to pollution control encompassed by the Acid Rain Program's "allowance system" and the volatile org anic compounds "system or systems of regulation."

Comments that EPA's formulation of the best system of emission reduction reflects a common

sense approach to achieving reductions from the affected EGUs. Commenters stated that the electricity sector is uni que among source categories due to the relative fungibility and interchangeability of electricity produced by sources on the interconnected grid; no other source category to which standards of performance might be applied under section 111(d) is so integra ted, such that an increase in the operation of a lower emitting source to fulfill demand results in a concomitant reduction in emissions from a higher emitting source. Commenters said in competitive electricity markets, demand is met on a moment

- by

- moment basis so that, among interchangeable marginal sources, those that can generate the needed electricity at least cost to consumers (which are also generally the most energy efficient) will operate instead of higher cost, less efficient sources. Commenters sa id that given the fundamental nature of electricity markets, EPA's proposed formulation of the BSER as expressly including reductions achieved through re

- dispatch of the existing fleet of generating sources to those with the lowest emissions reflects a com mon

- sense approach that will achieve the required reductions at least cost to ratepayers. Commenters said the alternative formulation of the BSER proposed by EPA

- whereby the reductions achieved through Building Blocks 2 through 4 are not actual component s of the system of emission reduction, but instead provide the basis for quantifying reductions in affected EGU emissions

- similarly reflects a common

- sense approach that appropriately recognizes the interconnected nature of the electricity grid.

Commente rs also supported EPA’s definition of system of emission reduction because some states do not have fossil fuel

- fired EGUs. Commenters said, if excluded from the rule, these states would not be required to participate in measures to reduce emissions and as a result, CO2 emissions in other states would increase, making it not possible to meet their emission reduction goals.156 Commenters stated, furthermore, although Congress made changes to the definition of "standard of performance" in 1977 that introduced add itional requirements and distinctions between the standards for new and existing sources, with the 1990 amendments, Congress essentially restored the 1970 version of the term. Commenters said, changes to the definition made in the 1977 Amendments to the Cl ean Air Act required section 111 standards for new sources to reflect "the best technological system of continuous emission reduction."

Commenters stated, in contrast, the section 111 standards for existing sources were to reflect the "best system of cont inuous emission reduction," which, as clarified by the Conference Report, need not be a technological system. Commenters said, in 1990, Congress removed the requirements that standards for new sources be based on "technological" systems and that standards for both new and existing sources achieve "continuous" reductions, restoring use of broad "system" language for both new and existing source standards. Commenters said, thus, the 1990 version of section 111 that Congress adopted was strikingly similar to t he 1970 version, calling for "standards of performance" for both new and existing sources that would reflect the "best system of emission reduction." Commenters said, it is noteworthy that even during the period of time when Congress determined a more spec ific definition of "standard of performance" was advisable for new sources, it did not take this approach for existing sources. Commenters said, the current text of the Clean Air Act reflects both Congress' more recent decision to allow EPA to select a non

- technological system of emission reduction when promulgating standards for new sources under section 111 as well as Congress' longstanding policy of allowing that approach for existing sources.

Commenters stated, courts have recognized that the identific ation of the best system of emission reduction is an expansive, flexible endeavor, in the service of securing the maximum emission reductions, finding that EPA may weigh "cost, energy, and environmental impacts in the broadest sense at the national and reg ional levels and over time as opposed to simply at the plant level in the immediate present." Commenters said, further, courts have noted that EPA's choice of the best system of emission reduction should encourage the development of systems that achieve gr eater emission reductions at lower costs and deliver energy and nonair health and environmental benefits.

Commenters argued that EPA may consider other relevant factors, including emission reductions, promotion and development of new technologies and cost s not just at the source level but also in the broadest sense at the regional or national scale and over a long time horizon, and cited Sierra Club v. Costle , 657 F.2d at 330

Commenters stated, in short, section 111 gives EPA wide discretion to identify an emission reduction system that relies on solutions such as averaging to maximize environmental performance and enhance cost

- effectiveness.

Comment 4: EPA misinterprets what may constitute a "system" of emission reduction.157 Response 4: We disagree with thi s comment. For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reasonable in light of the statutory text, statutory context, statutory purpose, and legislative history. In the
pr eamble, we discuss why the unique facets of the electricity system, including, among other things, the fungibility of electricity, the physical interconnectedness of the sources and customers, and the lengthy history of dispatch shifts supports our determi nation of the BSER. We also discuss why, as a legal matter, section 111(d)(1) and (a)(1) does not limit the BSER as commenters believe. Also, we have concluded that our approach for the BSER for new affected EGUs does not constrain our approach for the BSE R for existing affected EGUs. In any event, we have separate BSER determinations in this rule for steam EGUs (building blocks 1, 2, and 3) and combustion turbines (building block 3).

The following are summaries of specific public comments under this commen t: Commenters stated that a more narrow and specific understanding of “system of emission reduction” is reflected in the legislative history for the 1977 and 1990 Clean Air Amendments. Commenters cited text from the committee reports for the bills that ult imately became the 1970 CAA Amendments, the House Committee on Interstate and Foreign Commerce, reporting H.R. 17255, the Senate Committee on Public Works' report for the Senate bill, S. 4358, and a "Summary of the Provisions of Conference Agreement on the Clean Air Amendments of 1970" inserted into the Congressional Record and concluded the this review of the legislative history reinforces that Congress intended “standard of performance” to mean emission limitations that would be accomplished at individual units through the use of low

- emitting fuels, process changes, operation changes, or direct emission controls. Commenters argued that EPA’s broad interpretation of “system” is inconsistent with examples found in the Act and the legislative history.

Comment ers argued that sections 111(b) and 111(d) are inextricably tied, and EPA must interpret key regulatory terms, such as "standard of performance" and "best system of emission reduction ... adequately demonstrated" in the same manner under each provision. Co mmenters stated, EPA's claim that it has discretion to adopt a beyond the fence line approach to BSER based on an expansive interpretation of the word "system" and, specifically, EPA's assertion that the word "system" should be interpreted to mean "[a] set of things working together as parts of a mechanism or interconnecting network" misses the mark. Commenters said, first, under the plain meaning of the statute, the system of emission reduction must be something that can be applied to the "existing source" which is a "building, structure, facility or installation which emits or may emit any air pollutant." Commenters said, second, the operative term in the definition of standard of performance in Section 111(a)(1) is not "system," but "system of emission re duction." Commenters said, thus, even under EPA's interpretation, Section 111 requires EPA or the States to identify a set of things working together as parts of a mechanism or interconnecting network to reduce emissions. Commenters said, the four Building Blocks identified by EPA do not meet this standard because they are a set of things working together as parts of a mechanism or interconnecting network to generate electricity. Commenters also said, the mere fact that shifting generation from coal to othe r energy sources has an effect on net CO 2 emissions from the158 electricity sector does not make those other energy sources "pollution prevention measures" for coal

- fired EGUs. See id. at 34,886.

Commenters stated, further, EPA's interpretation of "system" un der Section 111(d) allows it to unlawfully shift the focus of regulation to other entities that are not "existing sources" "to which a standard of performance under [Section 111(b)] would apply." 42 U.S.C. section 7411(d). Commenters said in key respects, the proposed regulation is addressed to State governmental agencies, transmission operators, and retail consumers of electricity, none of which emit any air pollutant subject to regulation under Section 111(d) and, as a result, cannot be considered "statio nary sources" within the context of Section 111. Commenters said, even the nuclear energy facilities that EPA would prohibit from closing and the renewable energy facilities that EPA would require to be built are classified as "zero

- emission" under the pro posed rule and, as a result, are also outside the scope of Section 111.

Commenters said the "system" of emission reductions refers to the range of options that can be implemented by an existing source to reduce its emissions, not "anything that reduces the emissions of affected sources" regardless of the entity that undertakes the emission reduction.

Commenters also stated that EPA's approach is unsupported by the CAA legislative history and provided an analysis of how the 1977 insertion of the terms "tech nological" and "continuous" in the definition of "standard of performance" and the 1990 restoration of the original 1970 definition does not give EPA a mandate to regulate electricity dispatch by States, require construction of renewable energy, set standa rds for nuclear retirement, and manage retail demand.

Commenters stated, the "system" that EPA has constructed

- the "regularly interacting or interdependent group of items forming a unified whole"

- is not a "system" of reducing emissions at coal plants b ut in reality is a restricting of the electric utility system. Commenters said, according to EPA, the "regularly interacting or interdependent group of items" in this system are EPA's building blocks, which it calls "components" of this system. Commenters said, but natural gas, nuclear, renewable, and energy efficiency resources are obviously not components of coal

fueled EGU's; they are components of a state electric utility system. Commenters said, under CAA section 111, however, BSER is not the "best sys tem" for operating a state's utility system. Commenters said, rather, it is the best system for reducing emissions from the source category being regulated.

Commenters said the building blocks have not been evaluated as a system and, in some ways, work ag ainst each other (e.g., changing dispatch order actually increases emissions at natural
gas

- fired EGUs.).

Comment 5: Comments suggesting that EPA's standard needs to encompass the full fuel cycle.159 Commenters argued that since emissions are directly related to energy consumption, the focus must be on source efficiency and EPA should embrace an efficiency standard that encompasses the full fuel cycle and considers the entire energy chain from source to site with rules and policies accordingly.

Response 5: We disagree that it is feasible or legally appropriate under section 111 to regulate the entire energy chain from the production, storage, and distribution of fossil fuels to the combustion in an EGU. As explained in section V.A and V.B of the final r ule preamble, we have defined BSER to include control measures that are under the control of individual EGUs, have been used for years to mitigate emissions, and that are included in integrated resource planning for the utility companies. An EGU has no co ntrol over the emission control practices of their fuel suppliers and would be unable to measure or otherwise determine the emissions associated with production of the fuels that they burn. The EPA already has established NSPS for certain process steps in the fuels industry, e.g., NSPS from coal cleaning and NSPS for natural gas production and processing. If we determine in the future that processing steps in the fuel supply chain warrant regulation of GHGs, then will we adopt additional NSPS at that time

.

Comment 6: Commenters argued that EPA violated its own implementing regulation in subpart B by failing consider emissions requirements by subcategory. Commenters stated that EPA provided no analysis to show that the BSER decision considered adopting "...d ifferent emission guidelines or compliance times or both for different sizes, types, and classes of designated facilities when costs of control, physical limitations, geographical location, or similar factors make subcategorization appropriate," as require d by 60.22(b)(5). Commenters pointed out that in past NSPS EPA has adopted separate standards of performance for different types of combustion devices and different pollutants. Commenters stated that EPA made subcategorical distinctions in the CO2 proposal for new and modified units but abandoned the distinctions in the proposal for existing sources.

Response 6: Under 40 C.F.R. § 60.22(b)(5), the EPA retains discretion as to whether and how to subcategorize classes of facilities for purposes of setting emis sions standards under section 111(d) of the Clean Air Act (which does not itself require that the EPA establish facility subcategories). Section 60.22(b)(5) provides that EPA will “specify different emission guidelines . . . for different sizes, types, and classes of designated facilities when costs of control, physical limitations, geographical locations, or similar factors make subcategorization appropriate .” There is thus no requirement that the EPA establish additional subcategories under section 111(d) unless it finds that such subcategories are “appropriate.” In this rule the EPA has determined that it is appropriate to specify emission guidelines for two subcategories of existing fossil fuel

- fired EGUs: fossil fuel

- fired electric utility steam generat ing units, and stationary combustion turbines. The EPA is not finalizing any further subcategories because it has determined that all affected EGUs can achieve the relevant performance standard set by applying the BSER to each of these two subcategories. T his approach is also consistent with the EPA’s160 approach in the final rule establishing standards of performance for greenhouse gas emissions from new, modified, and reconstructed sources, which defines the same two subcategories. Further discussion of the EPA’s approach to subcategorization can be found in the preamble to the final rule for existing sources in sections V.A.1.d, V.A.2.i, and V.B.2.

Comment 7 : Commenters stated that forcing state legislation to implement Building Blocks 2

- 4 is illegal. Comme nters argued that (1) the state goals are so stringent that states will have no choice but to implement beyond

- the

- fence emission reduction measures to attain the goals, and (2) if a state submits a plan that EPA finds unsatisfactory, EPA would impose a fe deral plan on the state that would require state legislative action to allow the beyond

- the

- fence emission reduction measures. Commenters argued that it is well

- established that federal agencies may not usurp the authority of states, nor may states be forc ed to administer federal programs. Commenters argued that many states that have adopted requirements regarding Building Blocks 2, 3 and 4 did so for economic reasons in order to mitigate over

- reliance on a limited variety of fuel sources and the consequent vulnerability to fuel price fluctuations; the commenters argued that EPA's co

- opting of these measures for environmental purposes conflicts with the bases on which such provisions were adopted, and runs counter to the ends that drove the issuance of those state requirements (i.e. by fostering greater dependencies on a more limited range of fuel sources). Commenters argued that the proposed rule could cause the sort of resource mix imbalances that state RE and EE requirements were designed to combat. Commen ters further argued that EPA recognized in its Legal Memorandum that it could not order the utilization of Building Blocks 2, 3 and 4 in the way it suggests.

Response 7: We disagree with these comments. As we discuss in the preamble (section V.B), the affe cted EGUs are able to implement the building blocks. It is not necessary for a state to implement any type of control measures; rather, a state may adopt a state plan that imposes emission standards on its affected EGUs, and the affected EGUs will be able to achieve those standards by themselves taking actions that implement the building blocks.

Comment 8: Supports broad definition of system because 111(d) applies to states. Commenters argued that the CAA makes a distinction between standards of performance for new sources and for existing sources under Section 111. Commenters argued that because Section 11 1(d) for existing sources applies to States rather than individual stationary sources, this opens up a greater range of "systems" which may be considered appropriate to specify as the "best system of emission reduction" under Section 111(d) than is availab le under Section 111(b).

Response 8: We appreciate these comments and agree with some, although not all, of the comment. The BSER must be something that the affected sources can implement, although the state may, through the state measures approach, adopt additional measures that may result in emission reductions from the affected EGUs

. In the preamble and the Legal Memorandum, we161 discuss and compare the types of BSER that we determine under the section 111(b) rule and this rule. We agree that the unique c haracteristics of the electric power sector support our determination that building blocks 2 and 3 are part of the BSER, but those types of building blocks may not be the BSER for other source categories.

Comment 9 : Commenters stated one caveat is that t he EPA's proposal undermines its own interpretation by grouping coal and gas plants into separate categories. Commenters said its second building block explicitly assumes generation will shift from coal to gas. Commenters stated doing so does cut overall e missions from fossil power, but not those from gas

- gas emissions go up. Commenters said the other four building blocks may have similar effects, especially to the extent that states allow trading. Commenters stated in other words, standards ostensibly "f or" the gas category actually increase gas emissions. Commenters said the EPA can solve this problem simply by combining all fossil power into one legal category, as it already assumes for purposes of setting targets in the proposal. Commenters stated the agency has cryptically "co

- proposed" such a merger of categories, but the traditional split categories remain the primary approach, for reasons that are unclear. Commenters said the agency has extremely broad powers to define and redefine categories of sou rces. Commenters stated the fix here is easy

- joining all fossil power in the same category

- but the agency actually needs to do it or risk unnecessary legal vulnerability.

Response 9 : We do not agree that treating steam EGUs and combustion turbines as two subcategories imposes any legal vulnerability. As we explain in section IV.E of the final rule preamble, all fossil fuel

- fired EGUs are a single category; and, therefore, all EGUs are eligible to participate in any emissions trading programs that are established by the states in any section 111(d) plans that are approved by EPA. We selected the subcategories of steam EGUs and combustion turbines to determine state emissions guidelines that can be achieved at a reasonable cost by the integrated utility system as a whole.

Comment 10: Commenters argued that the procedural and compliance requirements of EPA's 111(d) rule must support incremental and iterative policy and business developments by requiring gradual reductions, and allowing time for state and other key stakeholder policies and practices to evolve. Commenters stated that only in this way can EPA's rule accurately and appropriately utilize a "beyond the fence" BSER comprising the interconnected bulk electric system.
Response 10: We disagree with these comments. As we discuss in the preamble (section V.D.), the building blocks qualify as part of the BSER because they are adequately demonstrated.162 Comment 11: Commenters argued that section 111 rests on the premise that adding emiss ion controls to new sources will be less costly than it is for existing sources, and thus that more stringent standards may be inappropriate. However, commenters argued, for 26 states, EPA's outside

- the

- fence interpretation of BSER for existing EGUs result s in emission limitations (state goals) that are more stringent than the emission limitations EPA has proposed to determine are achievable and adequately demonstrated for any affected new EGU. Commenters argued that this result is "inconsistent with the de sign and structure of the statute as a whole" and so "does not merit deference."

Response 11: For the reasons discussed in the preamble (section V.A and V.B), our interpretation of the BSER is reasonable in light of the statutory text, statutory context, and legislative history. We also explain in the preamble and the Legal Memorandum why CAA section 111(b) and (d) have a different BSER and why the section 111(d) requirements cannot be said to be more stringent than the section 111(b) requirements.

Commen t 12: Support for and opposition to non

- electric utility sources.

Commenters stated that the final rule should make it clear that the Clean Power Plan does not set a precedent for regulating the industrial sector like the utility sector and the final rule should have measures to prevent industrial GHG leakage to foreign companies that sell into U.S. markets if manufacturing must be moved offshore to achieve required GHG reductions in the industrial sector. Commenters were concerned that regulating GHG emiss ions outside

- the

- fence line sets a problematic precedent for the manufacturing sector. Commenters stated that the electric utility sector is significantly different than the industrial sector because, the electric utility sector does not face international competition and all prudent costs incurred by electric utilities are passed through to electricity consumers. Commenters stated that some electric utilities will actually benefit financially from the Clean Power Plant because they will be able to

secure a return on investment on new capital investments that are required for compliance. Commenters pointed out that industrial companies selling products in international markets cannot pass along costs like regulated electric utilities, and commenters were con cerned that requiring industrial companies to reduce GHG emissions outside

- their

- fence line will result in increased costs that could dramatically reduce competitiveness and result in GHG leakage to foreign countries.

Commenters stated that the final rule should include provisions expressly delineating the treatment of sources within the metalcasting industry within state plans because otherwise the national metalcasting industry will be forced to make its case for reasonable and meaningful regulations in 5 0 individual state capitols.

Response 12: We discuss in the preamble (section V.A and V.B) and the Legal Memorandum that the BSER for this rule is appropriate for the electric power sector, and we discuss the extent to which the similar approaches could a pply to other industries noted by other commenters.163 Comment 13: Commenters argued that EPA can only arrive at a beyond

- the

- fence definition of "standards of performance" for existing sources by first redefining "performance." Commenters argued that perfor mance should logically be read to mean the amount of emissions attributable to a given generation output from a particular source, but the EPA is implicitly redefining the term, to instead mean the total amount of emissions from the source category, even w here that requires a particular unit to be used less or shut down altogether. Commenters stated that such a reading of the term "performance" would allow EPA to use the Clean Air Act to simply require Americans to use less of those technologies that EPA be lieves could be replaced by better substitutes that result in lower emissions from nearly any industry. Commenters argued, after providing several supporting hypothetical examples, that EPA's approach would be both lawless and boundless.

Response 13: We d isagree with these comments. The c ommenters are incorrect concerning the definition of “performance” because “performance” is not a separate word that takes its own definition, rather, it is part of the phrase “standard of performance,” which is a defined term. In any event, even if “performance” were treated as somehow separate, it could be a reference to emissions performance, which is open ended and permits of various types of standards (including, e.g., a tradeable allowance system.) There is no reason why the term should be constrained as commenters suggest.

Comment 14: Commenters argued that the Proposal's definition of affected entity is remarkably broad, and includes any "entity with obligations under this subpart for the purpose of meeting the emis sions performance goal requirements in these emission guidelines." Commenters argued that this definition, could conceivably apply to any entity that a state wishes to target for energy consumption reductions, and that the Agency itself suggests states loo k to applying requirements to "electric distribution utilit[ies]," "private or public third

- party entit[ies]," or "a state agency, authority or entity." Commenters noted that the Supreme Court recently rejected an attempt by EPA to "assert[] newfound autho rity" over entities such as these and then "decide, on an ongoing basis,...how many of those sources to regulate." Commenters noted, according to EPA, measures applicable to these entities "would be federally enforceable because they would be included in
t he state plan."

Commenters argued that Section 111 does not authorize this approach, and neither EPA nor the states may impose legally enforceable obligations on entities other than those within the listed source category for the purpose of achieving aggr egate emission reductions reflected in the measures contained in Building Blocks 2, 3, and 4. Commenters argued that the statute, in fact, says the exact opposite. Section 111(b) expressly states that EPA may "establish[] Federal standards of performance f or new sources" within a "category of stationary sources in a list under subparagraph (A)." Commenters noted, under section 111(d), states may submit plans "establish[ing] standards of performance for any existing source for any air pollutant...to which a164 standard of performance under this section would apply if such existing source were a new source." Put another way, commenters stated, only stationary sources of pollutants in a category for which EPA has promulgated an endangerment finding and an applicab le NSPS can be subjected to any obligation under section 111(d).

Commenters argued that EPA's rationale that "[t]here is no specific language in CAA section 111(d) or elsewhere in the Act that prohibits states from including measures other than performance standards and implementation and enforcement measures" in state plans for existing sources is not supported. Commenters also noted that the Supreme Court recently reaffirmed, Congress must "speak clearly if it wishes to assign to an agency decisions of va st 'economic and political significance.'" Commenters argued that there is no justification for EPA's claim of this authority.

Commenters stated that EPA's regulatory structure for its proposed NSPS for new units is source specific as is its proposed rule on Modified and Reconstructed Stationary Sources. Commenters stated that EPA fails to offer a sufficient explanation for changing the regulatory approach for existing units, particularly for a policy change as radical and far reaching as found in the CPP; i.e., section 111(d) permits regulation of a source only if that source is one "to which a standard of performance under this section would apply if such existing sources were a new source." Commenters stated that because EPA's proposed Section 111(b) new unit rule applies only to fossil

- fired units, there is no basis for EPA to establish existing unit standards for non

- emitting sources such as wind, solar or nuclear generation, let alone energy efficiency, under Section 111(d).

Response 14: We disagree with this comment. Under both section 111(b) and section 111(d), the EPA regulates sources in the source category. In addition, in the final rule, the EPA is not subjecting non

- affected EGUs to regulatory requirements.

Comment 15: Supports broad definitio n of system because 111(d) applies to states. Commenters argued that the CAA makes a distinction between standards of performance for new sources and for existing sources under Section 111. Commenters argued that because Section 111(d) applies to States ra ther than individual stationary sources, this opens up a greater range of "systems" which may be considered appropriate to specify as the "best system of emission reduction" under Section 111(d) than is available under Section 111(b).

Response 15: We appre ciate these comments and agree that section 111(d) affords significant flexibility to the states. For the reasons discussed in the preamble, we interpret the BSER to focus on actions that the affected sources can take.165 Comment 16 : Commenters stated tha t the CAA supports a broad definition of system of emission reduction. Commenters stated, although Congress made changes to the definition of "standard of performance" in 1977 that introduced additional requirements and distinctions between the standards f or new and existing sources, with the 1990 amendments, Congress essentially restored the 1970 version of the term. Commenters said, changes to the definition made in the 1977 Amendments to the Clean Air Act required section 111 standards for new
sources to reflect "the best technological system of continuous emission reduction."

Commenters stated, in contrast, the section 111 standards for existing sources were to reflect the "best system of continuous emission reduction," which, as clarified by the Confer ence Report, need not be a technological system. Commenters said, in 1990, Congress removed the requirements that standards for new sources be based on "technological" systems and that standards for both new and existing sources achieve "continuous" reduct ions, restoring use of broad "system" language for both new and existing source standards. Commenters said, thus, the 1990 version of section 111 that Congress adopted was strikingly similar to the 1970 version, calling for "standards of performance" for b oth new and existing sources that would reflect the "best system of emission reduction." Commenters said, it is noteworthy that even during the period of time when Congress determined a more specific definition of "standard of performance" was advisable fo r new sources, it did not take this approach for existing sources. Commenters said, the current text of the Clean Air Act reflects both Congress' more recent decision to allow EPA to select a non

- technological system of emission reduction when promulgating standards for new sources under section 111 as well as Congress' longstanding policy of allowing that approach for existing sources.

Commenters stated, in short, section 111 gives EPA wide discretion to identify an emission reduction system that relies o n solutions such as averaging to maximize environmental performance and enhance cost

- effectiveness.

Response 16: We agree that the Clean Air Act supports a broad definition of system of emission reduction, given the unique circumstances of the electric pow er system.

1.10.4 Additional considerations related to inclusion of building blocks 2, 3, and 4 as part of the basis supporting the BSER: "best" system that is "adequately demonstrated"

Comment 1: EPA's Finding That the BSER Has Been "adequately demonstrated" Is Supported by Both System Level Modeling and an Analysis of the System Components.

Commenters said, EPA has shown that the BSER and alternative BSER is "achievable because it has been achie ved" by demonstrating how all of the BSER's elements have been adequately166 demonstrated in states, and that its reduction goals are realizable and not unreasonably costly by providing thorough modeling accompanying the Proposed Rule. Commenters said, thus, EPA has demonstrated that BSER feasibility and cost requirements have been met at the state level and at the sector level through its modeling of what may "fairly be projected." Commenters stated, EPA's proposed system of emission reduction is authorized by the Clean Air Act.

Commenters stated, EPA's analysis is supported by a robust and growing literature supporting the strategies identified in the building blocks of the BSER (which are the same strategies that enable the alternative BSER of reduced utili zation). Commenters said, the power industry itself has identified supply

- side heat rate improvements as a commercially proven, cost

- effective first step to reduce power plant CO2 emissions. Commenters said, in addition, the last twenty years of electricit y generation show that increased dispatch of natural gas combined cycle (NGCC) plants and further deployment of renewable energy generation is technologically feasible, having been thoroughly demonstrated in the United States and in Europe, and that they d o not pose unreasonable additional costs. Commenters said, in fact, increased NGCC dispatch and renewable energy utilization are both commercially available approaches to controlling carbon emissions and thus easily meet the statutory requirement for their inclusion with the BSER. Commenters said, the states have decades of experience with demand

- side energy efficiency, which is recognized as an energy resource in the ISO New England Forward Capacity Market, and the role of efficiency is increasingly being recognized in flattening of the growth in demand for energy.

Commenters stated, this system of emission reduction reflects the real

- world reality of the electricity system, within which different power generation sources and demand

- side energy efficiency resources are managed dynamically to ensure that energy demand is met at each moment in time. Commenters said, companies and states have long been relying on the interconnected nature of the electric grid, including demand

- side management, to meet system d emand while reducing harmful pollution from power plants. Commenters said, adding renewable electricity can displace generation from fossil fuel

- fired plants

- and will reduce emissions accordingly. Commenters said, similarly, improving energy efficiency l owers demand for electricity, reducing power generation and associated emissions. Commenters said, states and power companies have been increasing use of natural gas plants which has reduced emissions from coal

- fired power plants. Commenters said, coal

- fir ed power plants can (and many already do) co

- fire with natural gas, which reduces combustion emissions. Commenters said, coal plants can also be converted to burn natural gas (which has been done at many plants) and this also reduces combustion emissions. Commenters said, these techniques

- switching to lower carbon fuels, non

- emitting generation resources, and improving energy efficiency

- have all been used to comply with a range of air pollution programs under the Clean Air Act.

Commenters said, the flex ibility of this system enables sources and states to develop plans that will secure emission reductions cost effectively, ensure that there are no effects on reliability, and reduce carbon emissions. Commenters said, this system allows sources and states t o secure all of the co

- benefits of transitioning to cleaner energy and harvesting energy efficiency,167 reducing not only carbon pollution but also the burden of other health

- harming air pollution on their communities.

Commenters said, furthermore, an assess ment of benefits may also be instructive in determining the reasonableness of the costs. Commenters said, EPA's BSER and alternate BSER formulations easily meet these requirements. Commenters said, EPA's reliance on well

- established and cost

effective syst ems of emission reduction for each of the building blocks places its actions comfortably within the Clean Air Act's legal requirements. Commenters said, and, the implementation of numerous measures, including those in the building blocks, have demonstrated that reduced utilization of fossil

- fueled power plants reduces emissions in a cost

effective manner.

Response 1: This comment is supportive of the overall approach the EPA is taking to the BSER and contains useful information that we incorporate into the record of this rulemaking.

Comment 2: Commenters stated that BB2 is adequately demonstrated.

Commenters stated , regarding increasing natural gas utilization, even if such utilization is not feasible in every region or state, the EPA is not required to demonstrate that BSER is universally achievable; only that it is nationally achievable and adequately demonstrated . Commenters said, the Clean Power Plan rule has clearly met this burden.

Response 2: This comment is supportive of the overall approach the EPA is taking to the BSER and contains useful information that we incorporate into the record of this rulemaking.

Comment 3: Commenters said that, EPA legally justifies BSER by proposing that BSER is the combination of building blocks 1 through 4. Commenters agreed that each building block meets the criteria for BSER because they: 1) achieve emission reductions; 2) a re of reasonable cost; 3) encourage technology development; and 4) are adequately demonstrated to reduce emissions from affected sources. Commenters said that each building block satisfies the statutory and case law criteria for BSER, is appropriately part of the target setting process for emission reductions, and is sufficiently tied to emission reductions at affected sources either by affecting their operation or displacing higher emitting resources with low

- or zero

- emitting generation or energy efficien cy.
Response 3: This comment is supportive of the overall approach the EPA is taking to the BSER and contains useful information that we incorporate into the record of this rulemaking, although we are not finalizing the measures in building block 4 as par t of the BSER.168 Comment 4: Commenters said that, EPA must consider the cost and impacts of each source to adequately demonstrate nuclear power, renewable energy, and energy efficiency in terms of BSER. Commenters said that, renewable energy and energy efficiency have been adequately demonstrated using that definition and are cost effective.

Response 4: See section V.B of the final rule preamble of the CPP for an explanation of our basis for why the building blocks are adequately demonstrated and the req uirements that will apply to the affected EGUs.

Comment 5: Commenters stated that the notion of state implementation flexibility is at odds with the building block methodology. Commenters stated that if a state determines it can do better than EPA's assum ed stringency for one building block it does not mean that the state cannot obtain the level of stringency EPA has set for another building block. Commenters said that determining the "best" amount each state should obtain for each building block gives EPA no logical basis to say that what matters is the overall goal and not the building blocks. Commenters provided an example of the grid operation model that EPA used, which the commenters said shows that state compliance strategies deviate significantly fro m the "best" system.
Response 5: See section V.B of the final rule preamble of the CPP for an explanation of our basis for why the building blocks are adequately demonstrated and the requirements that will apply to the affected EGUs.

Comment 6: Commen ters said, they know that a system that includes improvements in fossil plant efficiency, displacement of higher

- emitting plants with lower

- emitting plants, increased reliance on renewable generation and increased investments in demand

- side efficiency is

a dequately demonstrated because power companies and states across the country are effectively using each of the building blocks to cut emissions of carbon pollution and other dangerous air pollutants from fossil fuel

- fired power plants. Commenters said, the y agree with EPA that such a system is the "best" system as defined by the Clean Air Act because it has the potential to secure large reductions in carbon pollution at reasonable cost, and will provide companies and states with flexibility to manage energy requirements and identify the emission reduction pathways that are best suited to their particular circumstances.

Response 6: This comment is supportive of the overall approach the EPA is taking to the BSER and contains useful information that we incorpo rate into the record of this rulemaking.

Comment 7: A system that promotes increased use of fossil fuels does not adequately consider adverse environmental effects into account in setting BSER169 Commenters noted several court cases ( Essex Chemical and Sierra Club v. Costle ) in concluding that a system that promotes the increased use of fossil fuels and the future construction of more natural gas

- fired power plants with a useful life far exceeding the target date of 2030 (while also acknowledging that in creased use of natural gas will supplant investment in renewable energy sources) cannot constitute the "best" system of emission reductions as the courts have defined it.

Response 7: See section V.B of the final rule preamble of the CPP for an explanation of our basis for why the building blocks are adequately demonstrated and the requirements that will apply to the affected EGUs.

Comment 8: Commenters said that, BSER should be based on applications that have been adequately demonstrated and takes into acc ount the different sizes, types and classes of existing sources, as well as costs of control, physical limitations, geographical location and similar factors which make sub

- categorization appropriate.

Response 8: See section V.B of the final rule preamble of the CPP for an explanation of our basis for why the building blocks are adequately demonstrated and the requirements that will apply to the affected EGUs.

Comment 9 : Commenters stated that EPA has not met its statutory duty to provide reasonable and adequately demonstrated BSER, but instead imposes strict and infeasible emission limitations on states and their facilities. Commenters argued that by proposing "discretionary" building blocks, EPA is avoiding havi ng to provide a specific BSER that is both reasonable and adequately demonstrated. Accordingly, commenters argued that the EPA has not provided an adequate proposal for BSER for review and comment because the proposed rule does not provide an adequately de monstrated reasonable standard and leaves states and the public guessing at what emissions reductions are viable, adequate, and achievable.
Response 9 : See section V.B of the final rule preamble of the CPP for an explanation of our basis for why the buildi ng blocks are adequately demonstrated and the requirements that will apply to the affected EGUs.

Comment 10 : Commenters argued that the Proposed Rule with a broad definition of system exceeds EPA's legal authority under Section 111(d) of the CAA because t he EPA has failed to show that the proposed BSER has been "adequately demonstrated" and because the proposal lacks specificity as to the requirements that will ultimately apply to affected EGUs (and potentially other unidentified entities) under the final rule and adopted state plans.170 Response 10 : See section V.B of the final rule preamble of the CPP for an explanation of our basis for why the building blocks are adequately demonstrated and the requirements that will apply to the affected EGUs.

Comment 11 : Commenters asserted that the proposed BSER has not been adequately demonstrated.

Commenters stated, the EPA has not "adequately demonstrated' its proposed BSER to be reasonably reliable, reasonably efficient, and not exorbitantly costly. Commenters said , by choosing a BSER that requires a significant change in the generation mix for the nation as a whole (and Kansas in particular) the EPA has created incredibly complex legal issues over whether the EPA or each individual State ultimately determines wheth er the electric system is reasonable, reliable, and efficient. Commenters said, the EPA has failed to demonstrate that its BSER, using generation mix as its "system," is "adequately demonstrated" as required by CAA Section 111.

Commenters said, the EPA pr ovides no rigorous technical modeling or analysis demonstrating its BSER to be "reasonably reliable, reasonably efficient, and "reasonably" expected to serve the interests of pollution control without becoming exorbitantly costly in an economic or environm ental way." Commenters provided further technical analysis showing EPA's BSER is not "adequately demonstrated."

Commenters stated, the EPA demonstrates its lack of experience and technical knowledge of the electrical system, generation mix, and associated reliability issues by relying solely on the generic assertion that States have implemented measures similar to the EPA's building blocks. Commenters said, the EPA has completely failed to "adequately demonstrate" that its Clean Power Plan, as proposed, ens ures the electrical system in Kansas will continue to be "reasonably reliable, reasonably efficient, and can reasonably be expected to serve the interests of pollution control without becoming exorbitantly costly in an economic or environmental way."

Comme nters requested that the EPA withdraw the proposed guidelines and issue new guidelines that allow the southern states to establish policies that are in the best interest of the region and each of its states. Commenters said, the guidelines should (among ot her things) establish emissions guidelines based on adequately demonstrated systems that are fuel and technology specific.

Commenters stated, none of the individual Building Block goals set for West Virginia is "achievable." Commenters said this, alone, sh ould establish that the proposed system of emission reduction is not adequately demonstrated. Commenters said in addition, the comments provided below also illustrate significant flaws with EPA's reasoning in establishing these Building Blocks and the asso ciated goals, which preclude any conclusion that EPA's best system of emission171 reduction or any of its elements has been adequately demonstrated or that its emissions goals are achievable.

Commenters discussed cost. Commenters said, the FPSC contends that EPA's proposed BSER in its current form is unreasonable, extremely difficult to achieve both in scope and timeline, and should not be used to set an emissions performance requirement for Florida.

Commenters discussed adequately demonstrated. Commenters s aid, the proposed emission performance requirements for Florida are not based on a BSER that has been adequately demonstrated, as required by Section 111(d). Commenters said, an adequately demonstrated system is one that has been shown to be reasonably rel iable, reasonably efficient, and that can reasonably be expected to serve the interest of pollution control without becoming exorbitantly costly in an economic or environmental way. Commenters said, the EPA's basis for stating that its BSER analysis is ade quately demonstrated is that each of the building blocks may be well established in some, but not all states. Commenters said, this basis fails to take into account the Florida

- specific factors discussed throughout these comments. Commenters said, the disc laimer in the Notice of Rulemaking that none of the building blocks in the BSER "are being mandated, the states are free to use any compliance strategy" does not alleviate the FPSC's concerns.

Commenters stated, as a part of its analysis of the Proposed Ru le, the FPSC solicited comments from Florida's generating utilities and other interested persons. Commenters said, based in part on the responses, the FPSC believes that EPA's CO2 emission performance requirements for Florida cannot be met solely by increa sed efficiency of operating coal

- fired units, increased dispatch of natural gas

- fired electrical units, and decreased use of coal

- fired EGUs. Commenters said, the Proposed Rule would require Florida's utilities to attempt to implement all of the proposed b uilding blocks, despite the fact that these proposed requirements do not take into account Florida's specific policies and circumstances. Commenters said, therefore, the BSER has not been adequately demonstrated as an effective approach to achieve EPA's pr oposed emission performance requirements for Florida.

Commenters stated, the building blocks have not been shown to be adequately demonstrated for the State of Nebraska. Commenters said, the EPA has failed to show that the building blocks reflect an emissi on limitation which is achievable or adequately demonstrated in the state of Nebraska.

Commenters stated in promulgating the CPP and specifically the BSER (i.e., four "building blocks"), EPA essentially treats each individual state rather than the units a s "designated pollutants." Commenters stated this is an unprecedented departure from how EPA has historically developed emissions regulations, and the agency has not demonstrated that the building blocks are "adequately demonstrated" or achievable with rea sonable considerations of cost, as statutorily required.172 Response 11 : See section V.B of the final rule preamble of the CPP for an explanation of our basis for why the building blocks are adequately demonstrated and the requirements that will apply to the affected EGUs.

Comment 12 : Commenters stated, in its proposed rulemaking, EPA has cobbled together an amalgam of energy policies that individually and collectively dictate unlawful emission rate standards for existing fossil fuel

- fired EGUs that are not adequately demonstrated and are perhaps more costly than any other EPA rulemaking in the Agency's history. Commenters said, importantly, EPA's BSER analysis must be based on "adequately demonstrated" technology at a reasonable cost.

Commenters said, th at critical EPA assertion is simply false. Commenters said, the truth is vastly and vividly different. Commenters presented Table 1 (titled: "BSER Is Not Adequately Demonstrated"), which shows which of the fifty states met the EPA's four building blocks (C oal

Fleet Demonstrates 6% Net Emission Rate Improvement; NGCC Fleet Demonstrates 70% Capacity Factor in 2012; Renewable Generation Level Met EPA's Target in 2012; Demonstrates 1.5% Incremental Annual EE Savings in 2012).

Commenters stated, as shown in Tabl e 1, no state has enacted or undertaken all of EPA's so

called Building Blocks at the levels prescribed by EPA. Commenters said, even if the cited programs were in fact identical to a proposed EPA Block, which they are not, only six states have attempted o ne of the four blocks (and one of that number

- Vermont

- is not even subject to the program). Commenters said, only one state has undertaken two Blocks. Commenters said, two of the Blocks have never been undertaken in any state. Commenters said, forty

- fou r U.S. states have taken no action related to any of the four EPA Blocks. Commenters said, thus, seven different and unrelated efficiency and renewable efforts in relatively small states are being used to suggest that as many as 190 completely new state pr ograms dealing with coal unit efficiency, gas unit re

- dispatch, mandated energy efficiency, and renewable energy construction targets are a matter of routine regulation.

Commenters stated, when all 50 states have never attempted even half of an identified control program (Blocks 1 and 2) and 46 and 47 states, respectively, have not demonstrated Blocks 3 and 4, EPA cannot truthfully assert its "building blocks" are "adequately demonstrated" [or technically feasible in the case of Blocks 1 and 2] because they are each well

- established in numerous states." Commenters said, nor can EPA assert that its Building Blocks are "currently in use for achieving CO2 emission reductions from existing fossil fuel

- fired EGUs." Commenters said, in a regulatory setting with bi llions of dollars of assets and the livelihoods of millions at stake, it is beyond the bounds of even "arbitrary and capricious" behavior for an agency to assert enormously important and fundamental facts as true when they are demonstrably false.173 Response 12 : See section V.B of the final rule preamble of the CPP for an explanation of our basis for why the building blocks are adequately demonstrated and the requirements that will apply to the affected EGUs.

Comment 13 : Four building blocks operating togeth er as a system are not adequately demonstrated

Commenters said, EPA has assumed that it is sufficient to assert that the individual building blocks are adequately demonstrated. Commenters said, this does not satisfy EPA's requirement to show that its BSER determination is adequately demonstrated. Commenters said, because EPA defined BSER to be the combination of the four Building Blocks, EPA has the burden of showing that such combination, at the emission reduction levels EPA asserts are possible, is techni cally feasible

- and, more importantly, technically feasible while still assuring that the power sector can still meet its overarching obligation to provide reliable electricity to the public. Commenters said, EPA did not undertake this step, and instead s imply added the estimated reductions achievable from the individual building blocks without assessing the impact of the BSER Building Blocks on each other or the interconnected power system. Commenters said, the Agency's determination, therefore, is not co nsistent with the statutory criteria of adequate demonstration, technical feasibility, costs, emission reductions and reliability concerns for finding a system to be BSER.

Commenters stated, the result is that EPA has set state goals that are not demonstra ted to be achievable. Commenters said, EPA cannot have it both ways when it considers the interconnected power system: it cannot use the nature of the system to reach outside the affected fossil

- based facilities in order to drive more stringent emission re duction targets, but then ignore the interconnected nature of that system by asserting that its BSER determination is adequately demonstrated as a technical matter without ever assessing the impacts on the system. Commenters said, this raises legal questio ns as to whether the particular BSER EPA has proposed meets the statutory requirements under the CAA.

Commenters stated, the proposed guidelines do not demonstrate that the four Building Blocks meet the legal criteria for BSER under section 111(a) because the Agency has not demonstrated the Building Blocks can achieve the proposed state goals when operated together as a system of emission reduction that is compatible with the technical, cost

- effective, and reliable operation of the interconnected electric s ystem.
Commenters stated, in the very section of the proposed guidelines justifying BSER as the combination of the four Building Blocks, EPA primarily argues that the state goals meet the relevant criteria. Commenters said, in so doing, EPA relies signific antly on the flexibility it has provided to states by imposing only an emission goal and allowing the state to tailor application of emission reduction measures including but not limited to those that make up BSER. Commenters said, state flexibility to imp lement the emission limitation through other means is174 important, but cannot be a shield against insufficient analysis of the proposed BSER measures used to set the emission goal in being able to meet that goal for affected units or on a statewide basis. Co mmenters said, in every section 111 rulemaking, regulated units clearly have the flexibility to take measures other than the specific BSER technology EPA has determined is adequately demonstrated, and EPA cannot bar states from taking verifiable, demonstra ble and innovative measures to achieve reductions. Commenters said, it is EPA's responsibility, however, to evaluate the proposed BSER against the statutory criteria and determine that the BSER meets the statutory criteria. Commenters said, EPA has not don e so in the proposed guidelines.

Commenters stated, EPA's proposed guidelines fail to adequately consider whether these Building Blocks work together as a system of emission reduction that is compatible with the technical, cost

- effective, and reliable oper ation of the interconnected electric system. Commenters said, the proposed guidelines contain two short and largely repetitive sections ostensibly considering various combinations of the BSER blocks together. See 79 Fed. Reg. at 34,877

- 78 and 85. Commenter s said, however the discussion of these combinations is not sufficient. Commenters said, there is no analysis of the interactive effects of each of the Building Blocks when implemented together, nor is there analysis of changes in the cost of reductions or electric reliability impacts when the Building Blocks are combined. Commenters said, reliability impacts can have significant health and economic consequences that need to be included in the analysis.

Commenters stated, EPA assumes that each state can sim ultaneously expand significantly the usage of existing and under construction NGCC units, generate an increased quantity of electricity from renewable and nuclear power units, and avoid demand for electricity generation through end

- use energy efficiency pr ograms as part of BSER. Commenters said, that is, in calculating each state's goal as a combination of the Building Blocks, EPA has made implicit assumptions about the pace and timing of the future transformation of the electric system without considering practical constraints such as reliability obligations, natural gas pipeline capacity limits, competing demands from consumers for natural gas during the winter, delays in approving needed transmission infrastructure, among other practical considerations in implementing the proposed system.

Commenters stated, as courts reviewing EPA actions have explained, "an initial burden of promulgating and explaining a non

- arbitrary, non

- capricious rule rests with the Agency.... [B]y failing to explain how the standard proposed is achievable under the range of relevant conditions which may affect the emissions to be regulated, the Agency [will have] not satisfied this initial burden." Commenters said, this determination cannot be a "crystal ball inquiry."

Commenters sta ted, yet, the EPA's justifications for its interpretation that the four Building Blocks, taken together, constitute the "best...adequately demonstrated" system that achieves the reductions proposed by the Agency are cursory. Commenters said, by expanding B SER to include a system

- wide basis for regulation and determining potential reductions from fossil

based units, EPA commits itself to demonstrating that its BSER determination works in the context of that interconnected system. Commenters said, EPA has not done so, and the Agency's175 determination, therefore, is not consistent with the statutory criteria of adequate demonstration, technical feasibility, costs, emission reductions and reliability concerns for finding a system to be BSER.

Response 13 : See section V.B of the final rule preamble of the CPP for an explanation of our basis for why the building blocks are adequately demonstrated and the requirements that will apply to the affected EGUs.

Comment 14 : Commenters said, with regard to the alter native approach to BSER, EPA asserts that reduced utilization is "adequately demonstrated" because affected EGUs can "adjust their own generation," states can "impose requirements," and "other entities that operate in the various types of markets in the st ates can be expected to respond to the reduction in generation from the fossil

- fuel fired EGUs by undertaking the measures in the building blocks or other actions that would assure reliability." Commenters said, but this, to some extent, begs the question. Commenters said, EPA does not point to any state that is currently utilizing every building block, combined, in the manner and at the levels proposed in the Clean Power Plan. Commenters said, EPA does not point to any state that has imposed operating rest rictions on affected EGUs at the levels that would have to be imposed to meet EPA's proposed carbon intensity goals. Commenters said, EPA asserts that each building block, by itself, has worked in some state at some point, and thus assumes that they will w ork in combination. Commenters said, but an assumption is not a demonstration. Commenters said, EPA has not shown that either variation of its building block BSER is "adequately demonstrated." Commenters said, most notably, Regional Greenhouse Gas Initiati ve ("RGGI")

- the program EPA most heavily cites

- does not rely on the Agency's Building Blocks nor has that program demonstrated the level of reductions required by EPA.

Response 14 : See section V.B of the final rule preamble of the CPP for an explanati on of our basis for why the building blocks are adequately demonstrated and the requirements that will apply to the affected EGUs.

Comment 15 : Commenters asserted that the proposed BSER is not a product of "reasoned decision making," as defined by case la w.
Commenters stated, the proposed rule is prohibited because the Administrator's determination that the proposed BSER has been adequately demonstrated, as required by the CAA, is unfounded.

Commenters said, the court elaborated on this notion of reasonableness, stating: "in subjecting the Administrator's actions to judicial review we apply a test of reasonableness," and "our 'expertise' is not in setting standards for emission control but in determining if standards as set are the result of reasoned decision making.'" Id. at 434. Commenters said, reasoned decision176 making requires an agency to "examine the relevant data and articulate a satisfactory explanation for its action[s]." Motor Vehicle s Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983).

Commenters stated, EPA's proposed building block system is not the product of the necessary "reasoned decision making," as required by Essex, because EPA relies on flawed data, improp er modeling, and draws a conclusion not justified by the data. Commenters said, as a result, the state standards that EPA sets forth are not at all a reflection of real

- world conditions in a given state, but merely an amalgam of national projections applie d to that state's energy fleet. Commenters said, in employing this strategy, EPA has not exercised "reasoned decision making." Id.

Commenters added, in fact, in the proposed Modified and Reconstructed Source Rule, EPA specifically states that it believes t he most efficient generation technology available for large sources is SCPC and sets this technology as BSER for reconstructed sources. Commenters said, it makes no logical sense for the EPA to argue in one proposed rule that BSER is a single technology ap plied to a single source yet in another, related proposed rule, argue that BSER is a multitude of practices applied to a multitude of sources and non

- sources when both rules propose a standard of performance for the exact same pollutant.

Commenters added, EPA has created a system premised on the "integrated grid" and then torn off pieces, one by one. Commenters said, hydro, a zero

- emitting source like wind and solar, is not included. Commenters said, EPA includes some nuclear but not all of it. Commenters said, EPA includes non

- generation

- energy efficiency and demand response

- converting it to generation. Commenters said, but all of these contortions distort the initial determination that the integrated grid can be treated as a single unit. Commenters sa id, EPA's decision making process simply creates compliance risk, is not an incentive, and fails to set a compliance glide path for the states that is achievable.

Response 15 : See section V.B of the final rule preamble of the CPP for an explanation of our basis for why the building blocks are adequately demonstrated and the requirements that will apply to the affected EGUs.

As discussed in section I.A of the final rule preamble , the interim compliance period has been adjusted to begin in 2022, we have provided states with flexibility with respect to the glide path, and “early” emissions reductions achieved between 2012 and 2022 can be accounted for in demonstrating compliance.

Comment 16 : BSER for CO2 from Existing Power Plants Does Not Exist.

Commenters said, per section 111(d), states are to adopt ESPS for "particular sources." Commenters said, per EPA's 1974 and 1975 procedural regulations, ESPS apply to "designated pollutan ts" from "designated facilities." Commenters said, EPA has promulgated only five177 111(d) ESPS rules since Congress amended the CAA in 1970. Commenters said, in each case, following the Act's plain language and the implementing regulations, EPA required stat es to adopt ESPS for "designated air pollutants" from "designated facilities" (e.g. acid mist from sulfuric acid production plants). Commenters said, and in each case, BSER consisted of one or more facility

- specific technologies.

Commenters stated, from th ose elementary facts alone, the unlawfulness of the CPP is evident. Commenters said, economical technologies to capture or filter CO2 emissions from existing power plants do not exist. Commenters said, EPA claims partial CCS is the adequately demonstrated BSER for new coal power plants

- a highly dubious proposition, as explained above. Commenters said, but EPA acknowledges that retrofitting existing coal power plants with CCS is too costly to pass muster as "adequately demonstrated." Commenters said, EPA a lso states that CCS is not an economic technology for NGCC power plants.

Commenters stated, EPA, however, refuses to face the obvious implication of those assessments: There is no "adequately demonstrated" BSER for CO2 emissions from existing power plants. Commenters said, hence, the agency may not lawfully regulate CO2 emissions from existing power plants under section 111(d).

Commenters stated, the CPP unlawfully defines BSER as a wish

- list of 'green' energy policies. Commenters said, to improvise around the fact that "demonstrated" technologies to control CO2 emissions from existing sources are not available, the CPP proposes to define BSER as a mix of policies for changing how electricity is produced, managed, and consumed in each state.

Response 16 : S ee section V.B of the final rule preamble of the CPP for an explanation of our basis for why the building blocks are adequately demonstrated and the requirements that will apply to the affected EGUs.

Comment 17 : Commenters stated, Building Block 2 assumes that all existing NGCC units can achieve a capacity factor of 70%. Commenters said, this assumption is based on historical 2012 data which showed that a specific subset of natural gas combined cycle power plants operated at a capacity factor of 70% or gre ater. Commenters said, this too is an erroneous assumption to extrapolate to all NGCC units. Commenters said, it is not accurate to assume that all NGCC units can operate at this capacity factor because of the impact of outside variables such as natural ga s availability that can affect this percentage.

Commenters stated, Building Block 3 includes renewable energy goals that are theoretical because they are based upon regional averages instead of a state's actual capabilities. Commenters said, in addition, the inclusion of under construction nuclear is not treated in the same manner as renewables. Commenters said, EPA categorizes both nuclear and renewables as options that are less

- carbon intensive generating capacities. Commenters said, however, EPA178 conside rs future aspects that could impact renewables but does not include a similar assessment when including nuclear under construction.

Commenters stated, these points reveal that BSER has not been "adequately demonstrated". Commenters said, to be adequately demonstrated means that these systems for emission reductions have in some manner shown measurable reductions in emissions previously. Commenters said, while it is obvious that Energy Efficiency programs do reduce energy demand, there has been no approved method for quantifying these reductions.

Commenters said that EPA failed to adequately demonstrate that co

- firing with natural gas at coal

- fired EGUs represents BSER. Commenters stated, "effective" RE generation in 2020 is an estimated value by EPA and ha s not been "adequately demonstrated" as required within the BSER definition.

Response 17 : See section V.B of the final rule preamble of the CPP for an explanation of our basis for why the building blocks are adequately demonstrated and the requirements t hat will apply to the affected EGUs.

Comment 18 : Commenters said historical, an individual measure, or even collective measures, does not demonstrate that the collective measures are technically feasible in the specific manner EPA prescribes or at the le vels EPA assumes. Commenters said that if Congress intended the required analysis to be so simplistic, then there would be no need for regulation at all, because the regulation would do no more than codify what is already in practice.

Commenters said that, EPA's proposed rule goes far beyond how these measures are used in practice today, and EPA cannot merely point to historical use to prove the feasibility of its proposed system. Commenters said EPA's analysis fails to show the regulation is technically fe asible.

Commenters said that, EPA has not demonstrated that its BSER is technically feasible, because it has not shown that the natural gas infrastructure is capable of meeting the natural gas demand.

Commenters said that, EPA asserts that Arizona can sw itch all electrical demand currently met with coal

- fired EGU's to existing NGCC capacity to meet Arizona's interim goal by 2020. Commenters said that such a large shift in capacity will require natural gas infrastructure improvements, and EPA does nothing more than quote past history on the rate of pipeline expansion in the U.S. to justify the technical feasibility of meeting an increased natural gas demand in Arizona and throughout the U.S. Commenters said while history can be instructive, the mere fact th at it was done before, cannot prove that it can be done again. Commenters said EPA's analysis is conclusory and fails to address numerous aspects of the technical feasibility of such a large supply shift.179 Commenters said that first, even assuming that infrastructure improvements are feasible, EPA fails to provide any information on the time needed to obtain rights of ways and permit authorizations, to conduct environmental assessments, and to obtain bank fi nancing, etc. before actual expansion can begin. Commenters said that these delays will hinder or prevent industry from meeting an increased natural gas demand on EPA's timetables.

Commenters said that, second, with regards to its IPM feasibility modeling , EPA used 2012 utilization rates to model the capacity in the system for supply shifts. Commenters said that 2012 was the lowest utilization rate in the past 10 years, and is not representative of an electric utility system under full demand load. Comment ers said that, EPA's reliance on the modeled outputs does little to prove its theory.

Commenters said that, third, EPA bases its NGCC capacity analysis on the fact that NGCC operate at higher levels at certain times, and assumes that it could operate in a sustained fashion at this level without risks to pipeline or transmission capacity. Commenters said that, the pipeline capacity is a delicate balance of storage and peak shaving and because a demand level is met during a certain hour of the day, potential ly through peak shaving and linepacking, does not provide evidence that the transmission system can sustain this level of capacity for prolonged periods.

Commenters said that, fourth, EPA does nothing more than provide EIA data on current pipeline capaciti es in the U.S. without providing any information on the amount of residual capacity or the capacity necessary to meet EPA's 70% national NGCC capacity load shift; and, EPA certainly does not show that capacity exists to handle the load shift in Arizona. Co mmenters said that actual available capacity may be far below 100% of named capacity due to bottlenecks in the system. Commenters said despite the enormous complexity of the system, there was no evidence in the docket that EPA even consulted with FERC, US DOT Office of Pipeline Safety, or the Arizona Corporation Commission (ACC) agreed with EPA's assumptions. Commenters said that EPA also fails to consider any other infrastructure expansion needs such as trunklines, compressor stations, peaking storage, etc

. Commenters said that, without conducting a thorough assessment of the actual capacity expansion required to meet EPA's projected demand shift, and the time required to build this capacity, EPA failed to show that its proposed BSER is technically feasible

. Commenters said that EPA has not demonstrated that its BSER is technically feasible, because it has not shown that its building blocks achieve continuous emissions reductions.

Commenters said that, EPA's approach of citing "historical use" to show tech nical feasibility of its "system" lacks an essential link to the requirement that the standard of performance reflect an emission limitation "a limit on the quantity, rate or concentration of emissions of air pollutants on a continuous basis" 42 U.S.C 7602 . Commenters said a technology may be technically feasible with regards to producing some degree of emissions reduction, it may not be technically feasible as a means to generate continuous emissions reduction. Commenters said that, since the180 CAA requires continuous emissions reductions, EPA must consider technical feasibility in this
context.
Commenters said that, EPA readily admits that "renewable EGUs such as wind and solar units" generally operate when wind and sun conditions permit rather than at oper ators' discretion. Commenters stated through this admission, EPA demonstrates the technical infeasibility of renewable energy to serve as a continuous emission reduction measure. Commenters said that this is because the measure cannot provide a continuous assurance of emissions reductions and it can only reduce emissions when operating; it can only operate when weather conditions are favorable. Commenters said that the DC Circuit held that a measure must be "reasonably reliable," and in the context of a req uirement for "continuous" emissions reductions, renewables lack this reasonable reliability because the amount of emissions reductions expected from the measure vary over time, and a State cannot reliably quantify the emissions reduction in advance.

Commen ters said that, the demand

- side management lacks "reasonable reliability" of generating continuous emissions reductions. Commenters said that Building block 4 would rely on supply side decreases in electricity demand to generate emissions reductions. Comme nters said that, many demand

- side changes are temporal in nature. Commenters said that a residential customer might agree to maintain a household thermostat at 68 degrees during winter months, but this "reduction" is dependent on external temperatures and the length of the winter season. Commenters said that this same customer could, in fact, fail to manage energy use during other months and negate any benefits gained during winter months. Commenters said that an industrial customer might agree to reduce pr oduction during high demand periods, but the "reduction" only lasts for the time of the high load demand. Commenters said that while these measures are effective in creating emissions reductions, the reduction is temporal and lacks the permanency and predi ctability to make the measure "reasonably reliable" for purposes of establishing a section 111 emission standard guideline.

Commenters said that, EPA assumes that the demand side reduction will reduce "fossil fuel" EGU demand, but without mapping the entir e electrical system, EPA lacks the accountability to know whether the reduced demand results in actual reductions from a fossil fuel fired EGU or some other form of energy generation. Commenters said that, given the integrated nature of the electricity gri d, EPA is unable to determine if a demand

- side measure implemented will affect electric demand from utilities. Commenters said that, EPA has not demonstrated that block 4 measures are technical feasible in the sense of creating reliable and continuous emis sions reductions from fossil fuel EGUs.

Response 18 : See section V.B of the final rule preamble of the CPP for an explanation of our basis for why the building blocks are adequately demonstrated and the requirements that will apply to the affected EGUs.181 Comment 19 : EPA's approach to under construction nuclear violates CAA section 111(d).

Commenters stated while nuclear power has been demonstrated to be a proven source of safe, affordable, reliable, and clean energy, the EPA has provided no support in th e record for its conclusion that these under construction nuclear units are already "adequately demonstrated" as that statutory term is intended in the special context of section 111(d). Commenters said the five under construction nuclear power units do not even fall within the interpretation of "adequately demonstrated" set forth in the EPA's own legal memorandum accompanying the NPRM, which states: "the measures in each of the building blocks are 'adequ ately demonstrated' because they are each well

- established in numerous states, many of them have already been relied on to reduce air pollutants, including CO2, from fossil fuel

- fired EGUs and, as noted, they may be undertaken by the affected EGUs or, in g eneral, required by the states." Commenters stated t his legal test, set forth by the EPA, is not met by the five units at issue. Commenters stated l ater in the same legal memorandum, the EPA offers a somewhat different interpretation of "adequately demonst rated," asserting the measures in building blocks 2, 3, and 4 are "adequately demonstrated" because "they have already been implemented in many states, and because they may be undertaken by the affected EGUs in the regulated markets in which they operate, or may be implemented by the states in the state plans." Commenters said n onetheless, the five units that remain under construction do not meet this test either, as they have not "already been implemented in many states," nor have they been "undertaken by the affected EGUs in the regulated markets in which they operate." Commenters stated it is quite revealing that the section of the EPA's legal memorandum detailing the "basis for adequately demonstrated finding" fails to even mention nuclear energy or thes e five specific units that are under construction.

Response 19 : See section V.B of the final rule preamble of the CPP for an explanation of our basis for why the building blocks are adequately demonstrated and the requirements that will apply to the affec ted EGUs.

Comment 20 : Approaches taken by states and power companies reflect the integrated nature of the power sector Commenters stated, the best system of emission reduction identified in the Clean Power Plan reflects the approaches taken by states and power companies across the country to reduce carbon and other harmful air pollutants use mechanisms that reflect the integrated nature of the power sector. Commenters said, across the country, states and companies are taking system

- based approaches to achi eve carbon pollution reductions, with a long track record of successful implementation. Commenters said, these programs are cost

- effective and enable significant reductions because they take advantage of the unique opportunities for emission reductions pro vided by the interconnected electric grid. Commenters said, in fact, proven techniques for controlling GHGs that approach EGUs as part of an integrated system are the dominant approach for controlling EGU emissions of GHGs.

Commenters stated, one of the mo st widespread and oldest approaches for states to reduce power sector emissions is the Renewable Portfolio Standard (RPS). Commenters said, as captured in the182 following chart, twenty

- nine states and the District of Columbia have enacted RPSs, beginning in 1983. Commenters said, in many of these states, RPS requirements have been in force for ten or more years. Commenters said, there is also significant variation in program design among the RPS; states have made different decisions about key RPS features, su ch as resource eligibility, the program target, set

- asides, and flexibility mechanisms. Commenters said, the long experience with different kinds of RPS has allowed policymakers to understand best practices for RPS design. Commenters said, in particular, t he best practices guide states in developing programs that are enforceable, consistent with the structure of the electricity market, socially beneficial,
cost

- effective, flexible, and predictable. Commenters said, RPS have had a significant impact on GHG e missions from the power sector. Commenters said, several RPSs are slated to become even more stringent in coming years, leading to even greater reductions.

Commenters provided Figure 1 (titled: "Timeline of RPS Enactment and Initial Requirements"), which illustrates RPS enacted timeline for States, including year of first requirement by State; the figure also illustrates when major RPS revisions were made by State.

Commenters stated, several studies have documented the ability to expand on these historical successes by integrating much more renewable energy on the grid. Commenters said, a recent study of the PJM system found that it will not have any significant issues operating with wind and solar generation providing up to 30% of its energy. Commenters sa id, in every scenario examined, integrating renewables into the PJM system would lead to lower operation and maintenance costs and a lower locational marginal price of electricity (which reflects the cost of generation and transmission), while reduction in CO2 emissions relative to business as usual would range from 12% to 41%. Commenters said, a study commissioned by the Minnesota Department of Commerce and conducted in coordination with the Midcontinent Independent System Operator (MISO) has found the sta te of Minnesota could obtain 40% or more of its electricity from wind and solar energy without suffering any grid reliability issues. Commenters said, accordingly, grid operators around the country are poised to duplicate the success of the RGGI region, wh ich demonstrated the ability to dramatically increase its use of renewable generation while maintaining grid reliability.

Commenters stated, another well

- demonstrated state policy for reducing GHG emissions from the power sector as a whole is the energy e fficiency resource standard (EERS). Commenters said, currently, twenty states have an EERS and an additional seven states have energy efficiency goals. Commenters said, as with RPSs, states have taken a variety of approaches in designing EERSs that meet sp ecific state needs. Commenters said, key policy

- design elements include the stringency of the standard, flexibility mechanisms, and methodology for measuring savings. Commenters said, almost all the current EERSs were enacted five or more years ago. Commen ters said, over this time, these policies have proven to be an achievable means of reducing emissions from the power sector. Commenters said, and the diversity of EERS design has allowed stakeholders to analyze best practices. Commenters said, the Institut e for Electric Innovation recently found that if rate

- payer funded energy efficiency programs continue to grow at trend, they will reduce total U.S. electricity use by 5.9% by 2025.183 Commenters stated, energy efficiency programs are especially suitable for wide

- scale deployment because they present an enormous opportunity for cost

- savings. Commenters said, investments made to meet state energy efficiency targets regularly save customers over $2 for every $1 invested, and in some cases up to $5. Commenters s aid, for example, the largest utility in Minnesota, Xcel energy, reported that its energy efficiency programs in 2012 alone would provide a net benefit of $376 million to its electricity customers. Commenters said, across the country, there are many money

- saving energy

- efficiency opportunities that are yet to be realized. Commenters said, in 2010, National Academy of Science reported that full deployment of cost

effective energy

- efficiency technologies in buildings would eliminate the need to add new
genera tion capacity. Commenters said, this study identified opportunities to reduce power consumption in residential and commercial buildings that (together) would save over 1,200 TWh in 2030 and yield a return on investment in less than three years. Commenters said, another recent report identified building retrofit opportunities with the potential to mitigate more than 600 million metric tons of CO2 per year, returning more than one trillion dollars in energy saving over ten years on a $279 billion dollar inves tment. Commenters said, the many opportunities for reducing power

- sector emissions through energy efficiency give states a range of well

- demonstrated options for inclusion in their state plans.

Commenters stated, where energy efficiency resources compete on the market, it is clear that they are a cost

- effective way to meet consumer needs while reducing power

- sector GHG emissions. Commenters said, over the past decade, efficiency has remained the least

- cost electricity option; with an average cost of 2.8 ce nts per kilowatt hour, energy efficiency programs are about one

- half to one

- third the cost of new electricity generation options. Commenters said, in some regions, efficiency is beginning to feature in forward capacity markets directly competing for the ri ght to meet the capacity needs of the electric grid. Commenters said, comparing the cost of energy efficiency and affected

- source generation in this context clarifies the interconnected nature of the electric system and the appropriateness of taking a syst em

- based approach to reducing GHG emissions from EGUs.

Commenters stated, individual states have crafted strategies for reducing power

- sector emissions that combine several tailored policies. Commenters said, in Colorado, emissions reductions are being driven by the Clean Air

- Clean Jobs Act, an energy effici ency standard, and a renewable energy standard. Commenters said, the Clean Air

- Clean Jobs Act required Colorado's utilities to propose plans for achieving integrated multi

- pollutant reductions from coal

- fired power plants, prompting utilities like Xcel E nergy design systems

- based plans that shift generation to cleaner sources. Commenters said, the Act has enormous public health benefits and is expected to create about 1,500 jobs during the construction of cleaner facilities. Commenters said, Illinois also has a unique suite of policies with proven results; Illinois has an energy efficiency standard that requires utilities to save two percent of electricity annually by 2015 and reduce rate

- payer spending, an RPS that requires 25 percent of electricity to co me from renewables by 2025 and drives a booming local economy in wind energy, and has required any new coal

- fired power plants to capture and store some of their carbon emissions.184 Commenters stated, the nine states participating in the Regional Greenhouse Gas Initiative (RGGI) have already demonstrated that a systems

- based approach to reducing power sector GHG emissions can achieve vast reductions with economic benefits. Commenters said, since 2005, the RGGI states have reduced their power sector CO2 emiss ions by 40 percent, while the regional economy has grown 7 percent. Commenters said, the RGGI states now have nearly six years of experience with a fully operational carbon market. Commenters said, even during the first three years of the RGGI cap

- and

- trad e program, the mandatory system had been functioning properly and seamlessly introducing a carbon price into the electricity market. Commenters said, experience with RGGI demonstrated that not only that the initial system

- wide targets were achievable, but that even more ambitious targets were within reach: in 2013, the RGGI states lowered the program' emissions cap by 45 percent, starting in 2014.

Commenters stated, RGGI's enormous economic benefits demonstrate that integrating energy efficiency into power

- sector GHG

- reduction is not just available, but an economic boon. Commenters said, during the first three years of its cap

- and

- trade program, RGGI added $1.6 billion in economic value to the ten

- state region. Commenters said, in general, this positive imp act results from the injection of carbon

- allowance revenue into the economy and consumer savings on energy. Commenters said, during this three

- year period, RGGI state investments in energy efficiency created about 16,000 "job years." Commenters said, elect ricity consumers (including households, businesses, government users, and others) saved nearly $1.1 billion overall because investments in energy efficiency lowered prices, outweighing some near

- tern increases in electricity prices.

Commenters stated, RGG I also demonstrates that systems

- based approaches to reducing power sector emissions can boost local economies

- even in states that heavily rely on coal

- fired generation. Commenters said, in the first three years of the RGGI cap

- and

- trade program, every RGG I state experienced net positive benefits from RGGI and job growth. Commenters said, the states in the more coal

- reliant PJM region

- Delaware, Maryland, and New Jersey

- added $341 million in value and 3,676 job years. Commenters said, consumers also realized significant bill savings in these three states, as longer term savings in electricity and energy bills offset the minor increases (0.7 percent) in electricity bills during 2009

- 2011. Commenters said, RGGI states may be able to improve upon this impressive track record in the future, as the first three years of the program provided an important opportunity for identifying best practices for using allowance revenue and designing energy efficiency programs.

Commenters stated, another part of RGGI's success h as come from shifting from high

- emitting to lower

- emitting sources of generation. Commenters said, from 2005 to 2012, coal

- fired generation declined from 23% of the regional generation mix to 9%. Commenters said, in the same period, the share of natural ga s

- fired generation rose from 25% to 44%. Commenters said, between 2005 and 2012, the RGGI states also increased in

- region, non

- hydroelectric renewable generation by 47 percent. Commenters said, this dramatic growth in renewables is driven by a combination of complementary policies: RPSs, net metering tariffs, long

- term contracting, the establishment of "Green Banks," innovative green financing mechanisms, and renewable energy185 technology grant programs. Commenters said, these shifts in generation were able t o occur without any disruption to consumers because the power sector functions as an integrated system.

Commenters stated, when utilities have designed GHG reduction programs, they too have adopted successful systems

- based approaches. Commenters said, thes e approaches vary widely, but generally combine a shift toward lower

- emitting generation with increased energy efficiency. Commenters said, the following examples illustrate the GHG reduction strategies that have been successfully demonstrated on the groun d:

- In 2001, Entergy set a goal of stabilizing GHG emissions for its power plants at 2000 levels through 2005 and, after achieving its initial goal, the company strengthened its goal to stabilize emissions at 20 percent below 2000 levels. Entergy was succe ssful, in part, due to upgrades and efficiency improvements at existing facilities.

- Public Service Enterprise Group (PSEG) set a goal of reducing its GHG emissions by twenty

five percent and achieved its goal in 2011, 14 years ahead of schedule. PSEG's m ulti

- pronged efforts include deploying energy efficiency, increasing nuclear power output, building efficient natural gas plants, and investing in renewable energy production. From 2000

- 2011, PSEG increased electricity generation by 37 percent while simult aneously reducing its CO2 emissions rate 24 percent.

- From 2000

- 2011, NextEra Energy's CO2 emissions rate declined by approximately 40 percent while its power generation increased by almost 90 percent. This achievement has been mainly driven by greater en ergy efficiency in its generation facilities and its large renewable portfolio. One of NextEra Energy's subsidiaries is also a leader in demand

- side management.

- In 2008, Exelon set a goal of abating 15.7 million metric tons of GHG emissions by 2020 (the equivalent of its total GHG emissions in 2001 and then increased) and increased its abatement goal to 17.5 million metric tons after its 2012 merger with Constellation Energy. Exelon has already exceeded its revised goal through a combination of measures. Exelon achieved more than half of its goal by increasing production at existing nuclear plants through updates and other operation efficiency, reducing the need for fossil

- fired generation. The second most significant source of Exelon's reductions were pro grams that helped its customers use electricity more efficiently.

Commenters stated, municipal utilities have also had proven success with systems

- based approaches to reducing power sector GHG emissions. Commenters said, CPS Energy, the nation's largest m unicipally owned electric and gas utility, has reduced its CO emissions rate by seven percent from 2000

- 2011, as power generation increased 36 percent. Commenters said, while CPS Energy maintains a diverse electricity mix that includes wind, solar, natural gas, coal, and nuclear, it has achieved substantial emissions reductions by deactivating two older coal units, increasing renewable generation, and implementing energy efficiency programs. Commenters said, the utility is also on track to reach its ambitio us energy

- saving goal

- 771 MW of electricity by 2020

- through a program that includes rebates for rooftop solar power,186 commercial lighting and HVAC retrofits, free energy efficiency measures for low

- income households, and new home construction. Commenters sa id, Austin Energy, the eighth largest public power utility in the United States, has implemented demand

- side management (DSM) programs since 1982. Commenters said, in total, Austin Energy's energy efficiency programs have saved about 1.8 billion kWh since 1982. Commenters said, Austin Energy's combination of DSM and increased renewable generation has allowed it to serve a rapidly growing population without increasing its CO2

- emitting generating capacity over the past 20 years.

Commenters stated, one of the most common ways that electric utilities structure their analysis of options for reducing GHG emissions is by considering a carbon price in an Integrated Resource Plan (IRP). Commenters said, a 2011 study of best practices in integrated resource planning that examined the IRPs of fifteen utilities operating across the United States found that carbon costs were among the variables most commonly considered in assessing available portfolio strategies. Commenters said, accordingly, the study determined that on e of the "key components" of integrated resource planning was "[a] Portfolio Strategy Assessment evaluat[ing] the cost / risk tradeoff of potential strategies as natural gas prices and carbon costs varied." Commenters said, this component was present, for example when an IRP identified alternative mixes of supply

- side resources with comparable reliability and then "[c]onducted Monte Carlo analysis assessing total supply cost for each portfolio over the twenty ear planning horizon with varying gas and carbon prices." Commenters said, an in

- depth 2008 study of the IRPs of fifteen utilities in the Western United States (accounting for about 60% of retail electricity sales in the West) illustrates the varying methodology for considering carbon costs. Commenters said, all but one of the fifteen utilities in the sample incorporated a future carbon tax or cap

- and

- trade system into their portfolio analysis, confirming that consideration of carbon costs in IRPs is common practice. Commenters said, but crucially, "[e]l even of fifteen utilities included carbon emission prices in their base

- case scenario, thereby affecting their choice of preferred portfolio, to the extent that the choice was based on a comparison of candidate portfolios "expected costs." Commenters said, analyzing scenarios with different carbon prices allows the utilities to reduce risk by shifting from high

- emitting sources to lower

- generating sources. Commenters said, "based on the results under its high carbon price scenario, PSCo selected a preferred portfolio that replaces four existing coal

- fired units (~200 MW nameplate capacity) with a new CCGT." Commenters said, for a variety of economic and compliance reasons, utilities are shifting toward renewable generation and energy efficiency to meet consu mer needs. Commenters said, in addition to IRPs, utilities can consider carbon costs in any investment decision framework. Commenters said, National Grid factors a social cost of carbon of about $50 per ton of CO into all capital project decisions.

Commen ters stated, regardless of what factors are driving power company choices, their decisions to shift from high

- emitting generation to lower

- emitting generation demonstrate the availability of this GHG

- reduction option. Commenters said, power companies that once met a majority of customer demand with coal

- fired generation have drastically reduced their reliance on coal. Commenters said, for instance, in 2005, Southern Power and its affiliates generated over 60 percent of their electricity from coal and 10 per cent from natural gas. Commenters said, in187 2013, Southern Power generated about 40 percent of its power from coal and 34 percent from natural gas.

Commenters stated, in addition, there are numerous demonstrated systems

- based approaches for reducing criter ia pollutant emissions from EGUs. Commenters said, perhaps most notably, Title IV of the Clean Air Act established a successful market

- based program to control EGU emissions that contribute to acid rain, setting a permanent cap on the total amount of SO2 t hat may be emitted by EGUs nationwide. Commenters said, states and local governments also implement energy efficiency programs to improve local air quality as part of the SIP process. Commenters said, these programs are effective because decreases in elect ricity demand reduce EGU emissions through the interconnected electricity system. Commenters said, further, since 1998, each of EPA's rules to address the interstate transport of pollution from EGUs has incorporated energy efficiency compliance options; of these, the NOx SIP Call also provided a renewable energy compliance option. Commenters said, taken together, these EPA and state programs have long demonstrated the ability of systems

- based approaches to reduce power sector emissions, while providing flex ibility and reducing compliance costs.

Response 20 : This comment is supportive of the overall approach the EPA is taking to the BSER and contains useful information that we incorporate into the record of this rulemaking, although we are not finalizing the measures in building block 4 as part of the BSER.

Comment 21 : Commenters stated that City Utilities does not feel EPA has adequately shown that the nation's energy infrastructure (both primary and secondary) is capable of accommodating the sweeping changes in the time frame dictated. Commenters said this is an integral factor in establishing that the technological "system" ensconced by the proposal is adequately demonstrated.

Response 21 : We disagree with commenters. For a comprehensive discussion o f our basis for why the building blocks are adequately demonstrated and the requirements that will apply to the affected EGUs , please see preamble section V. B. and the GHG Mitigation Measures TSD

.

Comment 22 : EPA Cannot Arbitrarily Define BSER to Signific antly Curtail or Retire Existing Lignite

- Fueled Electric Generating Units

Commenters stated that EPA identifies four building blocks which it characterizes as "adequately demonstrated" because "they are each well

- established in numerous states ...." Commen ters said there are several underlying assumptions regarding the use of the building blocks that prevent EPA from stating that they have been "adequately demonstrated," including:1) EPA's assumption that electrical power is fully fungible across the grid s uch that any generating source can freely supplant generation from another; 2) the ability of states to "require" the construction of new energy sources and transmission infrastructure at will; and 3) the ability of industry to build and188 install the necess ary new infrastructure. Commenters cited description in EPA's Legal Memorandum:

"All of these measures [the four building blocks] are components of a 'system of emission reduction' for the affected EGUs because they either improve the carbon intensity of t he affected EGUs in generating electricity or, because of the integrated nature of the electricity grid and the fungibility of electricity and electricity services, they displace or avoid the need for generation from those sources and thereby reduce the em issions from those sources. Moreover, those measures may be undertaken by the affected EGUs themselves and, in the case of building blocks 2, 3, and 4, they may be required by the states."

Commenters stated that the LEC submits that none of the four build ing blocks have been adequately demonstrated in the Proposed Rule, and are likely not achievable in the time frames required by EPA. Commenters said that while EPA will receive detailed comments from LEC members and other parties with which the LEC is alig ned, the LEC summarizes certain concerns pertaining to the EPA building blocks further in the attached technical comments.

Commenters stated that the LEC strongly disagrees with EPA's underlying assumption about the fungible nature of electricity because i t is not accurate. Commenters said as a consequence, EPA's underlying assumption that power from coal

- fueled EGU's can always be replaced with renewables or natural gas because electricity across the grid is fully fungible is not true. Commenters said it i s not adequate to assume, as EPA does, that new power generation and transmission infrastructure can be built to comply with the Proposed Rule because "the states can require it." Commenters said that nowhere in EPA's Proposed Rule or supporting documentat ion is there an analysis of state law supporting the assertion that all fifty states can compel generating entities to construct, site, locate, build, operate and maintain new power sources to replace load lost from existing EGU's. Commenters said that if electricity is not fully fungible, and if actual transmission barriers exist, providers may have no reasonable alternative but to retire lignite

fueled generation assets and leave gaps in the grid that no other party is reliably able to fill at reasonable cost.

Response 22 : We disagree with th ese comment s . We explain in section V.B of the final rule preamble of the CPP why building blocks 1, 2, and 3 qualify as the BSER (and why we are not relying on building block 4 as part of the BSER). The GHG Mitigation Measures TSD also includes a comprehensive discussion of the building blocks. We also explain in the preamble and supporting documents that affected EGUs are able to implement each of the building blocks and that the rule will not adversely affect reliab ility. Finally, a s we explain in sections V.A. and V.B. of the preamble, our emission guidelines simply reflect an achievable emissions limit through the application of the BSER and do not in themselves require states or sources to implement the BSER. That is, EPA is responsible for determining the level of emission limitation from the source category, while states have the responsibility of assigning emission requirements to their sources that will ensure their achievement of that level of emission limitat ion. States may fulfil their responsibility by establishing emission standards or creating plans consistent with the guidelines. In doing so, states will be able to choose from a wide range of emission reduction189 measures, including measures that are not pa rt of the BSER. No state is required to order an entity that it does not have authority over to construct, site, locate, build, operate and maintain new power sources to replace load lost from existing EGU's.

Comment 23 : BB2, BB3, BB4 not adequately demonstrated

Commenters stated, any standard of performance under section 111 of the CAA must be achievable for individual sources based on measures implemented at the source itself. Commenters said, currently, the only avail able measures that meet this requirement and that have been adequately demonstrated are certain heat rate improvement measures described as part of Building Block 1 in this rulemaking. Commenters said, if EPA is not satisfied with the CO2 emission reductio ns that would be available from basing an emission guideline on these measures, then the Agency should postpone this rulemaking in order to provide more time for research, development, and commercial demonstration of other CO2 emission control technologies that could achieve greater reductions. Commenters said, additional time may allow EGU owners to develop and refine new methods of reducing CO2 emissions at reasonable cost in a way that can be translated to the source category as a whole. Commenters said, the appropriate way to foster such innovation is by providing an environment of regulatory flexibility, not by subjecting sources to overly stringent emission control requirements that discourage investment and experimentation with new and unproven contro l technologies, as the Agency proposes to do here.

Response 23 : We agree with this comment insofar as it states that building block 1 measures are adequately demonstrated. However, w e disagree with the remainder of this comment. We explain in section V.B of the final rule preamble of the CPP why building blocks 1, 2, and 3 qualify as the BSER (and why we are not relying on building block 4 as part of the BSER). We also explain in the preamble and supporting documents that affected EGUs are able to impleme nt each of the building blocks and that the rule will not adversely affect reliability

. As noted in section I.A of the final rule preamble, the interim compliance period has been adjusted to begin in 2022, we have provided states with flexibility with resp ect to the glide path, and “early” emissions reductions achieved between 2012 and 2022 can be accounted for in demonstrating compliance.

1.10.5 The EPA's discretion in applying the criteria for the best system of emission reduction

Comment 1: Case law shows that BSER should be technology forcing190 Commenters listed case law interpreting language in the context of section 111(b), and noted that Courts have listed a number of factors EPA must consider in setting BSER and standards of performance. Commenters argued that first, EPA must ensure that it has chosen emissions limitation constitutes the "best" system in terms of the amount of emission reductions accomplished in light of other statutory considerations. "We can think of no sensible interpre tation of the statutory word[] 'best' which would not incorporate the amount of air pollution as a relevant factor to be weighed when determining the optimal standard." Sierra Club v. Costle , 657 F.2d at 326. Commenters argued that the primary goal of the NSPS program is not merely to maintain air quality, but also to improve it. ASARCO v. EPA , 578 F.2d 319, 327 (D.C. Cir. 1978), and that, according to the D.C. Circuit, the "essential purposes" of the Clean Air Act include "reducing emissions as much as pra cticable." Sierra Club v. Costle , 657 F.2d at 326; see also Essex Chemical Corp . 486 F.2d at 437. Thus, concluded the commenters, whether the Proposed Rule actually does reduce carbon pollution from existing power plants as much as practicable is a central line of inquiry.

Commenters argued that, second, BSER under section 111(b) and (d) must be technology

forcing. Commenters noted that the D.C. Circuit pointed out a significant distinction between "system" and "standard," stating that "[i]t is the system w hich must be adequately demonstrated and the standard which must be achievable." Commenters stated the court clarified that an achievable standard need not be "routinely achieved within the industry," but must be "within the realm of the adequately demonst rated system's efficiency." Essex Chemical Corp ., 486 F.2d at 433

- 4 (D.C. Cir. 1973).

Commenters argued that according to this reasoning, in Portland Cement v. Ruckelshaus , the D.C. Circuit dismissed cement industry groups' claims that section 111 emissio ns limitations cannot be "adequately demonstrated" unless cement plants already in existence are capable of meeting them. Commenters said that under Portland Cement and Essex, EPA may select as a system "a projection based on existing technology," restrain ed only by "the time in which the [projected] technology will have to be available," and then set a standard that is achievable, or technically feasible, for that system which, again, does not mean that any plant now in existence must be able to meet it. S ee Essex Chemical Corp ., 486 F.2d at 434. Commenters argued that BSER, in short, must be based on the agency's projections for future equipment, rather than an analysis of whether the system is presently in widespread use, and also cited Sierra Club v. Cos tle , 657 F.2d at 326.

Commenters argued that EPA has not followed this precedent because, instead of selecting as BSER a system of emission controls based on what may fairly be projected for the regulated future and then setting a standard achievable by th at projected system, EPA has built a requirement of present "technical feasibility" into the selection of the system itself, and then set a standard based on the average capability of that system.

Response 1: We discuss our interpretation of section 111(a) (1) and BSER in the preamble. Our interpretation that the system of emission reduction must be technically feasible is consistent with the case law and the fact that the emission performance level in the emission guidelines,191 which is based on the BSER, mus t be achievable by the affected sources. We recognize that under the D.C. Circuit case law, the BSER must be technology forcing but this does not mean that the BSER is not also required to be technically feasible. We explain in the preamble the different w ays that Congress and the case law have indicated that technology can be advanced.

Comment 2: BSER May Be Technology

- Forcing

Commenters argued that a BSER determination that is technology forcing would be valid for existing sources.

Commenters said that the D.C. Circuit has held that a "best system of emission reduction" that is "adequately demonstrated" is "one which has been shown to be reasonably reliable, reasonably efficient, and which can reasonably be expected to serve the interests of pollution co ntrol without becoming exorbitantly costly in an economic or environmental way." Essex Chem. Corp. v. Ruckelshaus , 486 F.2d 427, 433 (D.C. Cir. 1973). The performance standard must be "achievable because it has been achieved." Natural Res. Def. Council v. EPA , 655 F.2d 318, 330 (D.C. Cir. 1981) (citing cases). Commenters noted BSER "[w]hile not at the level that is purely theoretical or experimental, [the standard] need not necessarily be routinely achieved within the industry prior to its adoption." Essex Chem. Corp ., 486 F.2d at 433

- 34 (D.C. Cir 1973).

Commenters further noted that EPA "may base its determination that a technology is adequately demonstrated or that a standard is achievable on "the reasonable extrapolation of a technology's performance in other industries." Lignite Energy Council v. EPA , 198 F.3d 930, 934 (D.C. Cir. 1999).

Commenters noted, "'Adequately demonstrated' does not mean that existing [sources] must be capable of meeting the standard; to the contrary, '(s)ection 111 looks toward w hat may fairly be projected for the regulated future, rather than the state of the art at present.'" Nat'l Asphalt Pavement Ass'n v. Train , 539 F.2d 775, 787.

Commenters said EPA correctly notes that a shared objective of both new and existing source stand ards under section 111 is that they must promote innovation and otherwise be "technology forcing" in their particular spheres. (See Lignite Energy Council citing Portland Cement at, 39; Nat'l Lime Ass'n. v. EPA , 627 F.2d 416, 433 n. 46 (D.C. Cir 1980) ("An achievable standard need not be one already routinely achieved in the industry."). Commenters noted that section 111 was designed "to assure the use of available technology and to stimulate the development of new technology." S.Rep.No. 95

- 127, at 171. Com menters said EPA, therefore, maintains the authority "to induce, to stimulate and augment the innovative character of industry in reaching for more effective, less costly systems to control air pollution." Commenters said that concept reasonably has a diff erent meaning in the context of new sources regulated under section 111(b) than when applied to existing sources, but it is nevertheless also relevant to the determination of the BSER underlying section 111(d) existing source performance standards.192 Commen ters also emphasized that past court cases have upheld standards that mandated higher than demonstrated efficiency based on EPA's prediction that the technology would be available in the future. Sierra Club v. Costle at 298, 330, 364. Commenters indicated that EPA has discretion, in setting standards under section 111(a), "to encourage innovative technology." Id. at 347. Consistent with the technology

- forcing purpose of the rule, commenters argued that the standard set by EPA should reflect efficiency impro vements which may be anticipated to occur within the implementation period for the rule.

Response 2: We agree with the commenters’ reading of the case law. With respect to efficiency improvements, we appreciate the commenter’s suggestion that the building block 1 component of the BSER should reflect technology

- forcing; EPA’s discussion of that issue is in section V.A.4.a of the final rule preamble of the CPP.

Comment 3: Commenters asserted that Congress allows BSER to encourage technology innovation.

Commenters stated, Congress designed section 111(d) to be a provision of the Act that drives innovation and emission reductions." Commenters said, the definition of "standard of performance" establishing the "best system of emissions reduction" standard ap plies equally to section 111(b) and (d). Commenters said, Sierra Club v. Costle validates EPA's adoption of approaches that encourage continuing technology innovation:

Commenters stated, their interpretation of section 111(a) is that the mandated balancing of cost, energy, and non

- air quality health and environmental factors embraces consideration of technological innovation as part of that balance. Commenters said, the statutory factors which EPA must weigh are broadly defined and include within their ambi t sub

- factors such as technological innovation.

Commenters stated, in proposing the new source performance standards for new fossil fuel

- fired power plants, EPA recognized the extensive legislative history and case law supporting the proposition that the technology

- based standards under section 111 were intended to be technology forcing, thus supporting the further growth and development of a range of practices that are already firmly established within the industry. Commenters said, EPA concluded that:

"T he legislative history just quoted identifies three different ways that Congress designed section 111 to authorize standards of performance that promote technological improvement: (i) the development of technology that may be treated as the "best system of emission reduction ... adequately demonstrated;" under section 111(a)(1) 151; (ii) the expanded use of the best demonstrated technology; and (iii) the development of emerging technology."

Commenters stated, however, EPA does not premise BSER in the propo sed Clean Power Plan on technologies that have not yet come to fruition. Commenters said, rather, the proposed rule is premised on currently existing emission reduction approaches that states and companies are193 already implementing and are projected to expa nd. Commenters said, thus, EPA's approach is entirely consistent with the Congressional focus on encouraging innovation.

Response 3: We appreciate these comments.

Comment 4: Technology forcing relevant only to new sources

Commenters stated, with regard t o technological innovation, the Court concluded only that "[i]n short, we can find no statutory bar to EPA's consideration of how various NSPS options will affect the development of new technologies which have economic, energy, and environmental implicatio ns of their own." Commenters said, although EPA relies on Portland Cement Association v. Ruckelshaus, that case also had nothing to do with existing stationary sources (but with new and modified sources) or with section 111(d). As the court said:

"We begi n by rejecting the suggestion of the cement manufacturers that the Act's requirement that emission limitations be "adequately demonstrated" necessarily implies that any cement plant now in existence be able to meet the proposed standards. Section 111 looks toward what may fairly be projected for the regulated future, rather than the state of the art at present, since it is addressed to standards for new plants

- old stationary source pollution being controlled through other regulatory authority."

Commenter s stated, the Court noted, again, that the fact that technology was not in "...in actual routine use somewhere..." did not control because "[t]he essential question was whether the technology would be available for installation in new plants."

Response 4: We disagree that these cases are not informative in interpreting CAA section 111(a)(1) for purposes of CAA section 111(d). The cases address interpretation of the phrase “best system of emission reduction,” which is relevant under both CAA section 111(b) and (d) as both sections use the same term defined at CAA section 111(a)(1).

Comment 5: Comments that EPA conflated the Clean Air Act legal requirements for new and existing sources such that EPA failed to consider the remaining useful life of existing s ources in setting the state emission goals.

Commenters stated, EPA directs the reader to the new source rule, where it cites a statement from a Senate Committee Report to the 1970 CAA Amendments regarding "constant improvement in techniques for preventing and controlling emissions from stationary sources." Commenters said, however, that Senate report clearly evinces the understanding that this technology forcing was to have prospective application, and not result in shutting down, or even affecting, existin g sources.194 Commenters stated, the portion of Senator Muskie's statements, which EPA cited in a footnote to the proposed rulemaking for new sources and incorporates by reference in the Legal Memorandum for the Proposed Rule, does not support EPA's claimed legislative intent that section 111(d) be technology forcing. Commenters said, that legislative history refers instead to five requirements and explains "... that industry can make compliance with them possible or impossible." Commenters said, these five r equirements refer to: 1) the promulgation and enforcement of NAAQS; 2) the establishment of "national air quality goals . . . for the major pollutants"; 3) the requirement under 111 that "newly constructed sources of pollution must meet rigorous national s tandards of performance" so that "[w]hile we clean up existing pollution, we . . . also guard against new problems"; 4) authorization to prohibit extremely hazardous emissions; and 5) the grant of authority "to set emission standards for selected pollutant s which cannot be controlled through the ambient air quality standards and which are not hazardous substances." Commenters said, this statement, to the extent it refers to technology forcing under 111, clearly contemplates only new sources, not existing so urces.
Commenters stated, the legislative history of the 1970 Amendments cited in the new source proposed rulemaking as showing that among the congressional purposes was "the expanded use of the best demonstrated technology," speaks to the widespread appl ication of BSER to new sources, and presumes that existing sources are otherwise being addressed.

Commenters stated, the provisions for new source performance standards are designed to insure that new stationary sources are designed, built, equipped, oper ated, and maintained so as to reduce emissions to a minimum. Commenters said, the performance standards should be met through application of the latest available emission control technology or through other means of preventing or controlling air pollution. Commenters said, the maximum use of available means of preventing and controlling air pollution is essential to the elimination of new pollution problems while cleaning up existing sources.

Commenters stated, as explained a few lines down, "The overridin g purpose of this section would be to prevent new air pollution problems, and toward that end, maximum feasible control of new sources at the time of their construction is seen by the committee as the most effective and, in the long run, the least expensiv e approach."

Commenters stated, EPA claims that BSER need not be achievable by "all[] of the existing sources in the source category." Commenters said, first, if EPA fails to set an achievable BSER, States can set higher emission limits when determining s tandards of performance; the risk of EPA identifying an unachievable BSER is not placed on States or sources. Commenters said, second, in claiming that BSER need not be achievable, EPA appears to rely on the discussion under section VI, subsection H of the proposed rule for new sources, but the legislative history it offers deals with distinct issues regarding national uniformity of emissions standards, not their onerousness with regard to particular source categories. Commenters said, the legislative histo ry cited in the proposed new source rule at 79 Federal Register 1467 and note 169 deals exclusively with regulation of sources of extremely hazardous emissions under the original section 112. Commenters quoted, "Under section 112, the Administrator must se t emission standards for195 hazardous air pollutants . . ." which "standards must be set to provide an ample margin of safety to protect the public health. This could mean, effectively, that a plant would be required to close because of the absence of control techniques. It could include emission standards which allowed for no measurable emissions."

Commenters stated, between the 1970 and the 1977 amendments to the CAA, EPA did not construe section 111(d) as involving technology forcing. Commenters said, inst ead, it has tailored its regulation of new and modified primary copper, zinc and lead smelters, for example, to avoid discouraging expansion of existing sources owing to the unavailability of control technology at a reasonable cost. Commenters said, althou gh EPA's proposed new source rule relies on legislative history for the 1977 amendments on the technology forcing issue, as we have seen those legislative statements were contemplating only "new sources." Commenters said, references to technology forcing w ere there and elsewhere always conjoined with the trigger of new construction, or reconstruction or modification of existing sources under section 111(b).

Commenters stated, the House Conference Report from August 4, 1977, entitled "Statement of Intent: C larification of Select Provisions," does state that "this year's legislation retains and even strengthens the technology forcing and technology encouraging goals of the 1970 Act," but with regard to section 111 it emphasizes that the goal is technology for cing of new source standards: "standards which effectively required use of the best practical control technology for new coal

fired power plants." Commenters said, that report incorporated the House's criticism of those standards as "operat[ing] as a disin centive to the improvement of technology of new sources, since untreated fuels could be burned instead of using such new, more effective technology."

Commenters stated, EPA's reliance on Robert M. Sussman's article is a weak reed indeed. Commenters said, that article argues that section 111(d) standards of performance could be set at "emission limits [that] are [not] achievable by every source subject to an ESPS," contending that section 111(d) could authorize EPA to deem the standards achievable because " achievable at a reasonable cost by the more modern, better performing coal and gas units, not by all plants." Commenters said, this analysis does not work because it is the States that ultimately have the authority to determine whether the BSER identified for their sources is achievable, not EPA. Commenters said, and the only support cited for this proposition is a case decided under the Clean Water Act. Commenters said, moreover, the article also argued: "By authorizing States under section 111(d)(1) to co nsider the 'remaining useful life' of a source covered by a standard of performance, Congress must have expected that BSER would be infeasible at specific plants and that the appropriate relief is to grant a 'variance' in cases of hardship as opposed to lo wering the overall standard of performance." Commenters said, but this does not help EPA at all. Commenters said, to give effect to the congressional intent that remaining useful life be reasonably taken into account, hard, inflexible state

- by

- state goals cannot be promulgated if they cannot be met while giving reasonable consideration to remaining useful life. Commenters said, if the rule were otherwise lawful, EPA would have to modify the Proposed Rule to provide that remaining useful life considerations are superior to a State's assigned goal where those remaining useful life considerations are reasonably found by a State to prevent achievement of the goal.196 Response 5: We disagree with this comment. For the reasons discussed in section V.A. and V.B. of t he preamble and in the Legal Memorandum, our interpretation of the BSER is reasonable in light of the statutory text, statutory context, statutory purpose, and legislative history.

Comment 6: Commenters said that, EPA's consideration of "promotion of implementation and use of technology" entails its declaration that its chosen BSER requires use of technology and therefore it satisfies the BSER criteria for promoting technology. Commenters said that the extent of EPA's discussion of this pre

- eminent cri teria in the proposed rule includes arguments for supporting its proposed BSER as meeting this criteria is

-- EPA requires it, so it is best.

Commenters said that, if EPA is to apply such an overly broad interpretation of this criteria, it must do so in a manner that does not rely on circular logic, but instead, allows one potential approach to be distinguished from another, based on how each differs with respect to the criteria. Commenters said EPA has not supported its proposed BSER as "best" because EPA is using the philosophy that it is because we say it is.

Commenters said that, EPA's statements are demonstratively false with regards to building blocks 2, 3, and 4. Commenters said deployment of advanced NGCC is ongoing and would occur absent this rule

-- just at a pace that is sustainable from an economic and environmental perspective. Commenters said studies show that increased availability of natural gas is the driving force for NGCC deployment. Commenters said that, EPA concedes that its BSER will

no t alter the rate of deployment of renewable energy. Commenters said that, EPA also admits that greater demand

- side energy efficiency is already a common policy goal among states. Commenters said that, EPA has not provided compelling support for how its pro posed BSER drives technology improvements.

Commenters said that, EPA's proposed BSER could not be more short

- sighted in failing to promote technological innovation and effective control measures for the affected sources, and as such, it does not meet this basic requirement for a standard of performance. Commenters said that, from cradle to grave, natural gas has numerous points in the system that result in GHG emissions

-- from drilling, to compressor stations, to gas line leaks, to storage tanks, to name only a few. Commenters said that, coal has two non

- trivial points of GHG emissions the fugitive emissions from the mine and non

- fugitive emissions from the EGU related to combustion; therefore, coal presents much greater opportunity to reduce GHG emissions through future technological innovation because of the ability to research within this limited focus.

Commenters said that, EPA does not yet even understand the nature and magnitude of the GHG emissions from natural gas production. Commenters said that, the EPA's Office of Inspector General "underscored the need for EPA to gain a better understanding of emissions and risks" from natural gas production. Commenters said that, EPA cannot pretend that its "system" promotes technological innovation over the co mpliance horizon, when ordinarily one must first study the problem before solving it

-- meaning EPA is a long way from developing solutions for197 natural gas GHG emissions. Commenters said that, EPA is not promoting investigation into a solutions aimed at co ntrolling emissions from two known and well

- characterized emissions points, which could eventually lead to significantly lower GHG emissions from coal

- fired EGUs. Commenters said that, EPA's proposed BSER would phase out use of coal all together in Arizona . Commenters said that this is hardly technologically innovative.

Commenters said that, Congress made clear its expectations with regards to research and development, "Finally, it establishes firmly that research and development on control technology is t o be focused on recycling of pollutants and confined and contained disposal of pollutants, and not on ways of putting pollutants into the ambient environment." Commenters said that, Congress clearly expressed concern that measures such as load switching co uld "stifle research and development efforts by utilities, and emissions control equipment vendors, to find methods for the clean burning or pretreatment of coal." Commenters said that, EPA cannot claim that it properly considered "promotion of implementat ion and development of technology" when it provided no consideration to the way in which its proposed BSER creates disincentives for further technology developments for the affected facility.

Response 6: We disagree with this comment. For the reasons disc ussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reasonable in light of the statutory text, statutory context, statutory purpose, and legislative history. Further, as discussed in the preamble, o ur rule is consistent with promoting technological innovation. Commenters’ concerns over greenhouse gas emissions from the natural gas production industry are not relevant to establishing standards of performance for the affected sources and therefore do n ot require a response.

Comment 7: BSER cost levels.

Commenters argued that the costs of the proposed BSER may be significant, but still "reasonable." The commenters noted language in Portland Cement Ass'n v. Train , 513 F.2d 506, 508 (D.C. Cir. 1975) that costs must not be "greater than the industry could bear and survive." Commenters stated EPA's standards of performance will meet the cost test unless the costs of meeting them would be greater than the industry could bear and survive. Commenters said with respect to cost, "the system must be one which can reasonably be expected to serve the interests of pollution control without becoming exorbitantly costly in an economic or environmental way." Nat'l Asphalt Pavement Ass'n , 539 F.2d at 786 (quoting Portlan d Cement Ass'n , 486 F.2d at 433); see also Essex Chemical Corp ., 486 F.2d at 433, and Lignite Energy Council v. EPA
, 198 F.3d 930, 934 (D.C. Cir. 1999).

Commenters said costs of the standards are those to which the industry can "adjust" in a "healthy

econ omic fashion to the end sought by the Act as represented by the standards prescribed." Portland Cement Ass'n v. Train , 513 F.2d 506, 508 (D.C. Cir. 1975). Commenters noted that198 most pollutants regulated under section 111(b) new source standards are either criteria or hazardous pollutants, and thus not subject to 111(d) regulation.

Commenters stated the statute permits EPA to measure costs on an industry

- wide basis and that a performance standard which is particularly costly, or even unaffordable to specific facilities due to their design may nonetheless be reflect the "best system of emissions reduction," provided the cost is reasonable to the industry as a whole. Commenters stated that where EPA demonstrates that it has taken cost into consideration, preced ent directs courts to defer to the Agency's analysis. See Essex Chemical Corp ., 486 F.2d at 437 (noting that "[i]t is not unlikely that industry and the EPA will disagree on the economic costs of these various control techniques," but having found that the Administrator considered economic costs as required by section 111 of the CAA, the court had "no desire or special ability to settle such a dispute"); Nat'l Asphalt Pavement Ass'n v. Train , 539 F.2d at 787 (same).

Response 7: We agree with this comment although we note that in this rule, the wide range of methods available to sources to implement the BSER and to achieve their emission standards means that few if any specific facilities can be expected to find the costs of comp liance with emission standards that reflect the emission performance rates in the guidelines to be particularly costly or unaffordable.

Comment 8: EPA has erroneously substituted the weaker test of "reasonableness" in assessing BSER costs

Commenters argu ed that in promoting innovative technology, EPA must also consider cost. However, commenters stated, existing case law does not, as the Proposed Rule and accompanying legal memorandum claim, instruct EPA to set costs at an open

- ended and generally undefine d level of "reasonableness." Instead, commenters argued that weight of the decisions defines acceptable cost levels as those short of "exorbitant," "exorbitantly costly," or "more than the industry could bear and survive." Commenters argued that EPA's subs titution of "reasonableness" for these criteria means EPA is choosing to rely on a vague, standard

- less term that does not reflect the case law.

Response 8: We agree with the commenters’ reading of the case law. We agree that the caselaw clearly identifi es the criteria for the cost component of the BSER and that the EPA has no authority to revise those criteria. We disagree that our use of the term “reasonableness” is an effort to revise those caselaw criteria. We use that term solely as a convenient refe rence for the cost criteria, and we define it as having the same meaning as the terms found in the caselaw, quoted by the commenters, to describe the cost criteria.

Comment 9: EPA must take into account the emission reduction potential of permissible

com pliance methods when establishing standards of performance in emission guidelines.199 Commenters stated, the statute requires consistency between the emission reduction methods considered in establishing a standard of performance and the emission reduction m ethods available for demonstrating compliance with that standard. Commenters said, this has been called the "symmetry principle." Commenters said, where the emission guideline allows compliance with a performance standard through a broad range of emission reduction methods, EPA must consider the emission reduction potential of those compliance methods when determining the level of reductions that the standard requires.

Commenters stated, the symmetry requirement works in both directions. Commenters said,
st andards must reflect the degree of reduction achievable through the best system of emission reduction, considering costs. Commenters said, it would violate that requirement for EPA to set a performance standard based on a given emission reduction method, b ut then not allow that method to be used for compliance purposes; such a standard would be more stringent than the statute permits. Commenters said, likewise, it would violate the statute to allow the use of an identified emission reduction method for comp liance purposes, but then ignore the reduction potential of that method when setting the target; such a standard would be less stringent than the statute requires. Commenters said, neither standard would represent the degree of emission reduction achievabl e at reasonable cost through the best system of emission reduction. Commenters said, the first would over

- represent what is achievable considering costs; the second would under

- represent it.

Commenters stated, thus, EPA's determination of the performance standard or target must be informed by the compliance methods EPA allows under the rule. Commenters said, once EPA has identified the system of emission reduction that will be available for compliance purposes, it must set an emission standard that reflect s the degree of emission limitation achievable, taking into account cost, by that system.

Commenters stated, the inclusion of credits derived from Building Blocks 2

- 4 substantially simplifies the question of assessing technical feasibility, because it chan ges the inquiry from what emission reductions are available to each source acting on its own, to what emission reductions are available to each source through the combination of measures acting alone and measures implemented through credit mechanisms acros s the electric system. Commenters said, the same is true regarding the consideration of costs. Commenters said, case law reviewed below establishes that EPA must show the costs of compliance are not exorbitant for existing power plants considered as a grou p. Commenters said, that judgment must be made in light of the compliance methods the standard permits. Commenters said, any given standard will be less expensive to meet if it allows compliance on a system

- wide basis

- that is, by measures both within and beyond the fenceline

- than if it allows compliance only by on

- site measures. Commenters said, thus, for any given cost, system

- based standards can achieve greater emission reductions.

Commenters stated, although EPA must "tak[e] into account the cost of achieving such reduction," nothing in section 111 requires the standards to preserve the unregulated economic position of individual facilities. Commenters said, indeed, the D.C. Circuit has specifically200 rejected such a requirement, concluding that EPA ma y consider costs and energy impacts "in the broadest sense at the national and regional levels and over time as opposed to simply at the plant level in the immediate present." Sierra Club v. Costle, 657 F.2d 298, 330 (D.C. Cir. 1981). Commenters said, EPA may not impose regulatory costs that are "exorbitant" or "greater than the industry could bear and survive" when considered "at the national and regional levels and over time." Essex Chemical Corp. v. EPA, 486 F.2d 427, 433 (D.C. Cir. 1973); Lignite Energy Council v. EPA, 198 F.3d 930, 933 (D.C. Cir. 1999). Commenters said, within that constraint, EPA is permitted to establish performance standards that are expected to result in the reduced utilization or retirement of affected sources.

Commenters stated, t he history and purpose of the section 111 and the Clean Air Act as a whole support EPA's authority to establish a cost

- justified emission standard even if it is expected to result in reduced operation or retirement of affected sources. Commenters said, Con gress intended section 111 to incentivize the "constant improvement in techniques for preventing and controlling emissions," S. Rep. 91

- 1196 at 16 (1970), and further recognized that one of the most powerful ways to incentivize these improvements to ask in dustry "to do what seems to be impossible at the present time." 116 Cong. Rec. 32,901

- 02 (1970) (remarks of Sen. Muskie). Commenters said, Congress knew that in some cases, what seemed impossible would in fact be impossible, and that some industrial source s of pollution would have to be "closed down." S. Rep. No. 91

- 1196, at 2

- 3 (1970); cf. Union Elec. Co. v. EPA, 427 U.S. 246, 270 n.1 (1976) (Powell, J., concurring) ("The record is clear beyond question that at least the sponsors and floor leaders of the C lean Air Act intended that industries unable to comply with approved state implementation plans ... would be "closed down'"). Commenters said, but in other cases, the Act's "[t]echnology forcing hopes [would] prove realistic," Whitman v. Am. Trucking Assn. , 531 U.S. 490, 490

- 92 (2001) (Breyer, J., concurring in part and concurring in the judgment), and sources would be able to comply with applicable emission standards without curtailing their operations. Commenters said, hence, the history and purpose of th e Clean Air Act support EPA's authority to establish a cost

- justified emission standard that is expected to cause some affected EGUs to reduce generation or retire.

Commenters stated, the D.C. Circuit has also held, in Portland Cement v. Ruckelshaus, 486 F.2d 375, 387 (D.C. Cir. 1973), that EPA is not required to perform a cost

- benefit analysis under section 111 but must consider the results of such analyses when available. Commenters said, in this case, EPA has performed such analyses itself, and these an alyses show that the quantifiable climate protection and public health benefits of meeting the proposed carbon pollution reduction targets vastly exceed the costs of implementation. Commenters said, that while no cost

- benefit analysis is required, when suc h an analysis shows that benefits vastly exceed costs, EPA may

- indeed, must

- conclude that costs are reasonable and non

- exorbitant.

Commenters stated, NRDC's comments demonstrate that EPA's June proposal overestimated costs in a number of crucial respec ts, making the preponderance of benefits over costs even more striking. Commenters said, further, NRDC has analyzed the impact of the range of corrections and improvements recommended in these comments, using the same IPM modelling platform that EPA used f or the proposal. Commenters said, these IPM analyses show that the net effect of201 improving and strengthening the targets as NRDC recommends is a benefit

- cost proposition even more favorable than EPA presented at proposal (see Section 8 of their comments). Commenters said, thus these recommended changes are justified under all reasonable methods by which EPA may "tak[e] into account costs."

Response 9: We disagree with this comment. For the reasons discussed in section V.A. and V.B. of the final rule preambl e of the CPP and in the Legal Memorandum, our interpretation of the BSER is reasonable in light of the statutory text, statutory context, statutory purpose, and legislative history.

Comment 10: EPA's use of different approaches to determine the four buil ding blocks is arbitrary and unsupportable.

Commenters stated, for each building block, EPA applies inconsistent approaches to determine state interim and final goals: building block 1 applies a national

- level heat rate improvement to each coal

- fired plan t, regardless of the ability of an individual plant to realize these gains: building block 2 similarly applies a nationally

- derived capacity goal for combined cycle plants; in contrast, for Building Block 3, state renewable goals take a regional approach, being driven by average renewable portfolio standard goals found in states arbitrarily grouped together by EPA; finally, for Building Block 4, energy efficiency goals are set using yet another method, as they are based on the incremental savings rate targe ted by a handful of leading states.

Commenters stated, the use of differing approaches presents several problems. Commenters said, first, it is arbitrary and inconsistent. Commenters said, EPA makes no compelling argument why it is appropriate to use diffe rent approaches for different building blocks. Commenters said, second, it ignores a critical aspect of setting BSER: namely, what is achievable in practice for the specific type of units being controlled. Commenters said, this is inconsistent with EPA's h istorical approach to implementing section 111(d), which is to evaluate what has been demonstrated to be achievable by a unit type.

Commenters believed EPA should use a state

- specific, bottom

- up approach that relies on state

specific data when determining BSER under this rule. However, according to the commenters, if the EPA maintains its proposed approach, the methods used to determine and apply the building block goals must be adjusted so that they are consistent, logical, and congruent with historical
ap plications of 111(d).

Response 10: In response to public comments, we have changes the method by which the state emission reduction goals are computed. For the reasons discussed in section V.A. and V.B. of the final rule preamble of the CPP and in the Lega l Memorandum, our interpretation of the BSER is reasonable in light of the statutory text, statutory context, statutory purpose, and legislative history.202 1.10.6 State

- wide Application of the BSER; Appropriateness of Standards of Performance

Comment 1 : Commenters stated that the EPA does not have the authority to establish BSER on
a state

- wide basis; CAA Section 111(d) requires for the establishment of BSER on a unit by unit basis.

Commenters argued that the EPA does not have authority under the CAA o r any other statute to impose a statewide CO2 emission reduction requirement. Commenters said, that under Section 111(d) of the CAA, the EPA may require states to establish "standards of performance" for "any existing source" within their borders and noted the statute defines a "standard of performance" to mean: "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..." Commenters also said that the EPA has always interpreted the "best system of emissions reduction" as something that occurs at the source (e.g. the existing coal

- fired power plant) and argued that the proposed rule takes a novel position that because coal

- fired power plants are th emselves elements of the broader system (i.e., the U.S. electricity sector) BSER should be applied to this broader system.

Commenters stated, EPA's proposed guidelines essentially establish a standard of performance for the source category that is not ach ievable by the source itself because it is premised on a series of activities by others in the interconnected system of electricity generation, and transmission. Commenters said, the question arises as to whether EPA's proposed standard for each state is a legal approach to setting a standard of performance for an existing affected facility.

Commenters stated, the entire structure for setting standards under Section 111 (b) or establishing guidelines under Section 111 (d) is based on setting standards of pe rformance for stationary sources. Commenters said, EPA must first define the source categories for which it intends to set standards. Commenters said, before establishing guidelines for existing sources, EPA must first identify specific sources for which i t establishes standards for new stationary sources and for pollutants that are not criteria pollutants or regulated under Section 112 (assuming for the moment EPA is entitled to regulate the source category at all if it is regulated under Section 112).

Com menters stated, section 111(a)(3) defines a "stationary source" as "any building, structure, facility, or installation which emits or may emit any air pollutant." Commenters noted that EPA has promulgated, literally, hundreds of standards of performance fo r new and modified sources in a defined source category under Section 111(b) of the CAA. Commenters said, in less than a dozen instances it has issued emissions guidelines under Section 111(d) for a defined category of sources. Commenters said, the definit ion of source is the same for purposes of setting 111(b) and 111(d) standards.203 Commenters stated, EPA does not specifically include a definition of affected source category because it has issued the proposed Section 111(d) guidelines prior to finalizing it s NSPS under Section 111(b) for this source category. Commenters said EPA does reference its January 8, 2014 proposed NSPS. See, 79 Fed. Reg. at 34852. Commenters stated that the EPA deto define the affected source category as

"any fossil fuel fired combus tion unit that supplies more than one

- third of its potential annual electric output and more than 25 MW net

- electrical output (MWe) to any utility power distribution system for sale, with certain exceptions noted below. For this proposed rule, covered EGUs include electric utility steam generating units ("boilers"), stationary combined cycle combustion turbines and their associated HRSG) and duct burners; and IGCC units, including their combustion turbines and associated HRSG. However, for purposes of this rule, covered EGUs do not include stationary simple cycle combustion turbines or EGUs located in Hawaii or other noncontinental areas. In addition, units subject to emission requirements under CAA section 129 would not be subject to requirements under this proposed rule."

Commenters stated, as noted, Section 111(a)(i) of the CAA defines a "standard of performance"

as:
... 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 non

- air quality health and environmental impact and energy requirements) the Administrator determines has been adequately demonstrated.

Commenters stated , section 302 of the CAA also 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 emission reduction."

Commenters stated, u nder Section 111(b), the fundamental starting point for setting a new source standard of performance is that it is for a source in the defined source category. Commenters said, regardless of one's view on the substantive merits of the NSPS proposal and whe ther the proposed standard reflects BSER, one need only look at the Section 111(b) proposal for the same source category to see the inconsistent approach to defining BSER. Commenters said, in that proposal EPA does not look at any of the other components o f the building blocks used here to define BSER for new sources. Commenters said, rather it looks at a suite of measures achievable at the source to determine BSER for new sources in the same source category. Commenters said, EPA defined BSER for new units based on what the source itself could do to reduce emissions in a manner consistent with previous NSPS standards. Commenters said, in contrast, EPA in this proposal has set a statewide standard for the source category that defines BSER to include

measures well beyond the control of the source in stark contrast to every previously issued NSPS or guideline. Commenters said, rather than look at BSER for the source category, EPA defines a state's BSER based on requiring a state to regulate the entire electricit y system in the state from generation to use, including requirements to develop alternative types of energy generation204 sources and reducing demand for the product coming from the source category. Commenters said, if one sets aside the very emotional discus sion over control of GHGs from power plants, it becomes more readily apparent that EPA's approach is legally vulnerable. Commenters said, for example, if EPA were proposing emissions standards for pulp and paper mills, would EPA's action be considered legi timate if, in establishing the standard for a paper mill and setting BSER it suggested that the overall standard could be more stringent based on the fact that states could require that offices move to a "paperless office" and/or print less paper? Commente rs said, could EPA set an emissions standard for an automobile assembly plant painting operation and make it more stringent by determining that cars could be smaller and thus need less paint or that increases in mass transit in a state could reduce the nee d to paint as many cars at the plant?

Commenters said, under Section 111, however, Congress has only authorized establishment of standards of performance (or guidelines under 111(d)) for stationary sources that reflect the application of BSER for the source, not some general target of emissions reduction from all sources that may in some way help reduce GHG emissions. Commenters said, EPA is not establishing an ambient standard under Section 111(d), nor can it.

Commenters stated, EPA itself several tim es in the preamble noted that a state plan "must include enforceable CO2 emission limits that apply to affected EGUs." Commenters said, but it then leaps to say that because BSER includes measures beyond the source, the impact of those measures can be enfo rceable against the source in its emission limit. Commenters said, it reaches this conclusion by effectively disregarding any linkage between the source and the standard

- which is at odds with the very structure of Section 111. Commenters said, a much mor e logical, and legally supportable, reading of Section 111 links the standard of performance to the source.

Commenters stated, subsections of Section 111 express clear congressional intent to require the promulgation of standards applicable to individual s ources. Commenters said, when managing emissions from existing units, Section 111 anticipates the States will be "applying a standard of performance to any particular source." Commenters said, in so prescribing, the statute outlines two expectations: (1) S tates will look with particularity at specific units applying standards of performance, and (2) EPA's guidelines must allow States to make prudential assessments about the remaining useful life of particular existing units and other source

- specific factors in determining the extent to which to apply those standards to each unit. Commenters said, the principle focus of the standard

- setting process must thus be whether the unit itself can meet the prescribed standards.

Commenters stated that States are not an "existing stationary source." Commenters stated that Section 111(d) states that EPA must establish standards of performance that will be applicable to existing stationary sources. Commenters stated that in setting single state

- wide CO2 emissions limits, t he EPA in effect is attempting to define the entire state as a single existing stationary source and then setting the standard for such source. Commenters stated that this not only directly conflicts with Section 111(d)'s deference to the states to establi sh standards within their own border, it also is an arbitrary and capricious application of the CAA that conflicts with the205 plain language of the Act, which defines a stationary source as "any building, structure, facility, or installation which emits or m ay emit any air pollutant.'

Commenters stated that EPA claims that "emissions reduction measures that the states themselves have the authority under state law to put in place may be considered part of BSER." Commenters stated that EPA's interpretation is inconsistent with the terms of section 111. Commenters said EPA has used renewable energy portfolio standards (RES or RPS) policies and
state

- mandated utility efficiency programs as a basis for determining state goals. Commenters noted, reading the plain l anguage of CAA section 111(d)(1)(A) that authorizes state plans to establish standards of performance for any existing source, the determination of the best system of emission reduction (BSER) must be source

- based and not system

- based or state

- based.

Comm enters said standards of performance should be based on reductions in CO2 emissions that can be reasonably achieved through actions at individual electric generating units (EGUs). Commenters stated, that is, the standards of performance that states establi sh must be a "standard for emissions of air pollutants" for those affected sources and not for the state itself. In CAA Section 111(i)(1), the commenters stated that the term "standard of performance" means 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 require ments) the' Administrator determines has been adequately demonstrated. Commenters noted that the Kansas legislature reinforced this interpretation with the passage of House Bill 2636, effective July 1, 2014.

Commenters stated the EPA is not authorized to adopt those portions of the goal that are derived from Building Blocks 2, 3, and 4, since they do not relate to standards for the regulated stationary source. Commenters stated that the EPA standards for stationary sources under Section 111 should begin an d end with the regulated source itself. Commenters stated that a new source performance standard (''NSPS") or existing source guideline must apply to individual sources; must be based on reductions that an individual source can achieve; and must be based

o n the use of a system that is incorporated into the design of the source.

Commenters requested that the U.S EPA withdraw the proposed guidelines and issue new guidelines that allow the southern states to establish policies that are in the best interest of the region and each of its states. Commenters said, the guidelines should be based on EPA guidelines for cost

- effective, achievable reductions at the affected power plant units, rather than the states.

Commenters stated, the Clean Air Act Section 111(d) r equires for the establishment of BSER on a unit by unit basis. Commenters said, the CPP has without clear congressional authorization expanded and thus exceeded its authority and the intent of section 111(d) by establishing BSER using criteria not related to the affected units.206 Commenters stated, standards of performance cannot be established on a state

- by

- state basis. Commenters said, section 111(d) provides for EPA to adopt regulations calling on states to submit plans establishing "standards of performa nce for any existing source." Commenters said, thus, standards of performance must be established on a source

- by

- source basis, not a state

- by

state basis.

Commenters thought the EPA has not provided an adequate explanation for straying from the prior cons traints of establishing BSER for a specific type of "source" as required by Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto, Ins. Co., 463 U.S. 29, 43 (1983), which held that in deciding whether an agency action is arbitrary and capricious, this Court co nsiders whether "the agency [examined] the relevant data and articulate[d] a satisfactory explanation for its action including a 'rational' connection between the facts found and the choice made.")

Commenters said, a "designated facility" is an existing st ationary source that is the same type of source for which EPA has proposed or promulgated a New Source Performance Standard and emits the pollutant that is the subject of the emission guidelines.

Commenters stated the "designated facilities" are the "affe cted EGUs." Commenters said, yet, EPA's emission guidelines do not reflect the best system of emission reduction that has been adequately demonstrated for those affected EGUs, as required by Subpart B. Commenters said, instead, it reflects the degree of em ission reduction that EPA believes is achievable through the application of the best system of emission reduction that EPA has determined has been adequately demonstrated for states. Commenters said, EPA's Legal Memorandum makes this quite clear: "In this rulemaking, the EPA proposes to determine the 'best system of emission reduction ... adequately demonstrated' on a state

- by

- state basis."

Commenters stated, thus, EPA's proposed CPP overlooks the fundamental regulatory requirement that its guideline docu ments must provide information on systems of emission reduction that can be applied to affected EGUs, and emission guidelines that are based on the best system of emission reduction that has been adequately demonstrated for affected EGUs. Commenters said, instead, EPA's proposed guideline document discusses and selects what it believes to be the best system of emission reduction that has been adequately demonstrated for the states in which those affected EGUs are found, which is contrary to 40 C.F.R. Part 6 0, Subpart B, and therefore unlawful.

Commenters stated that, first, the standards of performance to be established by States under Section 111(d) are intended to be source

- based standards. Commenters said the plain text of Section 111(d) directs States t o "establish[] standards of performance for any existing source ... to which a standard of performance would apply if such existing source were a new source." Commenters said further, the standard of performance must reflect the "best system of emission

re duction" adequately demonstrated, and, as described in Section VII.A.1., infra, a "system of emission reduction" under Section 111 is inherently source

- specific. Commenters said EPA recognized this in its initial 1975 rulemaking to implement Section 111(d) , in which the EPA asserted that Congress intended the emission guidelines and standards of performance207 established under Section 111(d) to be technology

- based. Commenters said a technology

- based standard is inherently source

- specific, and EPA tacitly ackn owledged this while discussing States' authority to impose more stringent standards: "EPA's emission guidelines will reflect its judgment of the degree of control that can be attained by various classes of existing sources without unreasonable costs. Parti cular sources within a class may be able to achieve greater control without unreasonable costs." Commenters said the question of whether or not a source or category of sources can achieve the level of control in an emission guideline only makes sense in th e context of a source

- specific approach. Commenters stated that, second, the "best system of emission reduction ... adequately demonstrated" for an existing source or category of sources cannot be contingent on the existence (or capacity to construct) othe r, unrelated facilities that produce the same product. Commenters said that is exactly what EPA has done here with respect to electricity generation. Commenters said under EPA's proposed BSER analysis, the agency looks beyond the emissions controls that ca n be implemented by coal

- fired EGUs and also considers the availability (or future availability) of other sources of electricity generation that could displace electricity generation from existing coal

- fired EGUs. Commenters said there is no statutory basi s for such a State

- wide approach. Commenters said neither the "integrated nature of the electricity system," nor the fact that States are directed to submit Statewide implementation plans creates a basis for EPA to deviate from Congress' intent that system s of emission reduction be evaluated on a source

- specific basis under Section 111(d). Commenters said to the extent that there is any flexibility to look beyond individual facilities under Section 111(d), that flexibility belongs to the States as they deve lop implementation plans, not to EPA as it develops emissions guidelines. Commenters said a central premise of any fair and reasonable regulatory scheme is that like sources should be treated alike. Commenters said this is particularly true in the case of GHG emissions, where the pollutant at issue is truly global in nature and there are no localized impacts that could justify treating similar sources differently. Commenters said that after taking into account remaining useful life and other related factors , the standards of performance established under Section 111(d) should essentially apply uniformly to all existing fossil fuel

fired EGUs. Commenters said EPA's proposed emission reduction targets fail to meet this standard. Commenters said for example, un der EPA's analysis, two identical coal

- fired EGUs operating in neighboring States built at the same time using the same technology would be subject to different emissions control obligations under Section 111(d) based solely on the availability of competin g natural gas, nuclear, and renewable energy in the State. Commenters said for example, on an aggregate basis, coal

- fired EGUs in Texas will be required to reduce their capacity by 50% in order to comply with the proposed emission reduction target as a res ult of the presence of underutilized NGCC facilities in the State. Commenters said in contrast, coal

fired EGUs in West Virginia will not need to reduce generation at all because there is no existing NGCC capacity available to replace it. Commenters said i t is both arbitrary and capricious and contrary to Congress' intent that virtually identical existing sources could be subject to such divergent emission control obligations.

Commenters stated, EPA's imposition of state

- wide goals, rather than source

- speci fic emission standards, is inconsistent with CAA section 111(d) and EPA's own implementing regulations.208 Commenters said, by setting state

- wide goals without reference to particular sources of emissions, the proposed guidelines stray from the source

- focused structure of section 111.

The text of section 111(d) clearly authorizes the regulation of sources, not states. Commenters stated, Section 111(d) requires states to "establish[ ] standards of performance for any existing [stationary] source." See CAA sect ion 111(d)(1)(A). Commenters said, section 111 defines "stationary source" as "any building, structure, facility, or installation which emits or may emit any air pollutant." See CAA section 111(a)(3). Commenters said, section 111 contains numerous other re ferences to sources, and section 111(d) also requires the EPA and the states to consider the "remaining useful lives" of regulated sources in promulgating standards.

Commenters stated, analyzing the section's structure, it is useful to view the initial por tion of section 111(d)(1) with the applicable definitions fully interposed:

"Each State shall submit to the Administrator a plan which (A) establishes [a standard for emissions of air pollutants which reflects the degree of emission limitation achievable t hrough the application of the best system of emission reduction which (taking into account the cost of achieving such reduction and any non

- air quality health and environmental impact and energy requirements) the Administrator determines has been adequatel y demonstrated for any [building, structure, facility, or installation] [other than a new source] [which emits or may emit any air pollutant] for any air pollutant."

Commenters stated, the full text suggests that standards promulgated under 111(d) must con sider both "the degree of emission limitation achievable" as well as "the best system of emission reduction" for any existing stationary source. Commenters stated, additionally, EPA advanced a

source

- oriented interpretation of the statute in its implementi ng regulations, which provide that the Agency will issue guidance on the best system of emission reduction adequately demonstrated "or designated facilities," and that EPA will consider "sizes, types, and classes of designated facilities," in setting guide lines for state plan development. See 40 C.F.R. section 60.22(b).

Commenters stated, however, the proposed guidelines deviate from this source

- based framework by basing standards entirely upon the state in which an affected EGU is located, rather than the attributes of any specific source. Commenters said, EPA states as much, noting that "he EPA sets out proposed state

- specific CO2 emission performance goals," but that "the EPA's guidelines contain no emission standards that the state must apply directly to a specific EGU." See 79 Fed. Reg. at 34,892 and 34,925. Commenters said, this is a questionable approach in light of the structure of the statute, as well as EPA's prior interpretation of it in the implementing regulations. Commenters said that nothing in section 111(d) clearly authorizes EPA to set emission goals based upon a large, heterogeneous set of units aggregated across a state. Commenters said, instead, for EPA to regulate CO 2 emissions (or emissions of any other type of pollutant) from existing s ources, the regulations should be based on the sources themselves

- and on a standard of performance attainable by implementing measures at those sources

- rather than an aggregation of sources that happen to be within a particular state. .209 Commenters sta ted that section 111(d) instructs EPA to "prescribe regulations which shall establish a procedure similar to that provided by [Section 110]" under which states submit plans to EPA establishing standards of performance for existing sources for criteria air pollutants and providing for the implementation and enforcement of those standards. Commenters said, this

cross

- reference to section 110 does not form a statutory basis for the establishment of state

based, instead of source

- based, emission limitations in the proposed guidelines.

Commenters stated, section 110 governs state plans for achieving the National Ambient Air Quality Standards (NAAQS). Commenters said, however, section 110 does not itself provide the basis for establishment of the NAAQS. Commenters said, rather, it is section 109 that provides that foundation of authority. Commenters said, in other words, section 110 outlines the procedures and authorities of the states in meeting an emission limitation that is established under the auspices of a se parate section of the statute. Commenters said, section 110 prescribes the scope of state planning authorities in meeting the substantive limitation established by EPA under section 109.

Commenters stated, accordingly, when Congress included a cross

- refere nce to the "procedure" of section 110, it intended to harness the state

- based planning process of section 110; it did not intend also to establish the scope of EPA's substantive authority to set the emission limitation that a state plan must achieve. Comme nters said, rather, the scope of the authority to set an emission limitation is provided by the rest of section 111, which, as discussed above, clearly contemplates the application of standards of performance for sources. Commenters said, in this way, sect ion 111 is distinct from section 109, which contemplates ambient air quality standards, without regard to particular sources.

Commenters stated, for these reasons, it is not valid to read the section 111(d) cross

- reference to section 110 as authority for E PA to impose state

- based emission limitations.

Commenters believed the EPA did not sufficiently show that the proposed BSER meets the legal criteria on a state

- specific basis. Commenters stated, EPA has not made any findings that the particular BSER mix us ed to set each state

- specific emission limitation is achievable, demonstrated, cost

- effective, and considers energy impacts specific to any of the states. Commenters said, for example, EPA has not conducted a state

- by

- state cost analysis of the Building Bl ocks for the proposed guidelines, nor has EPA conducted a state

- by

- state reliability analysis. Commenters said, EPA's analyses are mostly national and at best regional.

Commenters stated, EPA highlights the fact that BSER in the context of section 111(b) has been interpreted such that EPA need only find that the system is achievable for some sources; it need not find that it is achievable for every source. See Legal Memor andum at 39

- 40. Commenters said, EPA argues this approach should be applied to the BSER determination under section 111(d) based on the Clean Air Act's discussion of a state's ability to take into account a source's remaining useful life. Commenters said, the proposed guidelines, however, draws the wrong analogy. Commenters said, even if EPA need not show that BSER is achievable for every source, EPA has not set source

- specific standards in this rule. Commenters said, instead, it has210 determined BSER on a st atewide basis. Commenters said, yet EPA has not demonstrated that the particular mix of BSER Building Blocks is achievable for every state. Commenters said, in fact, EPA has effectively conceded that the BSER Building Blocks may not be achievable by a part icular state. See 79 Fed. Reg. at 34,893.

Commenters stated, this approach raises legal questions particularly because EPA has established a BSER methodology that sets state

- specific emission rates. Commenters said, EPA is, in effect, claiming that while t he rate was set based on the particular state's circumstances, it need not evaluate whether those circumstances actually are consistent with the mix of Building Blocks the EPA has determined are achievable. Commenters said, the proposed guidelines do not e stablish that the four Building Blocks can be implemented together as an achievable, adequately demonstrated, cost

- effective "system" for each state.

Commenters said, EPA's proposal to set state goals has an additional flaw. Standards of performance canno t be established on a state

- by

- state basis; they must be established on a unit

by

- unit basis.

Commenters stated, section 111(d) states that EPA must establish standards of performance that will be applicable to existing stationary sources. Commenters said, in setting single state

- wide CO2 emissions limits, the EPA in effect is attempting to define the entire state as a single existing stationary source and then set the standard for such source. Commenters said, this not only directly conflicts with Section 111(d)'s deference to the states to establish standards within their own border, it also is an arbitrary and capricious application of the CAA that conflicts with the plain language of the Act, which defines a stationary source as "any building, structure, facility, or installation which emits or may emit any air pollutant." Commenters said, if EPA is prevented from viewing multiple components of a plant as a single source, it is certainly prevented from viewing an entire state as a source. Commenters said, further, EPA is concurrently asking the state, which is tasked as the regulator and implementing body for Section 111(d) rules, to regulate itself as the stationary source. Commenters said, again, this is an illogical and contradictory application of the CAA.

Commenters stated, under section 111(d), EPA's obligation is to establish standards of performance for any existing source, and so by definition the "standard of performance" must be applicable to "the existing source." Commenters said, an existing s ource means any stationary source other than a new source. Commenters said, and so any proposed standard of performance necessarily identifies the "stationary source" to which it applies. Commenters said, the "standard of performance" that EPA proposes (e. g., 853 lbs CO2/MWh for Texas) is applicable to the State, and is based on what EPA has determined is achievable by application of BSER to the generation mix of that state. Commenters said, accordingly, in this first construct, the State must be the "stati onary source." Commenters said, but this is impossible given that section 111 distinguishes "states" from "stationary sources": The former is regulator, the latter the subject of regulation.211 Commenters stated, and this state

- as

- stationary

- source construct grinds other statutory gears, as well. Commenters said, "the term 'stationary source' means any building, structure, facility, or installation which emits or may emit any air pollutant ...." Commenters said, it was in the selfsame Supreme Court case recogn izing EPA's discretion to interpret an ambiguous statute that the Court upheld EPA's decision to adopt a plant

- wide meaning to the section 302(j) definition of stationary source. Commenters said, that's a far cry from authorizing EPA to interpret "stationa ry source" to comprise an entire state. Commenters said, besides, the section 302(j) definition of "stationary source" construed in Chevron is broader than the one that governs here, as the Supreme Court then noted: "The definition of the term 'stationary source' in section 111(a)(3) refers to 'any building, structure, facility, or installation 'which emits air pollution .... This definition is applicable only to the NSPS program by the express terms of the statute; the text of the statute does not make thi s definition applicable to the permit program."

Commenters stated, as the Supreme Court recently reminded EPA, nothing in the CAA authorizes the Agency to regulate GHGs "in any way that would be 'extreme,' 'counterintuitive,' or contrary to 'common sense. '" Commenters said, yet even a cursory examination of the Proposal reveals that it is rife with extreme, counterintuitive, and nonsensical consequences. Commenters said, beyond the legal and technical flaws described above, EPA's Proposal is simply not a r ational, consistent, or efficient approach to regulating GHG emissions from existing EGUs. Commenters said, these counterintuitive results "should have alerted EPA that it had taken a wrong interpretive tum" in developing the Proposal.

Commenters believed that the EPA arbitrarily grouped sources together by state. Commenters felt that this approach violate the CAA by shifting the focus of the Proposal from individual existing sources to combinations of them and also defies logic. Commenters said, grouping existing EGUs together by state bears no relation to the achievability, cost, or implementation of the measures that EPA has proposed to use as the basis for the Proposal, and it obscures the effect of these measures on individual EGUs. Commenters said, t he fact that a group of coal

fired EGUs are located in the same state does not indicate that they share any similar characteristics with regard to their potential to implement heat rate improvement measures, and EGUs in the same state do not necessarily o perate under the direction of a common dispatch authority or share common natural gas pipelines or transmission infrastructure. Commenters also noted that state policies for promoting renewable energy resources do not necessarily focus on developing such r esources within the state itself.

Commenters stated that EPA's imposition of individualized State

- wide goals is inconsistent with the structure of Section 111(d). Commenters stated that Section 111 explicitly focuses on stationary sources. Commenters state d that Section 111 is titled "standards of performance for new stationary sources," and Section 111(d) is "standards of performance for existing sources." Commenters stated that the "stationary sources" that Section 111 considers are narrowly confined to " building[s], structure[s], facilit[ies], or installation[s]," and not combinations thereof or integrated markets. Commenters stated that Section 111(d) is limited to source

- by

- source focused regulation. Commenters stated that Section 111 performance standa rds may be imposed only on sources that actually emit or may emit air pollutants. Id. Section 7411(a)(6).212 Commenters argued that CAA Section 111 is a source

- based regulatory program and CAA Section 111(d) authorizes the states (or EPA) to establish "standa rds of performance for any existing source." Commenters argued that setting different state

- based emission requirements is incompatible with this source

- based approach, and the requirement should apply uniformly to the entire source category, taking into a ccount an existing source's remaining useful life.

Response 1: We disagree with this comment. In section V.A of the final rule preamble of the CPP, we discuss the reasons why we are authorized to set state

- wide goals and include the building blocks as part of the BSER. In addition, our approach of applying uniform rates eliminates the problems of inconsistent requirements that commenters note. For the reasons discussed in section V.A. and V.B. of the preamble and in the Legal Memorandum, our interpretation of the BSER is reasonable and within the scope of EPA’s authority in light of the statutory text, statutory context, statutory purpose, and legislative history. With respect to the proper scope of analysis for building block 1, see section V.C of the final rule preamble of the CPP and Chapter 2 of the GHG Mitigation Measures TSD supporting the final CPP.

Comment 2 : Commenters argued that the EPA has not provided a statutory basis for treating an entire state as a “source.”

Commenters said, the proposed rul e does not sufficiently identity the statutory basis for EPA's treatment of an entire state as the "source," as opposed to individual facilities, as is contemplated by the definitions and structure of Section 111. See CAA section 111(a)(3) & (6), 42 U.S.C. section 7411(a)(3) & (6); 40 C.F.R 60.20

- 60.29.

Response 2 : The EPA disagrees with the commenters for the reasons discussed in section V.A. of the final rule preamble of the CPP.

Comment 3: The EPA cannot justify state

- wide goals by claiming the EPA is exercising its subcategorization authority.

Commenters stated that the EPA tries to justify setting "goals" state

- by

- state as an exercise of its subcategorization authority, quoting its regulations that allow the Agency to "specify different emission gu idelines or compliance times or both for different sizes, types, and classes of designated facilities, when costs of control, physical limitations, geographical location, or similar factors make subcategorization appropriate." Commenters argued the EPA und oubtedly has the authority to categorize and subcategorize under Section 111(b)(2) "for the purpose of establishing" performance standards, but the EPA must have a rational basis, grounded in the statute, to create categories and subcategories. Commenters said, if there are technological differences between types of facilities or differences in the types of fuel similar facilities use, then the EPA can create different categories and subcategories, as it has done many times in the past. Commenters said, in theory, geography could be the basis for subcategorizing to the extent213 there is some reason why geography affects the level of performance of various types of control technology that could be used as the basis for setting performance standards for coal EGU s. However, commenters noted that the EPA cites no geographical distinctions in the proposal, and there obviously are none. Commenters said, the Agency's only "geographical" justification for setting state

- by

- state standards is that different states have d ifferent resource mixes and so should have different carbon

- intensity goals. However, commenters argued the EPA does not have the authority to determine BSER for coal EGUs based on a state's utility system, and therefore differences in states' resource mi xes is not a valid justification for subcategorizing on a state

- by

state basis. Commenters said, differences in statewide resource mixes is certainly not what EPA had in mind in its subcategorization regulations when it referred to "costs of control, physi cal limitations, geographical location, or similar factors."

Response 3 : The EPA disagrees with the commenters for these reasons discussed in section V.A. of the final rule preamble of the CPP.

Comment 4: Commenters opposed setting state

- wide goals argu ing that because the grid does not operate on a state

- by

- state basis state

- wide goals are not appropriate.

Commenters stated that another example of the failure of EPA's state

- by

- state approach to reflect the interstate nature of the grid is EPA's inconsis tent and confusing approach to the interstate dispatch of renewable and fossil resources. Commenters said that, recognizing that renewable power is often sold to out

- of

- state purchasers, EPA appears willing to at least consider that the state in which the purchaser of renewable power is located should get credit for the CO2 emissions that the wind unit supposedly avoids, even if the power is produced in a different state, at least to the extent the sale is reflected in a renewable energy credit. Commenters said the same is not the case for fossil power, even though fossil power is at least as likely to be sold out

- of

state as renewable power and can easily be tracked either because the power is sold under firm contracts or through electronic tagging systems. Commenters said that this differential treatment is arbitrary and creates the illogical incentive to operate coal generation in states with relatively less stringent goals, and to curtail coal generation in states with relatively stringent goals, even tho ugh that incentive may not align with the economic and efficient operation of the grid and does not result in reduced CO2 emissions on a national level.

Commenters stated the biggest challenge in implementing the proposed rule is that electricity markets a re interstate in nature. Commenters said the proposal's state

- by

- state approach results in an enforcement regime that would be awkward at best, and potentially very inefficient and expensive. Commenters said the interstate nature of these markets is illust rated by the example of Idaho. Commenters said while that state currently does not generate electricity from coal plants within its borders, it consumes coal

- generated energy produced in at least five other states. Commenters said if those states decrease their coal generation and Idaho compensates by increasing generation from its existing natural gas plants, it creates complications related to its initial carbon baseline and its carbon baseline going forward.214 Commenters stated that EPA's state

- by

- state goals are also unreasonable in light of the way that the electric generation, transmission, and distribution system operates. Commenters said that in the continental U.S., the transmission grid enables electricity that is generated in one state to be

consu med in another. Commenters said interstate power transactions are the norm in most states, rather than the exception. Commenters said that often, meeting demand in one state will require production of electricity (and emission of CO2) in another state. Com menters said that similarly, an affected EGU's ability to reduce its output is often tied directly to the decisions of consumers in neighboring states, to the decisions of other EGU operators, and to factors such as weather or economic demand

- all of whic h are almost entirely outside of the control of the EGU operator and the state in which the EGU is located.

Commenters said because affected EGUs' abilities to reduce their emissions through EE, re

dispatch, or zero

- carbon generation depend in large part on the policies and decisions of neighboring states and other actors on the interstate grid, it is unreasonable and arbitrary to require EGUs to achieve emission standards that are calculated solely based on the emission reductions that are supposedly achi evable within the boundaries of the state. In addition, commenters said that because of the interconnected nature of the electric grid, it is difficult, if not impossible, to determine whether a particular megawatt

- hour (MWh) generated at an RE facility or saved through EE actually led to a reduction in emissions from an existing, covered EGU. All generation on the grid, commenters noted, is effectively fungible, and an RE MWh is just as likely to displace another zero

- carbon MWh (e.g., nuclear energy or a different form of more expensive RE) as it is to displace generation from a fossil

- fueled affected EGU. Similarly, as demand grows, commenters noted that increased RE and EE could reduce the need for new fossil generation, while having no effect on the exi sting EGUs that EPA to regulate under this proposal.

Commenters said that, ironically, given that EPA has justified its broad "system" approach to BSER by referring to the interconnected nature of the grid, EPA's "building block" analysis is premised on th e notion that the electrical grid in the United States can be disaggregated into fifty separate mini

- grids that follow states borders. Commenters said that with that flawed premise, EPA examines each state's electrical generation resource mix and the amoun t of emissions those resources produce, and then establishes individual state requirements based on how each state can change its resource mix to make the desired amount of emission reductions. Commenters said that no consideration is given to the fact tha t both the nature of a state's generation mix and how much of that generation operates at any particular time is directly affected by the interconnectedness of the state's generation with other states' generation. Commenters said that at any particular tim e, resources within a state may be operating more or less depending on factors affecting supply, demand and operating conditions in a broad multi

- state regional market.

Commenters stated that, given that EPA has justified its broad "system" approach to BSE R by referring to the interconnected nature of the grid, EPA's building block analysis is premised on the notion that the grid can be disaggregated into fifty separate mini

- grids that follow states215 borders. Commenters said that EPA examines each state's ge neration resource mix and the amount of emissions those resources produce, and then establishes individual state goals based on how each state can change its resource mix to make the desired amount of emission reductions. Commenters said that no considerat ion is given to the fact that both the nature of a state's generation mix and how much of that generation operates at any particular time is directly affected by the interconnectedness of the state's generation with other states' generation. Commenters sai d that at any particular time, resources within a state may be operating more or less depending on factors affecting supply, demand and operating conditions in a broad multi

state regional market. Commenters cited FERC Chair LaFleur:

"The Clean Air Act doe s things by state

- by

- state state implementation plans. That's how the Clean Power Plan draft last June is set up. The power markets, of course, do not operate state

- by

state. So, I think there will be very considerable

- potentially

- implications for the operation of the markets as the states make all their implementation decisions."

Commenters stated that EPA's approach therefore is not based on the operation of the grid as it exists in the real world. Commenters said that at the least, trying to superim pose individual state goals derived from EPA's imagined 50 "best systems" onto the actual real

- world system will create significant inefficiencies and perverse incentives. Commenters said these systems thus cannot be described as "best."

Commenters stated that while the Plan's structure allows for multi

- state or regional cooperation, EPA's single

- state approach to calculating each state's emission reduction budget is fundamentally flawed. Commenters said the nation's power grids do not stop and start at sta te borders; rather, they form an intricate power network that cannot be disaggregated. Commenters said that many states will need to consult with other states in their region in order to evaluate if and how it would be possible to change their energy resou rce mixes

- one source of power cannot simply be swapped out for another. Commenters said that for example, different sources of energy play different roles in supplying power. Commenters said coal and nuclear power have traditionally provided a steady base load of electricity, while natural gas has been used intermittently to supplement these base loads at times of peak usage. Commenters said natural gas fills this role well, as it can be ramped up and dispatched quickly. Commenters said that other renewabl es such as wind and solar, however, are inconsistent and need to be supported by other sources (such as coal and nuclear) in order to ensure the reliability of the power supply. Commenters said the idea that states can simply exchange one source for anothe r, or forego certain types of energy entirely, is not realistic or feasible. Commenters said that for example, in West Virginia, EPA's plan is premised in part on the replacement of baseload coal fired generation with wind

- based renewables

- a power source that cannot be generated on demand.

Commenters stated the biggest challenge in implementing the proposed rule is that electricity markets are interstate in nature, thus the proposal's state

- by

- state approach results in an enforcement regime that would be awkward at best, and potentially very inefficient and expensive. Commenters said the most concerning is assumption of increased "redispatch" of natural gas units of up to 70 percent and whether there will be sufficient pipeline capacity to216 support this in crease in natural gas generation. Commenters stated EPA's assumptions about each state's capabilities fail to account for the fact that slowing or shuttering perfectly good coal and gas plants and replacing them with windmills and solar arrays generally ra ise costs and diminish reliability.

Commenters suggested the EPA consider performing its analysis on a generation and transmission basis, applying the d building blocks to each, and determining each generation and transmission utility’s compliance requir ements, rather than by states.
Response 4: As discussed in section V.A of the final rule preamble of the CPP, t he final rule addresses these comments by adopting a region

- by

- region approach instead of a state

- by

- state approach to setting emission limits.

Comment 5: Commenters stated that EPA does not have the authority to impose different standards on each state.

Commenters stated the NPRM violates section 111(d) by setting substantially different BSER standards for each state. Commenters said a s the Sup reme Court has explained: "EPA issues emissions guidelines; in compliance with those guidelines and subject to federal oversight, the States then issue performance standards for stationary sources within their jurisdiction."

Commenters said the EPA is all owed to set emissions guidelines that are national in scope and the states are authorized to determine their own state

- specific approaches. Commenters stated the EPA is not empowered to set markedly different guidelines under section 111(d) using entirely different technologies for each state. Commenters stated the EPA's decision to set aggregate
state

- by

- state emission guidelines rather than subcategorized, nationally applicable guidelines contradicts all of the EPA's other section 111(d) guideline rules a s well as the legislative history of section 111(d). Commenters said o ther emission guidelines in part 60 of the existing EPA regulations establish nationally applicable emission guidelines based on adequately demonstrated, at

- the

- unit emission control tec hniques. Commenters stated t he levels that individual units must achieve do not vary based on the political jurisdiction in which they happen to have been built. Commenters said y et the NPRM would require EGUs with similar characteristics to meet different emission limits based on their host state. Commenters stated t his approach has no previous precedent and contradicts congressional intent for section 111, which was to eliminate disparities among states in the level of emission control that would be requi red of their major sources (Congress included section 111 so that EPA would set national emission standards that would "preclude efforts on the part of States to compete with each other in trying to attract new plants and facilities without assuring adequa te control of . . . large

- scale emissions therefrom."). Commenters said i n this instance, however, the EPA has effectively proposed BSER differently for Georgia, South Carolina, and Tennessee as compared to the other states. Commenters said the EPA has det ermined that completion of "under construction" nuclear units constitutes BSER for these few states where those projects happen to be under construction.217 Commenters stated the EPA does not have the authority to establish BSER on a state

- by

- state basis in t he manner the EPA has done here.

Commenters stated that EPA's proposal is also unlawful because it imposes dramatically different emission reductions obligations on each State. Commenters said section 111 is inherently a source

- based regulatory program and , to the extent that EPA seeks to administer the program directly, it must treat similarly situated existing sources in the same manner, regardless of the State in which they are located. Commenters said that by conducting its BSER analysis and proposing e mission reduction targets at a Statewide rather than source

- specific level, EPA is proposing a system where affected EGUs may be subject to different standards based solely on the fact that they are located in different States.

Commenters stated, the Act does not allow for EPA to set varying emissions rate targets among the states. Commenters said, section 111(d) outlines a process for EPA to establish a procedure, similar to the procedure under Section 110 (National Ambient Air Quality Standards ("NAAQS") of the Act, for the states to then implement and establish standards of performance. Commenters said, the Act, in either Section 111 or Section 110, does not command or allow EPA to establish state

- by

- state standards. Commenters said, rather, national sta ndards are established and then the states are tasked with implementing; there are no separate NAAQS standards for individual states.

Commenters stated, of course the NAAQS allow for regional differences in standards within discrete states for nonattainmen t standards. Commenters said, however, the process for establishing these regional standards and the reasons that they are established are further evidence that EPA cannot promulgate state

- by

- state rules as it has done in this Rule Proposal. Commenters sai d, first, there are entire sections of the CAA and associated rules contemplating rules for nonattainment areas to account from departures from national standards; this is not the case in Section 110. Commenters said, second, nonattainment areas (with emis sions standards departing from the national norm) are based on differences in the air quality in the region and are not based on differences in the generation technologies or the means or ability for those technologies to comply. Commenters said, for a glo bal pollutant such as CO2, there are no regional differences that would require any differentiation; EPA has acknowledged this fact. Commenters said, third, the thresholds and tiers of nonattainment limitations are consistent across the country; so a regio n with the same air quality concerns in Florida would have the same limitations as a similarly situated region in California. Commenters noted, again, this type of consistency is not provided for in this Rule Proposal. Commenters said, EPA's one alleged
at tempt at creating some kind of uniformity, EPA's flawed BSER analysis (discussed in greater detail throughout this letter), again is not driven by any air quality concerns, but rather is driven primarily by the existing generation mix of the state.

Comment ers stated, the practical effect of having different limits for each state is that EGUs of the same source category, potentially even the exact same EGU technology, sitting across state lines may ultimately be subject to wildly different, federally mandate d, emissions standards. Commenters said, this would depend on factors such as differences in those states' existing218 generation mix or the availability of natural gas or renewable resources. Commenters said, this would not depend, however, on the technology or operations implemented at those facilities. Commenters said, this type of arbitrary result is in direct contravention of Section 110 and the CAA as a whole.

Commenters stated the proposed rule places a higher burden on some states to achieve the requir ed reductions vis a vis other states, explaining that Florida's "state goal" under the proposed rule is one of the most demanding in the country while other states that have done relatively little in the way of reducing greenhouse gas emissions have far le ss demanding "state goals."

Commenters stated, the Proposed Rule would establish separate emission rate targets for every state, based on EPA's projections of the emission reductions the affected EGUs in each state could achieve through both at

- the

- unit and beyond

- the

- unit measures. Commenters said, in effect, EPA has subcategorized the fossil

- fueled boiler and gas turbine

- source categories based on the political jurisdiction in which the EGU is located. Commenters said, such a state

- by

- state approach is neither authorized by statute nor envisioned by EPA's regulations. Commenters said, rather, the legislative history of section 111(d), EPA's regulations, and previous court cases make clear that section 111(d) guidelines set nationwide performance levels t hat apply to all sources within a source category regardless of their location, unless EPA makes a supported finding that subcategorization

- based on factors other than political jurisdiction

- is appropriate.

Commenters stated, section 111(d) was origina lly conceived as section 114 of the Senate version of the 1970 CAA Amendments. Commenters said, as passed by the Senate, the provision that would become section 111(d) was captioned "National Emission Standards

- Selected Air Pollution Agents." Commenters said, it is apparent from this caption that the Senate intended to authorize EPA to establish nationwide emission limits that would not discriminate against existing stationary sources based on what state the affected sources happened to be located. Commen ters said, in the final version of the 1970 CAA Amendments, section 114 was combined with section 113 of the Senate bill, modified to give states a greater role in setting emission limits for existing sources, and incorporated into section 111 as subsectio n (d). Commenters said, although the final version of section 111(d) did not include the same caption as the Senate bill, the Conference Report made clear that Congress' intent was still that EPA would set national emission standards in order to "preclude efforts on the part of States to compete with each other in trying to attract new plants and facilities without assuring adequate control of . . . large

- scale emissions therefrom."

Commenters stated, the Act's subsequent legislative history confirms that section 111 was intended to create an even, national playing field for all sources within each source category. Commenters said, for example, Congress viewed uniform national standards to be necessary "to avoid situations in which industries could be lured to one State by relaxing emission standards or deadlines and away from other States with stricter standards" and "to avoid favoring some areas of the country over others . . . ." Commenters said, indeed, EPA itself argued, in 1975, that the absence of the word "national" from the caption for section 111 should not be taken as a sign that219 Congress had thought better of its decision to authorize "national criteria" for existing sources. Commenters said, finally, it is relevant that although section 111(d) sp ecifies that EPA must allow states to take into account, "among other factors, the remaining useful life" of individual sources, it does not authorize EPA to set state

- by

- state emission guidelines. Commenters said, section 111(b)(2)

- which authorizes EPA to subcategorize within new source categories

- likewise provides no indication that EPA may subcategorize based on political jurisdiction.

Commenters stated, EPA's implementing regulations for section 111(d) reflect the understanding that emission guidel ines are to be set on a source

- category

- wide basis, except where certain factors

- not including the state (political) jurisdiction in which a source is located

- make subcategorization appropriate. Commenters said, for example, EPA's regulations require E PA to issue a guideline "that reflects the application of the best system of emission reduction (considering the cost of such reduction) that has been adequately demonstrated for designated facilities"

- not for designated states or state economies. Commen ters said, the regulations also require EPA "specify different emission guidelines or compliance times or both for different sizes, types, and classes of designated facilities when costs of control, physical limitations, geographical location, or similar f actors make subcategorization appropriate." Commenters said, however, neither the statute nor the regulations allow EPA to treat similarly situated EGUs differently based solely on the state where they happen to be located.

Commenters stated, in light of clear Congressional intent that EPA's regulations under section 111 would set nationwide standards (with subcategorization where appropriate), EPA's failure to explain its authority for setting 49 different emission guidelines for 49 states is arbitrary,

c apricious, and contrary to law. Commenters said, although EPA can (and should) subcategorize among existing EGUs based on permissible factors such as cost, technology type, physical limitations, unit age, etc., EPA may not subcategorize based solely on the political jurisdiction in which the EGU is located. Commenters said, EPA's decision to do so by setting state

- by

- state emission goals thus exceeds its authority under the Act.

Commenters stated, the EPA has proposed a state

- by

- state emission rate for CO2 , which is a standard that cannot be monitored for compliance during operation. Commenter said the EPA is imposing a requirement on the state itself, rather than an emission standard for affected sources. Commenters said, in fact, it treats nearly identica l sources in different states very differently. Commenters said, rather than creating a standard for the NSPS regulated source, the EPA is creating a standard for the states, but the states are not sources under the CAA or EPA regulations. Commenters said, states are not listed in 40 CFR Part 60. Commenters said, moreover, the EPA's unequal and inequitable treatment of states vis

- a

- vis one another and sources within different states demonstrates the patent arbitrariness of the EPA's proposal and another rea son why it is unconstitutional.

Commenters stated, the EPA has created de facto source subcategories by state, but there is no legal basis for this. Commenters said, in its concurrent section 111(b) proposal the EPA states:220 Once the EPA has determined that a particular system or technology represents BSER, the EPA must establish an emission standard based on that technology.

Commenters stated, even if the EPA's 4

- Building Block approach were lawful, establishing 50 different emission rates is not only unpre cedented, but also it proves that the EPA has failed to determine a system that establishes an emission rate. Commenters said, while the Building Block approach has flaws of its own, these flaws are magnified by failing to apply the "particular system" uni formly. Commenters said, the Building Blocks get applied in whole or in part not because of any aspect of the affected sources the EPA is authorized to regulate under the CAA, but because of the current makeup of both regulated and non

- regulated electricit y producing and conserving facilities within a particular state.

Response 5 : The EPA disagrees with the commenters for the reasons discussed in section V.A. of the final rule preamble of the CPP.

Comment 6 : Commenters opposed state

- wide goals because they result in significant disparities among the states and different standards for similar EGUs; Commenters recommended the EPA set national goals.

Commenters argued that setting different CO 2 emission targe ts on a state

- by

- state basis would hold similarly situated EGUs located in different states to different emission reduction standards, even if they are identical EGUs built at the same time using the same technology, simply because of the availability of c ombined cycle natural gas facilities or renewable energy resources in the states where they are located.

Commenters argued that a central premise of any fair and reasonable regulatory scheme is that like sources should be treated similarly, and this is par ticularly true in the case of GHG emissions where the pollutant at issue is truly global in nature and there are no localized impacts that could justify treating similar sources differently. Thus, after taking into account remaining useful life and other r elated factors, commenters concluded that the standards of performance established under Section 111(d) should essentially apply uniformly to all existing sources, and EPA's proposed emission reduction targets fail to meet this requirement.

Commenters stat ed that the methodology by which EPA has determined BSER is flawed as it results in different targets (CO2 budgets) for each state, and therefore for EGUs in each state. Commenters stated that the historical implementation of Section 111(d) demonstrates th at Congress intended EPA to set BSER on a national basis. Commenters stated that EPA's proposed interpretation of BSER utilizing a methodology that results in such disparate standards for similar EGUs demonstrates that this approach is flawed and contrary to the plain reading of the CAA.

Commenters stated that section 111 standards to date have been designed to assure that units all over the country can meet the standards, i.e. the standards must be achievable by the affected221 sources. Commenters said, stand ards that are achievable for new sources have been set by EPA at the source, as required by Section 111(b), with sub

- categorization to assure that outcome. Commenters said, in the proposal for existing sources, EPA has set highly dissimilar binding goals f or the states, based on varying state BSER requirements resulting from the four BBs, in a manner that causes disparate cost and competitive impacts amongst the states. Commenters said, EPA's proposed state BSER goals vary from 11% to 72% emission rate redu ctions by 2030. Commenters said, some states can continue to operate most of their coal plants while other states are forced to close 90 to 100% of their coal plants, resulting in tremendous stranded investment costs which EPA failed to include in the cost accounting of the rule. Commenters said, this disparate treatment, concerning what are supposed to be state

- set standards that are achievable by existing units throughout the country, is arbitrary and capricious.

Commenters stated their major concern with the states' emission targets is that the supporting documentation do not reveal any rationale for the emission rates that are proposed. Commenters said, the rates assigned to individual states vary substantially and for reasons they find difficult to
comp rehend. Commenters believed that some states could conceivably be allowed to actually increase emissions of GHGs. Commenters provided eight examples of groups of states with widely varying emission reduction targets and stated that the examples are only so me their observations that they believed raise questions for which the proposal does not provide answers. Commenters said, the rationale of EPA appears to be an acknowledgment that each state is different and faces different challenges and opportunities fo r reducing GHG emissions. Commenters argued that the Clean Air Act does not authorize the EPA to “invent a plan for reducing emissions from existing sources without actually imposing requirements on existing sources and then allocate obligations to each of the states based on what in some opinion of EPA each state is capable of accomplishing.”

Commenters stated, EPA fails to justify its assignment of unequal carbon reduction targets to different states and does not adequately address the implications of th is unequal treatment.

Commenters stated, the EPA has assigned a 2030 emissions goal of 772 lbs/MWh to South Carolina. Commenters said, the average emission rate across the county in 2030 is 1016 lbs/MWh. Commenters said, South Carolina starts with 1587 lb s/MWh (above the national average of 1474 lbs/MWh) and is required to reduce CO2 emissions by the largest amount (815 lbs/MWh) in the country. Commenters said, the 772 lbs/MWh required of South Carolina is far below the 1100 lbs/MWh new source standard in the Section 111(b) rulemaking governing NEW fossil plants. Commenters said, the irrational result of the EPA formula applied to South Carolina is that the existing plants (which are the subject of this rulemaking) are required to be less carbon intensive t han new plants. Commenters said, the state

- based, rather than source

- based, implementation plan proposed by the EPA results in the outcome that similar existing generation resources will be treated drastically different. Commenters said, this is contrary t o the legislative history of 111(d) which was intended to create a uniform national standard which would "avoid situations in which industries could be lured to one State by relaxing emission standards or deadlines and away from other states with stricter standards ...." Commenters said, since each state has been treated differently, it is likely that each state may treat EGUs differently.222 Commenters said, it is possible under this proposed scenario that EGUs similarly situated will be treated differently, resulting in winners and losers among the EGUs, and winners and losers among the states. Commenters said, rather than providing a comprehensive national standard as it has done for new generators, the EPA has chosen to arbitrarily assign emission reduction goals among the states and some states, including South Carolina, are bearing a disproportionately difficult burden. Commenters said, although EPA is allowed to subcategorize among existing EGUs based on permissible factors such as cost, technology type, physical limitations, unit age, etc., EPA may not subcategorize based solely on the political jurisdiction where an EGU happens to be located. Commenters said, this unfair, arbitrary and unauthorized implementation plan is inconsistent with 111(d) and in e xcess of the authority granted to the EPA under the Clean Air Act.

Commenters stated the use of the states as the basis for the carbon targets is problematic because it creates considerable inequities between states in terms of the level of reductions req uired. Commenters stated further, it ignores the basic facts that most operating companies have generation in multiple states, and regional transmission organizations like PJM and MISO also operate in multiple states.
Response 6: For the reasons discussed in section V.A of the final rule preamble of the CPP, the final rule addresses this concern by establishing emission guidelines based on uniform nationwide limits on steam generators and combustion turbines.

The final rule applies the applicable building blocks uniformly to steam EGUs and to combustion turbines within the three Interconnections, and establishes uniform source subcategory

- specific emission performance rates for steam EGUs and for combustion turbines.

Comment 7: By imposing binding emission reduction targets on a state

- wide rather than source

specific basis, EPA is inviting the States to impose inconsistent obligations on individual facilities in their implementation plans.

Commenters stated that by imposing binding emission reduction target s on a Statewide rather than source

- specific basis, the EPA is inviting states to impose inconsistent obligations on individual facilities in their implementation plans. Commenters said the EPA appears to take the position that States will have complete di scretion to impose emission reduction obligations solely on affected EGUs or on a broader range of affected facilities through a "portfolio" approach. Commenters said nowhere does EPA indicate that States must treat similarly situated EGUs in a similar fas hion.

Commenters stated for example, States could potentially impose more stringent emission limits on certain coal

- fired EGUs in an attempt to dictate which facilities within a State will be forced to close. Commenters said this is of particular concern i n States that export significant amounts of electricity. Commenters said that by targeting companies that export significant portions of their generating capacity with larger emission reduction obligations, States could effectively223 export the costs of comp liance to rate payers in neighboring States, while minimizing the in

State effects of the rule. Commenters said an approach that shifts compliance costs to out

- of

State rate payers would embody the type of economic protectionism that national pollution

con trol programs are designed to avoid. Commenters said that imposing source

- specific standards of performance on affected EGUs would avoid the temptation for States to impose differing standards on similarly situated EGUs in an effort to protect their own re sidents and export the costs of complying with the rule.

Commenters stated that EPA's approach has no precedent in EPA's prior Section 111(d) actions. Commenters stated that, in most if not all cases, the result is likely to be a substantial variation in the degree of control required for particular sources, rather than identical standards for all sources." Commenters stated that 40 Fed. Reg. at 53,343. Commenters stated that under the Agency's own Subpart B rules (i.e., 40 C.F.R. Section 60.20

- 60.29), S tates have considerable flexibility to deviate from EPA's emission guidelines in adopting plans and emission standards. Commenters stated that states may apply "less stringent emissions standards or longer compliance schedules" to particular facilities or classes of facilities if the costs of adopting the standards suggested by the emission guidelines would be unreasonably costly, physically impossible, or for other reasons. See 40 C.F.R. Section 60.24(f)(1)

- (3).

Response 7: We disagree with the commenters . As discussed in section V.A of the final rule preamble of the CPP, t he final rule addresses these comments by adopting weighted

- average state goals that reflect the application of uniform CO 2 emission performance rates for affected steam EGUs and affect ed NGCC units located in each state. For the reasons discussed in section V.B.6 of the preamble, States have broad discretion in assigning emission limits to their individual sources under CAA section 111(d)(1).

Comment 8 : Commenters supported state

- wide performance levels and stated that they are reasonable and consistent with EPA’s authority under the Clean Air Act.

Commenters stated, they strongly support EPA's decision to propose state goals in the form of average performance levels that ref lect state

- wide application of the BSER. Commenters said, as EPA recognizes in the preamble this approach has clear policy advantages. Commenters said, because CO2 is a dispersed pollutant whose effects on the atmosphere are the same regardless of where it is emitted, EPA's averaging approach is as environmentally effective as an alternative approach establishing guidelines specific to particular EGUs. Commenters said, at the same time, the averaging approach allows each state valuable flexibility to determ ine the most locally appropriate mix of measures to reduce carbon pollution

- and to establish standards of performance for individual EGUs that recognize the unique circumstances of specific facilities. Commenters said, for example, the proposed state

- wid e averaging approach automatically takes into account reductions in carbon intensity associated with shifting generation from high

emitting EGUs to lower

- emitting facilities, and allows states to flexibly adjust the amount of dispatch shift that occurs in their generating fleet both geographically and over time.224 Commenters said, similarly, the statewide averaging approach allows states to themselves put in place flexible, averaging compliance frameworks to capture emission reductions attributable to

zero

- em itting resources, such as renewables. Commenters said, lastly, the state

- wide averaging approach is also compatible with existing state programs, such as renewable portfolio standards and emissions trading programs, which could be incorporated into state p lans and used to meet the state goals. Commenters said, given the interconnected nature of the power sector and the fact that the most cost

- effective, well

- established techniques for reducing carbon pollution from existing EGUs rely on reducing aggregate e missions from the power sector, EPA's approach is eminently reasonable.

Commenters stated, EPA has appropriately determined that a more flexible averaging system best satisfies the statutory factors in the unique context of carbon pollution from the power sector. Commenters said, flexible averaging programs implemented under the Clean Air Act and by states and companies have demonstrated that they can significantly lower the cost of cutting pollution because they facilitate capture of the lowest

- cost emissi on reduction opportunities. As an example, the commenters stated that a recent survey of economic research found that the Clean Air Act's flexible Acid Rain Program has achieved "a range of 15

- 90 percent savings, compared to counterfactual policies that sp ecified the means of regulation in various ways and for various portions of the program's regulatory period." (see Gabriel Chan, Robert Stavins, Robert Stowe & Richard Sweeney, The SO2 Allowance Trading System and the Clean Air Act Amendments of 1990: Refl ections on Twenty Years of Policy Innovation, at 5 (2012), available at http://belfercenter.ksg.harvard.edu/files/so2

- brief_digital4_final.pdf.)

Commenters said, in the context of carbon pollution standards for existing power plants, a flexible averaging framework that rigorously quantifies the emission reductions achieved via increased utilization of lower and zero

- emitting generation and investments in demand

- side energy efficiency can achieve very substantial carbon pollution reductions cost

- effectively while enabling proactive management of generation capacity and enhancement of grid reliability. Commenters said, indeed, a flexible system will facilitate efficient compliance not only with the Clean Power Plan but also with other applicable air quality a nd energy regulations, allowing states and companies to make sensible investments in multi

- pollutant emission reductions and clean, safe, and reliable electricity infrastructure. Commenters said, such a system will enable states to consider the "remaining useful life" of sources as the Clean Air Act provides and optimize investments in existing and new generation to secure the necessary emission reductions. Commenters said, a flexible system that facilitates a variety of emission reduction pathways is also the system already being deployed by a number of states and companies, mobilizing innovative emission reduction measures and securing significant reductions in carbon pollution. Commenters said that some have suggested that the general Clean Air Act defini tion of "standard of performance" in section 302(l) also applies in the context of section 111, and precludes an averaging approach because it requires "continuous emission reduction." Id. section 7602(l). The commenters thought it is unlikely that the sec tion 302(l) definition applies given that Congress provided a specific and different definition of the term "[f]or purposes of" section 111, 42 U.S.C. section 7411(a). However, the commenters noted that even if section 302(l) were found to apply,225 an averag ing approach qualifies as "a requirement of continuous emission reduction" per the section 302(l) definition because covered sources must collectively achieve the emission limitations, which apply continuously. Even in a flexible program, commenters argued , each source meets its obligations continuously. Under an averaging framework, commenters asserted, each source must secure the emission reductions needed, onsite or from other plants, to continuously be in compliance with the standard. Commenters also no ted that the generally applicable definition of "emission standard" in section 302(k) likely does inform the otherwise undefined phrase "standard for emissions" within the definition of "standard of performance" in section 111(a)(1). See 42 U.S.C. section 7416 (referring to an "emission standard or limitation . . . under section 7411"). A section 302(k) "emission standard" or "emission limitation" is defined as "a requirement . . . which limits the quantity, rate, or concentration of emissions of air pollut ants on a continuous basis." Id. section 7602(k) (emphasis added). Commenters believed an averaging approach qualifies as an "emission standard" or "emission limitation," because covered sources must meet a limitation that applies continuously. Commenters noted that Congress used the term "emission limitation" in 1990 to describe its Acid Rain Program. See id. sections 7651b(a)(1), 7651c(a).

Commenters said, EPA's proposed approach is also fully consistent with the Clean Air Act. Commenters said, first, as the preamble explains, section 111(d) itself does not preclude EPA's emission guidelines from applying the BSER on a state

- wide basis or expressing the guidelines as an average performance level for each state. Commenters said, EPA issues emission guidelin es as part of its statutory responsibility under section 111(d) to ensure that state plans are "satisfactory," in that they establish, implement, and enforce "standards of performance" that reflect EPA's judgment as to the BSER for existing sources. Commen ters said, the statute does not preclude the emission guidelines from specifying an average level of performance that reflects the BSER, and that sets the degree of stringency that will be required for "satisfactory" state plans. Commenters said, EPA's pro posed approach is an appropriate application of the broad language of section 111(a)(1) and (d) to the unique circumstances affecting the power sector, which as noted above consists of a diverse population of interconnected sources.

Commenters stated, EPA' s proposal is consistent with the way EPA (and the courts) have flexibly applied the Clean Air Act to complex source categories, including the power sector. Commenters said, under section 110(a)(2)(D) of the Clean Air Act, for example, EPA has adopted a se ries of rulemakings that limit interstate transport of NOx and SO2 from the power sector by establishing state

- wide emission budgets based on state or regional application of pollution control measures. Commenters said, in the case of the 1998 NOx SIP Call , these budgets were based on IPM modeling of a multi

- state emissions trading system designed to achieve an average emission rate expressed in pounds per unit of heat input

- taking into account changes in dispatch and other measures available to reduce ag gregate NOx emissions from the power sector. Commenters said, similarly, EPA's 2011 Cross State Air Pollution Rule

- recently upheld by the Supreme Court as a "permissible, workable, and equitable interpretation" of section 110

- established state

- wide bud gets for NOx and SO2 that were based on power sector modeling of emission reductions achievable through "increased dispatch of lower

- emitting226 generation" and fuel

- switching, among other compliance options. Commenters said, in both of these major power sect or rulemakings, EPA established state

- wide emission targets that reflected system

- based measures to achieve aggregate emission reductions from the power sector

- just as EPA proposes to do here.

Commenters stated, in addition, the Clean Air Act provides t hat the procedure for establishing standards of performance for existing sources under section 111(d) is to be "similar" to that of section 110, and section 110 expressly provides that emission limitations and control measures can include "fees, marketable permits, and auctions of emissions rights." Commenters said, the direct link to section 110 thus further reinforces the appropriateness of such flexible approaches under section 111(d). Commenters said, EPA has also applied averaging approaches extensivel y in setting emission standards for mobile sources and fuels. Commenters said, under Title II of the Clean Air Act, EPA has long interpreted its authority to establish "emission standards" for motor vehicles to allow for average standards that apply to bro ad categories of vehicles and engines. Commenters said, in promulgating its first particulate matter and NOx emission standards for heavy duty vehicles in 1985, EPA defended the averaging concept as "fully consistent with the technology

- forcing mandate of the Act" and essential to establishing rigorous standards for a diverse group of sources. cited Control of Air Pollution from New Motor Vehicles and New Motor Vehicle Engines; Gaseous Emission Regulations for 1987 and Later Model Year Light

Duty Vehicles , and for 1988 and Later Model Year Light

- Duty Trucks and Heavy

- Duty Engines; Particulate Emission Regulations for 1988 and Later Model Year Heavy

- Duty Diesel Engines, 50 Fed. Reg. 10,606 (Mar. 15, 1985) (describing averaging system and noting that it is s imilar to the averaging system established for light

- duty vehicles and trucks in 1983). quoted the following from these sources: "Private and state sponsored environmental groups, as well as the Manufacturers of Emission Controls Association (MECA), claim ed that averaging as proposed was inconsistent with EPA's responsibility under section 202(a)(3)(A)(iii) of the Act to set standards that require use of the best technology that is expected to be available at the time the standards are implemented" The Age ncy finds the averaging concept, as applied by the standards promulgated, to be fully consistent with the technology

- forcing mandate of the Act. Particulate trap technology is heretofore untried on the fleet level. EPA believes that the 0.25 g/BHP

- hr stand ard which, through averaging, effectively requires use of traps on 70 percent of all heavy

duty vehicles will significantly reduce the risk of widespread noncompliance while allowing manufacturers to gain valuable experience with this new technology. To pr omulgate this standard without allowing averaging. . . would increase the technological risk associated with the standard because traps would have to be used in even the most difficult design applications."

Commenters said, the D.C. Circuit specifically up held EPA's use of averaging in those standards

- noting the "absence of any clear evidence that Congress meant to prohibit averaging" and the reasonable policy arguments EPA advanced in favor of the approach. Commenters said, similarly, EPA's regulations p hasing out lead in gasoline took the form of an average standard for the "total pool" of gasoline produced by each refiner; EPA's assumption that refiners would participate in a yet

- to

- be created inter

- refinery credit trading system, which was integral to the stringency of the standard, was likewise upheld by the D.C. Circuit. Commenters said that the227 early standards were also upheld by the D.C. Circuit, see Ethyl Corp. v. EPA, 541 F.2d 1 (D.C. Cir. 1976), and Congress effectively ratified EPA's approach in 1977 by enacting a special provision for small refiners prescribing maximum levels of stringency for average lead limits.

Commenters stated, thus, average standards such as those proposed in the Clean Power Plan are a time

- tested regulatory approach under the Clean Air Act and a reasonable application of the ambiguous language of section 111. Commenters said, in the context of section 111 and greenhouse gas emissions, a flexible system that enables a wide variety of available solutions to achieve rigorous and cost

- effective carbon pollution reductions manifestly fulfills the statutory criteria for the "best" system.

Response 8 : The EPA agrees with the commenters. However, as discussed in section V.A of the preamble, t he final rule adopts weighted

- average st ate goals that reflect the application of uniform CO 2 emission performance rates for affected steam EGUs and affected NGCC units located in each state.

Comment 9 : Commenters supported the EPA’s proposal to establish differentiated performance standards on a state

- by

- state basis.

Commenters stated, it is reasonable for the EPA to establish different performance standards (or targets) for each state in order to reflect differences in the states' current electric generation mixes and future emission reductio n capabilities. Commenters said, existing EGUs differ from other types of sources previously regulated under section 111(d) in several important respects. Commenters said, most source categories covered by past section 111(d) guidelines have consisted of s mall numbers plants operating independently at significant distances from one another, and emitting pollutants with localized impact. Commenters said, state

- by

- state target differentiation did not arise as an issue for these source categories.

Commenters s tated, in contrast, there are more than 1500 fossil

- fueled EGUs that are functionally interconnected and interdependent in the electric grid, and they emit carbon dioxide, a pollutant that mixes uniformly in the atmosphere on a national and global basis. C ommenters said, further, the distribution of fossil

- fueled EGUs differs from state to state, with some states having predominantly coal

- fired units, others having predominantly gas

- fired units, and others various mixes in between. Commenters said, in addit ion, the distribution of system

- wide emission reduction opportunities from non

- fossil generating resources (renewables, nuclear, hydro) and energy savings investments also varies from state to state.

Commenters stated, in this context

- and especially sinc e section 111(d) provides for state

- by

state implementation

- it is reasonable for EPA to aggregate fossil

- fueled EGUs by state and set differentiated targets on a state

- by

- state basis. Commenters said, this approach solves a significant problem with respe ct to the uneven distribution of types of EGUs: framing targets in terms of reduction from a baseline year, and differentiating those targets across the states makes228 it feasible to cost

- effectively obtain the most CO 2 reductions across the system. Commente rs said, EPA's choice to set differentiated standards by state in this manner is reasonable.

Response 9: The EPA agrees with the commenters. As discussed in section V.A of the final rule preamble of the CPP, t he final rule addresses these comments by adopt ing weighted

- average state goals that reflect the application of uniform CO 2 emission performance rates for affected steam EGUs and affected NGCC units located in each state.

Comment 10 : Commenters agreed the EPA has authority under CAA section 111(d) to use a sector

- based approach to determine the BSER on a state

- wide basis

Commenters supported the EPA’s approach for determining and applying BSER on a state

- wide basis. Commenters said that the EPA has set forth adequate and sound legal bases for its
appr oach in the preamble and the Legal Memorandum.

Response 10 : The EPA disagrees with the commenters for the reasons discussed in section V.A of the preamble.

Comment 11 : Commenters stated that there is no technical basis for basing emissions on state boundaries and that there should be national standards that do not categorize EGUs based on location.

Commenters stated that previous rules and legislative history support a nationwide performance guideline. Commenters stated that EPA's proposal to establish different emission performance targets for existing EGUs based solely on the political jurisdiction in which they are located represents a break with the agency's previo us interpretations of section 111(d) and appears to be precluded by the legislative history of this provision. Commenters stated that in the past, EPA has always established uniform emission guidelines for existing sources that prescribe emission targets f or individual categories or subcategories of stationary sources on a nationwide basis.

Response 11 : The EPA disagrees with the commenters for the reasons discussed in section V.A of the final rule preamble of the CPP.

Comment 12 : Commenters stated that there is no precedent for the proposed approach of setting
state

- wide emission rates under CAA section 111(d).

Commenters stated that EPA ignores the precedence set by all of its previous guidelines wherein the EPA set source

- category emission rates that could then be tailored by each State to fit the individual sources within the State. Commenters noted that the approach the EPA followed in its229 previous guidelines allows states to make exceptions for specific "facilities or classes of facilities" and to take into account the remaining useful life of the source and other factors (see 40 CFR Section 60.24(f)). Commenters stated that EPA has never before set mandatory State

wide emission rates under Section 111(d). Commenters stated that there is no preceden t under the EPA's historical practice or its own implementing regulations for the approach the Agency has proposed for the CPP.

Response 12 : The EPA disagrees with the commenters for the reasons discussed in section V.A of the final rule preamble of the CPP.

Comment 13 : State

- by

- state emission goals are impractical for Tennessee Valley Authority

Commenters stated the EPA's proposal to esta blish state

- by

- state emission goals is impractical for the Tennessee Valley Authority (TVA) because it fails to recognize that some of TVA's generating units are located in a seven

- state region and operates as one integrated generation and transmission sys tem. State

- by

- state environmental controls, the commenters argued are not feasible for TVA because they would impair reliability of electric power supply.

Response 13 : As discussed in section V.A of the final rule preamble of the CPP, t he final rule addres ses these comments by adopting weighted

- average state goals that reflect the application of uniform CO 2 emission performance rates for affected steam EGUs and affected NGCC units located in each state.

Comment 14 : Commenters expressed concerns with EPA's overall framework for establishing the "best system of emission reductions" (see UNS Comments); however, Commenters stated that EPA should be consistent in its application of the framework as it applies to states, U.S. territories and areas of Indian count ry.
Response 14 : For EPA’s response to this comment please see section V.A of the final preamble for the CPP.

1.10.7 Severability

Comment 1: EPA does not have authority to assert that the building blocks are not severable.

Commenters questioned whether or stated that, an agency declaration that a regulatory provision is severable only gives rise to a presumption of severability and that the ultimate decision on severability must be made by a court, not EPA. Commenters said, in INS v. Chadha, the230 Supreme Court explained that the "the invalid portions of a statute are to be severed unless it is evident that the Legislature would not have enacted those provisions which are within its power, independently of that which is not." C ommenters said, put another way, a statute is severable if what would remain after severance is "fully operative as a law." Commenters said, by contrast, "if the balance of the legislation is incapable of functioning independently" once the unlawful portio n is stricken, a court must presume that the provision was not intended to stand alone.

Commenters stated, the standard for severability as established in Alaska Airlines, Inc. v. Brock is clear: courts must first determine whether Congress intended the p rovisions to operate separately, and then whether the provisions can function separately if it did. Commenters said, the same standard of severability applies to regulations. Commenters said, the Section 111(d) rule cannot satisfy the Alaska Airlines two

- p rong test.
Commenters said, this is an invalid and illegal approach to establishing BSER, because it intentionally places the court in the role of regulator

- effectively making the courts choose whether to raise or lower emissions limits in the Rule. Com menters said, EPA cannot assign the role to the courts to piece together this Rule Proposal, but rather, the Rule must be reviewed in whole and cannot be broken apart at the judicial level.

Response 1: T he D.C. Circuit has long held that “[w]hether an admi nistrative agency’s order or regulation is severable . . . depends on the issuing agency’s intent.” North Carolina v. FERC, 730 F.2d 790, 795

- 96 (D.C. Cir. 1984); see Davis Cnty. Solid Waste Mgmt. v. EPA , 108 F.3d 1454, 1459 (D.C. Cir. 1997). In this rulemaking, the EPA has expressed its clear intent, and explained its determination, that in the event a building block were invalidated, the remaining combinations of building blocks would continue to constitute the “best system of emission reduction.” Wi th the exception of building block 1 acting in isolation

– as noted below

– all remaining combinations of the building blocks would be functional, cost

- effective means of reducing emissions of CO 2 from affected EGUs. Because the BSER reflects those measure s that the EPA has determined are achievable, cost

- effective, and demonstrated approaches for reducing emission from affected EGUs , the EPA believes all three building blocks are lawful and will withstand judicial scrutiny.

Comment 2: Building blocks are not severable because they do not operate independently.

Commenters stated, the building blocks cannot function independently and are not severable, so the invalidity of any one of them requires that they all be stricken. Commenters said the Proposal's BS ER requirements are interrelated and the final emissions targets are dependent on each block being implemented.

Commenters said, for example, EPA asserts that if reductions under one Building Block do not materialize, the necessary emission reductions mus t come from the other Building Blocks. Commenters said, that means the Building Blocks are not independent, but are closely and231 inextricably related. Commenters stated, further, it is not clear from the proposal whether EPA would in fact have relied on rem aining Blocks as "BSER" once invalid Blocks were stricken.

Commenters said, U.S. EPA is setting state goals based on what is achievable from a national perspective and not looking at individual state characteristics such as sufficiency of the natural
gas p ipeline or what HRIs have already occurred at specific units. Commenters said, if the combination of the four building blocks is the "best system" that has been "adequately demonstrated," severing one or more of the building blocks would result in a system that cannot be considered the "best" or to have been "adequately demonstrated." Commenters said, if any single building block is invalidated, the perceived "flexibility" being afforded to states under this approach becomes more strained, the goals may be unachievable, and the entire plan must be revised.

Commenters noted for instance, operating a coal

- fired EGU at sub

- optimal levels (a result of applying any or all of Building Blocks 2 through 4) will adversely affect its heat rate, thus hindering it from achieving the emission reductions required under Building Block 1. The commenters said, EPA has not explored these interrelationships in the preamble, because it simply assumes all four Building Blocks will be finalized. Several commenters said, if one or more of the Blocks is invalid, the entire system must be revised or stricken, performance goals adjusted, and EPA must properly assessed whether the remaining Block or Blocks still constitute BSER.

Commenters said, when discussing severability in the prop osed modified and reconstructed source rule U.S. EPA cites to a court case "holding that a regulation was severable because '[t]he severance and invalidation of [the subsection at issue would] not impair the function of the statute as a whole . . . ." Comm enters said, it is no wonder that U.S. EPA does not try to apply the holding of that case to this proposed rule. Commenters said, because U.S. EPA considers the "best system" to be a combination of the four building blocks, severing one can only be viewed as impairing the function of Section 111(d) as a whole under U.S. EPA's conception of the
statute.
Response 2: The EPA respectfully disagrees with these comments. B ecause all of the building blocks can be implemented independently, the building blocks are severable and the invalidation of one would not affect the legality or functionality of the others (the only exception is the application of building block one in isolation, as noted below). The EPA also notes that in the event a building block were invali dated, the rule’s emission limits would not remain fixed, but would rather reflect the emission reduction opportunities available from the remaining building blocks only. The CO 2 Emission Performance Rate and Goal Computation TSD for Final Rule provides ap propriate data and analysis to compute state goals under any combination of the building blocks, in the event a building block were invalidated.

The fact that the EPA has determined that the interconnected operation of all three building blocks constitutes the “best system of emission reduction ” established by this rulemaking does not undermine the severability of the building blocks. Were a building block invalidated by the232 court, the “best system” selected and promulgated in this final rule would no longe r be available as a means of reducing emissions. However, the EPA has concluded that the resulting combinations of the building blocks would continue to be the “best” system out of the options remaining to the agency. Accordingly, although the building blo cks would be most effective when implemented together, the building blocks are severable because each building block is a feasible and demonstrated means of reducing CO 2 emissions from the utility power sector, and each can be implemented independently of the other building blocks. The only exception is building block 1 in isolation: in light of the “rebound effect” described in sections V.A.4.a. and 4.d of the final rule preamble, the EPA believes that building block 1, if applied alone, would not constitu te the BSER.

The EPA also disagrees that the invalidation of one building block would strain the flexibility afforded states and affected sources under the final rule. In the event one of the building blocks were invalidated, compliance flexibility would l ikely expand rather than contract given that strategies in the invalidated building block would likely still be available for compliance with the resulting standards. For these reasons, the EPA does not believe that invalidation of a piece of this proposal would impair the function of the program as a whole or would require a revision to the approach taken in this rulemaking.

Comment 3: EPA's proposed severability approach affects the achievability of BSER and is unworkable in practice.

Commenters said, EPA calculated each state's CO2 emission standard using all four building blocks, so if any one of the building blocks is struck down, EPA will have to reassess each state's emission standard, and this weighs against severability.

Comment ers said EPA's contention that revised state goals could be computed after the fact by using the Goal Computation Technical Support Document and the enormous preamble is unworkable.

Commenters said, compliance strategies may be completely upset should a B B be determined illegal. Commenters said, consider a scenario where a state chooses to meet the obligation of all four BBs by transitioning from existing coal to new NGCC generation. Commenters said, should BB 2 be determined to be illegal but the other BB s are maintained, then the state's ability to comply with the existing goals is highly unlikely.

Commenters indicated that EPA should provide a clear description of how it will adjust the state

specific performance goals in the event that a building block is removed. Commenters indicated that without this planning, uncertainty, delayed program implementation and implementation of source compliance measures would result.

Response 3: While the fact that the invalidation of one building block would require n ew computations as to the uniform rates and state goals expressed in this final rule, the EPA does not233 believe that this weighs against severability. Re

- computation would be a purely technical exercise and the EPA has provided appropriate data and analysis to allow for the computation of interim and final state goals under any combination of the building blocks in the CO2 Emission Performance Rate and Goal Computation TSD for Final Rule. This would be a manageable administrative exercise that does not defea t the functionality of the building blocks or the EPA’s intent that the recombined building blocks would continue to represent the “best system of emission reduction . . . adequately demonstrated.

In the event a building block were invalidated after the s ubmission of state plans, the EPA would work with states to ensure the swift and efficient implementation of the adjusted standards of performance. However, the EPA does not anticipate significant disruption to state plans, as the emission reductions from the invalidated building block would likely still be available for compliance with the adjusted standards.
Further discussion of the independent bases for each of the building blocks and their severability can be found in sections V.A.4, V.A.7, and VI.C.1 .d of the final rule preamble.

Comment 4: Commenters were concerned that justifications based on flexibility provided by the incorporation of other building blocks undermine the severability of the components. Commenters said, each building block should be justified on the technical achievability, availability, and cost of the measures within that building block, not on flexibility provided by other building blocks to ensure each withstands judicial scrutiny.

Response 4: Although the building blocks wou ld be most effective when implemented together, the EPA believes each building block is a feasible and demonstrated means of reducing CO 2 emissions from the utility power sector, and each can be implemented independently of the other building blocks. A dis cussion of the independent bases for each of the building blocks can be found in section V.A.4, V.A.7, and VI.C.1.d. of the final rule preamble. Moreover, the measures that constitute the BSER do not encompass all possible means of reducing emissions or

co mplying with the standards of performance. Significant flexibility is afforded states and affected EGUs when seeking to comply with the standards of performance set through the application of the BSER; in the event one of the building blocks were invalidat ed, compliance flexibility would likely expand rather than contract given that strategies in the invalidated building block would likely still be available for compliance with the resulting standards.

Comment 5: Commenters stated, the EPA should clarify its intent regarding building blocks to be severable. Commenters notes that EPA expects that, for any particular state, even if the application of the measures in one building block to that state would not produce the level of emission reductions reflected in the EPA's quantification for that state, the state will be able to reasonably implement measures in other of the building blocks more stringently, so that the state would still be able to achieve the proposed goal. Commenters asked, does the EPA mean that an234 emission limit will be recalculated should a building block be determined unlawful or does it mean an emission limit is fixed and the remaining building blocks may be used to meet the emission limit?

Commen ters said, if any of the Building Blocks is invalid, EPA must revisit the entire structure of its proposal. Commenters said, at a minimum, EPA must recalculate state emission reduction targets, since the targets assume the validity and implementation of al l four Building Blocks.

Response 5: The rule’s emission limits would not remain fixed if a building were invalidated, but would rather reflect the emission reduction opportunities available from the remaining building blocks only. The CO 2 Emission Performa nce Rate and Goal Computation TSD for Final Rule provides appropriate data and analysis to compute state goals under any combination of the building blocks, in the event a building block were invalidated.

Comment 6: New notice and comment will be necessa ry if a building block is removed.

Commenters stated, if one or more of the building blocks were determined to be invalid and EPA either proceeded to enforce the goals using the remaining building blocks or recalculated and applied new goals without going through a new notice and comment process this would be unlawful, arbitrary and capricious.

Response 6: The EPA does not believe re

- computation of the standards of performance in the event a building block is invalidated would require additional opportunity for notice and comment. The EPA has already taken extensive comment on the operation of each of the building blocks individually. In addition, the proposed rule explicitly requested comment on systems of emission reduction employing only a subset of the b uilding blocks included in the original proposal.

Comment 7: Intent to make the Building Blocks severable is sound based on court precedence.

Commenters stated, agency intent is the touchstone as to whether a regulation or other agency action is severable. Commenters said, in Davis, operators of existing municipal waste combustor ("MWC") units which had municipal solid waste ("MSW") capacities b elow 250 tons/day, but which were located at a plant with an aggregate MSW capacity above 250 tons/day, challenged EPA's 1995 standards under Sections 111 and 129 of the Clean Air Act. Commenters said, in its initial opinion, the D.C. Circuit vacated the 1 995 standards in their entirety; however, on EPA's petition for rehearing on the remedy, the Court held that the standards would be vacated only as applied to small MWC units and cement kilns, leaving the performance standards and emission guideline for la rge units other than cement kilns in place. Commenters stated, the Court inquired whether EPA intended the regulation to be severable, and whether there was "substantial doubt" that EPA would have adopted the severed portion on its own. Commenters said, th e Court found235 that EPA intended the regulation to be severable, because it was "clear that the EPA would have adopted the standards for large MWC units even without the standards for small MWC units and cement kilns." Commenters said, the Court noted that "[t]he 1995 standards for large and small MWC units [were] not in any way "intertwined," [and that] they operate[d] entirely independently of one another." Id. at 1459. Commenters said, the inclusion of a severability clause in a regulation creates a presu mption that an invalid portion is severable.

Commenters stated, where an agency intends the provisions of a rule to be severable, invalidation of one provision does not warrant invalidation of the entire rule as long as the remaining provisions can operat e sensibly without the stricken provision.

Response 7: The EPA agrees with these comments and appreciates the commenters support. The comment contains useful information that we incorporate into the record of this rulemaking. Severability is discussed in the final rule preamble in section V.A.7.

Comment 8: Intent to make the building blocks severable is sound because building blocks operate independently.

Commenters stated, the proposed building blocks operate independently of one another, and that EPA has analyzed each building block individually, providing an assessment of technical potential, costs, and a description of data inputs used as the basis for the computation of the proposed state goals. Commenters said, EPA has also explained why each of the individual building blocks meets the statutory factors to qualify as components of the BSER under the agency's first BSER approach, and why each of the building blocks can serve as the basis for quantifying the amounts of red uced utilization from affected EGUs under its second BSER approach. Commenters stated, in addition, EPA’s proposed computation methodology adds each of the building blocks to the formula separately, calculates the 2012 emission rate for covered
sources, an d then adjusts the formula to reflect the application of each building block. Commenters provided additional details on the steps EPA followed. Commenters said, the proposal itself provides EPA's intent that the various building blocks be severable.

Respo nse 8: The EPA agrees with these comments. Although the building blocks would be most effective when implemented together, the building blocks are severable because each building block is a feasible and demonstrated means of reducing CO 2 emissions from the utility power sector, and each can be implemented independently of the other building blocks. The only exception is building block 1 in isolation: in light of the “rebound effect” described in sections V.A. 4 .a. and 4.d of the final rule preamble, the EPA believes that building block 1, if applied alone, would not constitute the BSER. Further discussion of the independent bases for each of the building blocks and their severability can be found in sections V.A.4, V.A.7, and VI.C.1.d of the final rule preamb le. The CO 2 Emission Performance Rate and Goal Computation TSD for Final Rule provides appropriate data and analysis to compute state goals under different combinations of the building blocks.236 Comment 9: The Clean Power Plan can operate without one or more of the Building Blocks

Commenters said the rule can operate sensibly even with the invalidation of one or more of the building blocks. Each building block independently accomplishes some level of carbon dioxide reduction, and each can operate regardless of whether any of the others are in place. Commenters said, because the goal computation formula is additive, EPA can easily recalculate the state goals to reflect any invalidation of one or more building blocks.

Response 9: The EPA agrees with these comme nts. The EPA only notes that in light of the “rebound effect” described in sections V.A.4.a. and 4.d of the final rule preamble of the CPP, the EPA believes that building block 1, if applied alone, would not constitute the BSER. Further discussion of the i ndependent bases for each of the building blocks and their severability can be found in section V.A.4, V.A.7, and VI.C.1.d. of the final rule preamble.

1.10.8 Achievability

Comment 1: Commenters stated, section 111 requires the best system of emissions reduction to be adequately demonstrated. Commenters said, the goals that EPA sets in the proposed rule are so unrealistically aggressive that no credible claim can be made that their fea sibility has been adequately demonstrated. Commenters said, block one, heat rate improvement at coal fired power plants seeks a six percent improvement. Commenters said, this is based upon EPA's review of literature, particularly a 2009 report. Commenters said, EPA obviously has not looked at the real capacity of actual electric generating units to achieve these improvements, nor has it considered that utilities have always been obligated to both regulatory commissions and their shareholders to achieve any economically achievable efficiencies. Commenters said, a six percent goal is far too aggressive for the West Virginia fleet of plants, which is already the second most efficient group in the county. Commenters said, block three, renewable energy would requ ires 600 percent increase for West Virginia. Commenters said, EPA arrived at this goal by arbitrarily including West Virginia and a region of northeastern states and establishing the goal not on what is feasible for West Virginia, but instead, appointed an unrealistically aggressive assessment for the region. Commenters said, block four, energy efficiency, sets a goal of 10.7 percent for West Virginia. Commenters said, the state's current rate is 0.05 percent, meaning EPA expects the state to achieve a comp letely unrealistic 200 fold increase.

Commenters stated that BSER requires that the system of emissions reduction be demonstrated. Commenters said that no one has ever achieved a 30% reduction in CO 2 through the means chosen in the Proposed Rule. Commente rs said the basis upon which demonstration is claimed depends largely upon a handful of state programs which are either aspirational and voluntary or mandatory, but not yet achieved, with off ramps and safety valves keyed to cost and reliability that would be precluded by the Proposed Rule. Commenters said the calculation of State CO 2237 ration limits is based upon arbitrary and circular assumptions concerning the ease with which States may reduce demand and switch to other generation sources at a reasonable c ost while maintaining requisite reliability.

Response 1: Based on public comments and further analysis since proposal, the EPA has revised the goals that comprise the EPA's determination of best system of emission reduction. These changes are described in section V of the preamble to the final rule. The EPA's changes and the supporting rationale to the proposed heat rate improvements in building block 1 are described section V.C of the preamble, and the EPA has included additional flexibility provisions for this goal in the final rule. The feasibility of the renewable energy deployment in building block 3 is discussed in section V.E.7 of the preamble to the final rule. Finally, the EPA is not including building block 4, energy efficiency, in the final rule f or the reasons discussed in section V.B.3 of the preamble to the final rule.

Comment 2: Commenters stated, the proposed guidelines do not establish that the four Building Blocks achieve the proposed levels of emission reductions when taken together as an integrated system, and therefore EPA's proposal has not shown that EPA's BSER determination has been adequately demonstrated and reflects an appropriate consideration of the required statutory criteria. Commenters said, EPA, therefore, has not met its burd en under the Act for determining that the combination of the four Building Blocks as BSER can achieve the proposed levels of emission reductions. Commenters argued that the EPA has not analyzed the operation of the interconnected power system when evaluati ng each Building Block individually, and as a result has overestimated the potential emissions reductions based on incorrect assumptions and unsupportable conclusions regarding the achievability, costs and energy impacts of each of the individual Building Blocks, and the EPA has not met its obligation for each individual BSER Building Block given the actual real

- world constraints and requirements of the electric system as it exists:

• EPA's analysis of Building Block 1 fails to account for causes outside of t he control of EGU operators that impact heat rates; the impact that reduced load factor caused by the increased use of renewables will have on heat rates; the heat rate impacts of pollution control technologies installed to meet other environmental regulat ions; and expected post

- 2012 unit closures (when assessing fleet

- wide heat rate improvement potential). The EPA also fails to incorporate realistic cost estimates of fuel savings from heat rate improvements.

• EPA's analysis of Building Block 2 fails to acc ount for natural gas pipeline infrastructure constraints and other gas

- electric interdependency issues; the operation of competitive markets and principles of security

- constrained economic dispatch; and physical, technical, reliability and financial constr aints of the gas and electric systems, among other technical obstacles to increasing the utilization of existing NGCC units to 70 percent.238 • The renewable energy component of Building Block 3 fails to account for the fact that many state RES policies are fo unded on political considerations rather than on technical determinations of resource potential; does not sufficiently address the technical grid management challenges associated with increased penetration of renewables; and fails to fully account for the reliability impacts that can be introduced by variable renewable

resources.

• EPA's analysis regarding the level of achievable end

- use energy efficiency under Building Block 4 fails to account for funding and cost recovery constraints on utility

- run energy efficiency programs; time constraints in implementing new energy efficiency
p rograms needed to bring a state's annual incremental savings to 1.5 percent; and the "pinching" effect of codes and standards on achievable EE savings rates.

Commenters stated, the Agency must demonstrate that the level of emission reductions it believes are achievable by the states can be achieved when its four Building Blocks operate concurrently as part of the interconnected power system. Commenters said, it is clear that, given the interconnected nature of the power system, the emission reductions EPA assumes are achievable by each individual Building Block might not be technically feasible given the complex interactions that exist between each of these Building Blocks as part of that same interconnected system. Commenters said, by pursuing an additive approach to calculate the emission reductions available from individual Building Blocks outside the context of the interconnected power system, EPA has not demonstrated the reductions its claims are available are achievable, as required by CAA section 111( a)(1).

Commenters stated, the statutory text of CAA section 111(a)(1) makes clear that EPA's obligations to make findings with respect to emission reductions, adequate demonstration, costs, nonair environmental impacts and energy requirements is an obligat ion to make findings with respect to the best system of emission reduction and not merely with respect to the emission limitation that, in the case of this rule, constitutes the state goals.

Commenters stated, further, while the section 111(a) definition of "standard of performance" specifies that the emission limitation must be "achievable," see CAA section 111(a)(1) (defining standard of performance as a "standard for emissions of air pollutants which reflects the degree of emission limitation achievable ..."), the limitation must be "achievable" by the regulated source "through application of" BSER. Id. Commenters said, that is, in order to set the emission limitation, EPA must make a finding about the achievability of that limitation specific to the syst em of emission reduction it uses to set that limitation. Commenters said, the Agency must show that the limitation (the state

- specific emission rate goal) is achievable using the particular BSER measures EPA has identified when combined as an integrated sy stem. Commenters said, therefore, achievability as an integrated system is an additional requirement for which the Agency must make an affirmative finding when broadly defining BSER on a system

- wide basis. Commenters said, EPA must also provide the requisi te analysis to support that finding.239 Response 2: The EPA disagrees with this comment. The EPA discusses the interaction among the different building blocks relative to the achievability of EPA's determination of BSER in section V.A of the preamble to the f inal rule. Finally, for the reasons discussed in section V.B.3 of the preamble to the final rule, the EPA is not finalizing the proposal to include building block 4, demand

- side energy efficiency measures, as part of the BSER.

Comment 3: Commenters indic ated that rural electric cooperatives generally have limited generation portfolios with a heavy reliance on coal

- fired EGUs, and this fact and other practical realities would limit the cooperatives' ability to either cost

- effectively implement or technical ly achieve many of the limits in EPA's building blocks.

Response 3: We disagree with this comment. In the preamble (section V.A) and the Legal Memo, we describe the ways that rural co

- ops can implement the building blocks.

Comment 4: EPA's BSER is unlawful and not adequately demonstrated for Texas' competitive intrastate electricity system.

Commenters stated that the EPA has failed in its efforts to draft a workable and defensible rule. Commenters said, particularly as to Texas and L uminant's units, EPA's so

- called "best system of emission reduction"

- its 791 pounds CO 2 per megawatt

- hour goal for Texas

- is not achievable, not adequately demonstrated, and does not take into account the cost, environmental impact, and energy requireme nts of reducing CO 2 emissions from fossil fuel

- fired EGUs, as a standard of performance must.

Commenters stated that the CAA requires that a "standard of performance" reflect "the degree of emission limitation achievable through the application of the bes t 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." Commenters stated , under this definition, "[a]n adequately demonstrated system is one which has been shown to be reasonably reliable, reasonably efficient, and which can reasonably be expected to serve the interests of pollution control without becoming exorbitantly costly in an economic or environmental way." Commenters stated, although the EPA may "look[ ] toward what may be fairly projected for the regulated future" rather than be restricted to the "state of the art at present," any system proposed is "subject to the

res traints of reasonableness and cannot be based on 'crystal ball' inquiry." Commenters argued that, in looking to dictate how the electricity system is operated from now until 2030, EPA has engaged in just such a crystal ball inquiry.

Commenters stated, in a ddition to the statutory and constitutional bars to incorporating building blocks 2, 3, and 4 as BSER, these building blocks have not been adequately demonstrated for Texas's competitive intrastate electricity system and are unachievable, particularly on E PA's240 proposed timeline. Commenters stated, section 111 standards must be achievable, but EPA's proposal is not.

Commenters stated, even after a system is "adequately demonstrated," it can only be applied to the source category to require "achievable" emis sion reductions. Commenters stated, "an achievable standard is one which is within the realm of the adequately demonstrated system's efficiency" and may not be "at a level that is purely theoretical or experimental." Commenters argued that to show that its proposed standards are "achievable," EPA is obligated to "(1) identify variable conditions that might contribute to the amount of expected emissions, and (2) establish that the test data relied on by the agency are representative of potential industry

- wid e performance, given the range of variables that affect the achievability of the standard," and the EPA has not done so here.

Response 4: The EPA disagrees with this comment. As described in section V.A.3 of the final CPP, the EPA has revised the BSER sinc e proposal, based on public comments, to ensure that the EPA's determination of BSER in the final rule is adequately demonstrated. These changes include revising the heat rate improvement goals, including those that would affect EGUs in Texas. Finally, for the reasons discussed in section V.B.3 of the final rule preamble of the CPP, the EPA is not finalizing the proposal to include building block 4, demand

- side energy efficiency measures, as part of the BSER.

Comment 5: Commenters argued that no state has demonstrated an ability to achieve all four of EPA's proposed Building Blocks. Commenters said, no state has achieved a six percent heat rate improvement, no state has achieved a 70 percent capacity factor for NGCC units, and while very few states achieved either EPA's renewable energy or energy efficiency targets in 2012, no states achieved this year

- after

- year.
Commenters argued that the proposed guidelines do not establish that the four Building Blocks achieve the proposed levels of emission reductions when taken together as an integrated system, and, therefore, EPA's proposal has not shown that EPA's BSER determination has been adequately demonstrated and reflects an appropriate consideration of the required statutory criteria. Commenters argued that EP A, therefore, has not met its burden under the Act for determining that the combination of the four Building Blocks as BSER can achieve the proposed levels of emission reductions. Commenters stated, the Agency must demonstrate that the level of emission re ductions it believes is achievable by the states can be achieved when its four Building Blocks operate concurrently as part of the interconnected power system. Commenters said, it is clear that, given the interconnected nature of the power system, the emis sion reductions EPA assumes are achievable by each individual Building Block might not be technically feasible given the complex interactions that exist between each of these Building Blocks as part of that same interconnected system. Commenters said, by p ursuing an additive approach to calculate the emission reductions available from individual Building Blocks outside the context of the241 interconnected power system, EPA has not demonstrated the reductions its claims are available are achievable, as required by CAA section 111(a)(1).

Commenters stated, the statutory text of CAA section 111 makes clear that EPA's obligations to make findings with respect to emission reductions, adequate demonstration, costs, non

- air environmental impacts and energy requirement s is an obligation to make findings with respect to the best system of emission reduction and not merely with respect to the emission limitation that, in the case of this rule, constitutes the state goals. See CAA section 111(a)(1).

Commenters stated, furt her, while the section 111(a) definition of "standard of performance" specifies that the emission limitation must be "achievable" (see CAA section 111(a)(1) (defining standard of performance as a "standard for emissions of air pollutants which reflects the degree of emission limitation achievable..."), the limitation must be "achievable through application of" BSER. Id. That is, according to the commenters, in order to set the emission limitation, EPA must make a finding about the achievability of that limi tation specific to the system of emission reduction it uses to set that limitation, and the Agency must show that the limitation (the state

specific emission rate goal) is achievable using the particular BSER measures EPA has identified when combined as an integrated system including all of the RTO's areas of responsibility. Commenters said, therefore, achievability as an integrated system is an additional requirement for which the Agency must make an affirmative finding when broadly defining BSER on a syst em

- wide basis, and EPA must also provide the requisite analysis to support that finding.

Commenters stated, EPA did not fully address the achievability of the Building Blocks and state emission rate goals in the context of the interconnected power system. Commenters said, for example, EPA does not appear to have considered that decreased utilization of existing coal

based units has a detrimental effect on their heat rate, thus increasing emissions despite possible investments in heat rate improvements. Comm enters said, similarly, EPA assumed that high levels of NGCC unit utilization can be achieved and maintained concurrently with increased deployment of renewable generation, despite the fact that gas

- based generation is often required to cycle to support in tegration of variable renewable resources into the grid. Commenters said, these types of fundamental programmatic issues raise questions about the adequate demonstration of EPA's selected BSER, and the states' ability to achieve the proposed emission
rate goals. Commenters said, accordingly, the proposed Colorado, South Dakota and Wyoming state goals should be adjusted based on numerous factors.

Commenters stated, however, in the very section of the proposed guidelines justifying BSER as the combination of the four Building Blocks, EPA primarily argues that the state goals meet the relevant criteria. Commenters said, in so doing, EPA relies signif icantly on the flexibility it has provided to states by imposing only an emission goal and allowing the state to tailor application of emission reduction measures including but not limited to those that make up BSER. Commenters said, state flexibility to i mplement the emission limitation through other means is important, but cannot be a shield against insufficient analysis of the proposed BSER measures used to set the emission goal and of the ability to meet that goal for affected units or on a statewide ba sis. Commenters said, in every section 111 rulemaking, regulated units clearly have242 the flexibility to take measures other than the specific BSER technology EPA has determined is adequately demonstrated, and EPA cannot bar states from taking verifiable, de monstrable and innovative measures to achieve reductions. Commenters said, it is EPA's responsibility, however, to evaluate the proposed BSER against the statutory criteria and determine that that BSER meets the statutory criteria, and EPA has not done so in the proposed guidelines.

Response 5: The EPA disagrees with this comment. As described in section V.A.3 of the final rule preamble of the CPP, the EPA has revised the BSER since proposal, based on public comments, to ensure that the EPA's determination of BSER in the final rule is adequately demonstrated. These changes include revising the heat rate improvement goals with regional rates ranging from 2.1 percent to 4.3 percent (rather than 6 percent) as the average heat rate improvement opportunity achiev able by steam units in each region under building block 1; use of 75 percent of summer capacity (rather than 70 percent of nameplate capacity) as the target capacity factor for existing NGCC units under building block 2; and use of updated information from the National Renewable Energy Laboratory (NREL) on renewable energy costs and potential, and revision of the list of quantified RE technologies to exclude landfill gas under building block 3. Finally, for the reasons discussed in section V.B.3 of the fina l rule preamble of the CPP, the EPA is not finalizing the proposal to include building block 4, demand

- side energy efficiency measures, as part of the BSER.

Comment 6: Commenters asserted that the proposed BSER has not been demonstrated to be achievable a nd is based on arbitrary, overly optimistic, and unfounded assumptions.

Commenters stated, EPA's proposal rests on a number of assumptions about the electric grid, the nation's transmission infrastructure, and the ability to transfer electrons on demand wh ich are not
correct.
Commenters said, these faulty assumptions include such critical issues as limitations on source efficiency improvements, natural gas availability and existing natural gas generation capacity, shortages of transmission infrastructure f or required additional renewable generation, arbitrary treatment of nuclear power, and the unrealistic assumptions regarding future potential reduction in electricity demand based on energy efficiency programs.

Commenters stated, the EPA has asserted that each of the individual building block targets assigned to States are based on "reasonably achievable rather than maximum performance levels." Commenters were concerned that, as with its proposed rule for new power plants, the EPA is basing enormously impac tful mandates on technology assumptions that have yet to be demonstrated as achievable at a reasonable cost and in some cases achievable at any cost. Commenters said, detailed analysis must be undertaken and made available to the public.

Commenters stated, even if permissible, it is not at all clear that it is feasible for states to meet the proposed required emissions reductions. Commenters said, the other building blocks seem243 equally ambitious and fraught with uncertainty. Commenters said, building block four assumes that states can achieve an annualized energy savings of 1.5 percent without constraining or stalling economic growth. Commenters said, in short the building blocks stack ambition on ambition and risk on risk.

Commenters stated, EPA's building block approach to setting state emission rate goals is replete with arbitrary, overly optimistic and unfounded assumptions. Commenters said, as a result, the goals for some individual states are highly discriminatory and unfair, and unachievable within th e short time frame allowed for compliance, if they are achievable at all. Commenters said, EPA also failed to explain why the proposed rule is reasonable and appropriate for those states which may be atypical for one or more of the building block provision s, other than to assume that expanding one of the other building blocks would still be reasonable as compensation. Commenters said, EPA should base its rule on levels of performance achievable in each state, instead of average achievable performance (e.g., for heat rate improvement or for renewable energy expansion), or best practices (e.g., for end

- use efficiency).

Commenters stated, despite its admirable commitment to flexibility, the Clean Power Plan cannot establish emission targets for any state based on policies or programs that would be unachievable if they were directly enforceable. Commenters said, many aspects of the Blocks are not technically and economically feasible, either on an individual basis or when interactions among the building blocks h ave been adequately considered.

Commenters stated, EPA applied the four building blocks to each state's 2012 electric generation to determine state goals for CO 2 reductions. Commenters said, EPA's methodology for applying the building blocks is difficult to interpret, but it is apparent that, in many instances, EPA has simply assumed that individual states will be able to implement the building blocks, without closely examining whether this is feasible in each case and this in itself is unreasonable and in adequate. Commenters said, EPA also claims that it is imposing "reasonable rather than the maximum" levels for each building block and that states can compensate for not using one building block by increasing the use of another. Commenters argued that beca use EPA's one

size

- fits

- all approach does not take into account the actual limitations on the states' abilities to implement the building blocks, this purported "flexibility" is in many cases simply nonexistent.

Commenters argued that EPA's own modeling fo r the proposal does not even attempt to rely on the four Building Blocks to assess the achievability (or cost) of compliance. Commenters said, for example, EPA's compliance modeling indicates that no additional renewable generation would be constructed in Georgia, despite EPA's assumption that Georgia could generate 10 percent of its energy from renewable energy sources in 2030 in setting Georgia's goal. Commenters said, as a result, EPA's own compliance modeling methodology as well as the results of that m odeling undercut the Agency's BSER determination.

Commenters stated, the EPA's proposed BSER and the state goals provided thereunder are based on faulty assumptions, or worse, indifference to known limitations, and are unevenly applied. Commenters said, by its decision to assign unachievable standards in South Carolina, the EPA244 has capriciously made the state a loser in the lottery of percentage reductions. Commenters said, there has been no consideration given to local constraints to achieve reduction goal s in South Carolina, and no demonstration that the building blocks can be made to work together to achieve the targeted reduction number. Commenters believed that the failures of the EPA proposal constitute an unlawful abuse of discretion.

Commenters stat ed, without modeling to support its four Building Block system, EPA falls back on qualitative assessments of the independent feasibility of each individual Building Block and then simply adds together the reductions it assumes each Building Block can achie ve to identify each state's required emission rate. Commenters said, for example, EPA simultaneously assumes significant reductions in electricity demand based on implementation of energy efficiency programs, increases in zero

- carbon generation, and re

- dis patch to natural gas. Commenters said, this simplistic approach fails to account for whether this particular mix would be possible in a state given localized system constraints or whether the resulting generation mix could be reasonably employed to meet de mand. Commenters said, nor has EPA evaluated how particular blocks would interact; for example, EPA does not consider the impacts that substantially increasing renewable generation may have on the efficiency of traditional fossil fuel

- fired EGUs as they ge t repurposed to fill in the load gaps when intermittent renewable generation is unavailable. Commenters said, EPA's failure to account for these negative interactions not only evidences the Agency's lack of expertise with the electricity sector but also fu ndamentally invalidates EPA's BSER determination.

Commenters stated, it appears that EPA made numerous assumptions in the proposed guidelines about the emission reductions achievable by each separate Building Block that are unsupported by evidence in the r ecord. Commenters said, while it is EPA's role to determine BSER in compliance with the provisions of the CAA, ultimately it is the role of the states to determine the application of the BSER to specific affected units within that state. Commenters said, E PA has a statutory obligation to ensure that BSER is adequately demonstrated and to show that the state emission rate goals are achievable, particularly in light of the interconnected nature of the power system. Commenters said, EPA's assumptions and concl usions about the individual Building Blocks that EPA identified in setting BSER should be scrutinized in light of the best available data and experience and, adjusted as necessary. Commenters said, EPA should ensure that the state emission rate goals in th e final rule reflect an evaluation of all BSER components together in order to properly reflect the interconnected nature of the power sector and appropriate assumptions and conclusions about the level of reductions achievable by each component.

Response 6: The EPA disagrees with this comment. As described in section V.A.3 of the final rule preamble of the CPP, the EPA has revised the BSER since proposal, based on public comments, to ensure that the EPA's determination of BSER in the final rule is adequately demonstrated. These changes include revising the heat rate improvement goals with regional rates ranging from 2.1 percent to 4.3 percent (rather than 6 percent) as the average heat rate improvement opportunity achievable by steam units under bu ilding block 1; use of 75 percent of summer capacity (rather than 70 percent of nameplate capacity) as the target capacity factor for existing NGCC units under building block 2; and use of updated information from the National245 Renewable Energy Laboratory ( NREL) on renewable energy costs and potential, and revision of the list of quantified RE technologies to exclude landfill gas under building block 3. The final rule also allows affected EGUs the flexibility to employ a variety of non

- BSER measures (to the extent permitted under a given plan), as described in section V.B.6 of the final rule preamble. Finally, for the reasons discussed in section V.B.3 of the final rule preamble, the EPA is not finalizing the proposal to include building block 4, demand

- side energy efficiency measures, as part of the BSER.

Comment 7: Commenters stated, it is fundamental that a standard of performance under section 111 must "reflect[] the degree of emission limitation achievable through the application of the best system of em ission reduction which (taking into account the cost of achieving such reduction and any non

- air quality health and environmental impact and energy requirements) the Administrator determines has been adequately demonstrated." Commenters said, EPA may not b ase its determination that a standard is achievable on "mere speculation or conjecture." Commenters said, rather, the Agency bears the burden of showing that a standard is achievable "for the industry as a whole" and "under the range of relevant conditions which may affect the emissions to be regulated," including "under most adverse conditions which can reasonably be expected to recur." Commenters said, in order to show that the Proposal is achievable, EPA must "(1) identify variable conditions that might contribute to the amount of expected emissions, and (2) establish that the test data relied on by the agency are representative of potential industry

wide performance, given the range of variables that affect the achievability of the standard."

Commenters stated, EPA has not done so in this rulemaking. Commenters said, rather, the Agency has set targets under each Building Block that far exceed what is feasible or cost

effective. Commenters said, in particular, the targets under Building Blocks 1 and 2 (i. e., the Building Blocks that involve measures taken by affected EGUs, either individually or collectively across a state) are not supported by the rulemaking docket and are simply not achievable. Commenters said, Building Block 3 is based on unrealistic as sumptions, and Building Block 4 gives rise to enforcement difficulties. Commenters said, as a result, compliance with the state goals will be extremely costly and difficult (if not impossible) for any state as a whole and will certainly be impossible for m any individual affected EGUs to achieve.

Response 7: The EPA disagrees with this comment. As described in section V.A.3 of the final rule preamble of the CPP, the EPA has revised the BSER since proposal, based on public comments, to ensure that the EPA's determination of BSER in the final rule is adequately demonstrated. These changes include revising the heat rate improvement goals with regional rates ranging from 2.1 percent to 4.3 percent (rather than 6 percent) as the average heat rate improvement oppo rtunity achievable by steam units under building block 1; use of 75 percent of summer capacity (rather than 70 percent of nameplate capacity) as the target capacity factor for existing NGCC units under building block 2; and use of updated information from the National Renewable Energy Laboratory (NREL) on renewable energy costs and potential, and revision of the list of quantified RE technologies to exclude landfill gas under building block 3. Finally, for246 the reasons discussed in section V.B.3 of the final rule preamble, the EPA is not finalizing the proposal to include building block 4, demand

- side energy efficiency measures, as part of the BSER.

Comment 8: Commenters stated, there are significant policy and technical impediments that make implementation of this proposal impractical and likely impossible. Commenters said, starting with the exclusive role of the Federal Energy Regulatory Commission (FERC) in determining how energy is dispatched, the proposed rule impermissibly requires States to regulate di spatch in contravention of FERC authority. Commenters said, next is the inability of the States to regulate based upon environmental rather than economic dispatch when such decisions are controlled by regional transmission organizations and independent sys tem operators whose boundaries are not contiguous with state borders. Commenters further said, there is the potential impact of the rule on the reliability of the supply of electricity.

Response 8: We disagree with commenters. The final rule does not requi re states to regulate dispatch in wholesale electricity markets. Our emission guidelines simply reflect an achievable emissions limit through the application of the BSER and do not in themselves require states or sources to implement the BSER. Moreover, th ese emission guidelines provide states with the flexibility to establish, implement, and enforce standards of performance and do not intrude on the regulatory domain of FERC or the states. For a comprehensive discussion of this issue, please see section V. A.2 of the final rule preamble of the CPP. Additionally, the EPA carefully considered reliability in drafting this final rule. For a discussion of reliability issues, please see preamble section VIII.G.2. Finally, we disagree with commenters that the fina l rule requires environmental dispatch. Instead, the potential to shift generation identified in building block 2 is entirely consistent with the existing economic dispatch protocols. Environmental policies can shift generation in two ways. The first is op erational restrictions, such as permit limits on the number of hours that an EGU can operate in order to limit emissions. The second is changes in the relative costs of generation among different types of affected EGUs related to pollution reduction measur es. For example, a regulation that necessitates the use of a control technology that requires the application of a reagent in a certain kind of EGU will increase the variable cost of operating that plant, which in turn may reduce the amount of generation i t is called upon to deliver to the grid through security

- constrained economic dispatch procedures. This is consistent with economic dispatch.

Comment 9: Commenters stated the NPRM would impose unachievable standards contrary to the plain language of section 111, which requires the degree of emission limitation to be "achievable." Commenters said the EPA's approach to nuclear units which are under construction would eliminate any meaningful margin for compliance purposes, substantially hindering the
op portunity for these states to achieve compliance with the EPA's standards. Commenters stated the EPA's claim that the rule provides "flexibility" is incorrect. Commenters said i n reality,247 Georgia, South Carolina, and Tennessee

- subject to 111(d) existing source emission rates that would be close to or more stringent than the 111(b) new source rates

- will face a substantial Clean Air Act compliance risk, with no real flexibility, as a result of their more stringent state goals. Commenters stated CRS explai ned: "If these anticipated units do not complete construction and enter service, these states would likely have more difficulty achieving their emission rate goals." Commenters said i n the Interagency Review process, OMB explained to the EPA: "As these new units do come on

- line, the inclusion of all generation from these units in the state goal is problematic as any prolonged outage would almost guarantee that any state relying on carbon

- free nuclear generation to meet its annual carbon goal would fail to m eet that goal." Commenters stated GEPD was more direct in their comments, explaining that "under

construction nuclear generation has such a significant impact on the goal that any shortfall in ultimate performance would be virtually impossible to overcome. " Commenters said s tates and utilities should not be forced by the EPA to make decisions about operating multi

- billion dollar nuclear reactors on the basis of achieving compliance with the Clean Air Act. Commenters stated

s imilarly, neither the relevant st ate agencies in Georgia, South Carolina or Tennessee nor the EPA has the authority to require the construction or operation of these units or to enforce any decision to build these units. Commenters stated y et, their respective states cannot reasonably be expected to meet the stringent goals that EPA has proposed without the construction and virtually continuous operation of these units.

Response 9: As described in section V.A.3. of the final rule preamble of the CPP, the EPA is not finalizing increased generation from new nuclear capacity as a component of the BSER.

Comment 10: Commenters stated the BSER in the proposed rule is not feasible and therefore cannot achieve the designated standard.

Commenters quoted, "EPA does have authority to hold the ind ustry to a standard of improved design and operational advances, so long as there is substantial evidence that such improvements are feasible and will produce the improved performance necessary to meet the standard." Sierra Club v. Costle, 657 F.2d, 298, 3 64 (D.C. Cir. 1981).

Commenters stated, EPA's proposed best system of emission reduction simply does not meet this standard. Commenters said, the agency has used national aggregated data for each BSER (four building blocks), which it applies to each state' energy fleet to determine that state's goal. Commenters said, because this national data represents EPA's analysis of 48 states total, and not any one individual state, EPA is skewing each state goal to the point where it is in no way a reflection of a go al that state can meet. Commenters said, thus, EPA has not provided substantial evidence to show that the BSER will produce the performance necessary to meet the standard, nor that the BSER is reasonably reliable, efficient, or cost

- effective, as required by the D.C. Circuit.248 Commenters added, in fact, in the Modified and Reconstructed Source Rule, the EPA acknowledges that the most efficient generation technology available is a SCPC boiler and the EPA proposes it as BSER for large reconstructed sources. Co mmenters said, yet, in this proposed rule, a rule that was intended to establish "the degree of emission limitation achievable," which has been adequately demonstrated, EPA does not propose to let states choose a technology

- based standard such as this for BSER.

Response 10: We disagree with this comment. The EPA's determination of the BSER and the changes since proposal with respect to the use of aggregated data are discussed in sections V.E and VI.D of the final rule preamble of the CPP. The comment compar ing the proposed BSER to the BSER for large reconstructed sources is addressed in section V.B.7 of the final rule preamble.

Comment 11: The proposed standard is not achievable because it is purely theoretical and arbitrary.

Commenters stated, "an achievable standard is one which is within the realm of the adequately demonstrated system's efficiency and which, while not at a level that is purely theoretical or experimental, need not necessarily be routinely achieved within the industry prior to its adoption." Essex Chem. Corp., 486 F.2d at 433

- 34.

Commenters stated, in composing each state's emission guideline, or standard of performance, EPA has used national aggregated data for each BSER building block, which it applies to each state's energy fleet to determine that state's goal. Commenters said, because this national data represents EPA's analysis of 48 states total, and not any one individual state, EPA is skewing each state goal to the point where it is in no way a reflection of that state's abil ity to meet it. Commenters said, these state standards are not at all a reflection of real

- world conditions in a given state, but are merely an amalgam of national projections applied to that state's energy fleet. Commenters said, thus, EPA's standard is p urely theoretical.

Commenters stated, in North Carolina v. EPA, the D.C. Circuit in striking down EPA's Clean Air Interstate rule ("CAIR"), noted that it is "entirely arbitrary" to base standards on "irrelevant factors." North Carolina v. EPA, 531 F.3d 896 , 930 (D.C. Cir. 2008). Commenters argued that in the proposed rule, two of the four building blocks (building blocks 3 and 4) simply do not emit CO 2 , and thus the EPA's contention that, under Section 111, these other units are somehow relevant to the regu lation of emissions from fossil fuel EGUs further supports the EPA's fiction that it is establishing an ESPS. Commenters said, EPA argues that these building blocks "displace or avoid the need for generation from those sources and thereby reduce the emissi ons from those sources." Legal Memorandum for Proposed Carbon Pollution Emission Guidelines for Existing Electric Utility Generating Units ("Legal Memorandum or "Mem."). Commenters said, by this logic, EPA could include any number of things under this rule , including electric vehicles, global GHG emissions and geo

- politics, all of which also have the ability to "avoid the249 need for generation from those sources and thereby reduce emissions from those sources." Commenters said, as the court in North Carolina noted, "lest EPA forgot, it is 'a creature of statute' and has only those authorities conferred upon it by Congress." North Carolina, 531 F.3d at 44.

Response 11: We disagree. As we explain in the preamble, an emission guideline simply identifies an achie vable emission limit for affected sources based on application of the BSER; it does not require sources to implement the BSER and encourages sources to take advantage of compliance alternatives, such as demand

- side energy efficiency, where appropriate. For reasons discussed in section V of the final rule preamble of the CPP, our interpretation does not extend beyond the relevant factors of the statute and would only impose requirements on affected EGUs.

Comment 12: Commenters stated the proposed standard is not achievable because it is not representative of the industry as a whole.

Commenters stated, in determining the achievability of a standard, EPA must "consider the representativeness for the industry as a whole of the tested plants on which it relies , at least where [EPA's] central argument is that the standard is achievable because it has been achieved (at the tested plants)." Nat'l Lime Ass'n v. EPA, 627 F.2d 416, 431 n.46, 433 (D.C. Cir. 1980). Commenters said, more specifically, in order to show t hat a standard is achievable by a system of emission reduction, EPA must "(1) identify variable conditions that might contribute to the amount of expected emissions, and (2) establish that the test data relied on by the agency are representative of potenti al industry

- wide performance, given the range of variables that affect the achievability of the standard." Costle, 657 F.2d 298 at 377.

Commenters stated, EPA has dismissed the requirement that its standard must be representative of the industry as a whole by proposing a standard that is simply not representative of industry entities. Commenters said, EPA knows that states will have difficulty meeting the emission guidelines without employing building blocks 3 and 4, and EPA concedes this point by calculati ng different, less stringent goals when relying only on Building Blocks 1 and 2 as BSER. Goal Computation TSD, EPA, App. 4, (June 2014) (calculating Blocks 1 & 2 only state goals before entering nuclear, renewable, and EE into the denominator). Commenters stated that EPA, in proposing a guideline that bases its stringency on beyond

- the

- unit measures, has created a standard plainly unrepresentative of the industry as a whole.

Commenters stated, courts have dismissed test data, and whole standards, for not b eing representative of the industry as a whole. Commenters said, in National Lime, the court remanded a NSPS for lime manufacturing because the data were not representative of the industry as a whole. Nat'l Lime Ass'n v. EPA, 627 F.2d at 416. Commenters sa id, similarly, in Portland Cement Assn' v. EPA, the court threw out an agency NESHAP because of insufficient data. Portland Cement Ass'n v. EPA, 486 F.2d. 396, 402 (D.C. Cir. 2011). Commenters said,250 similarly, in this proposed rule, EPA has relied upon dat a that are not only unrepresentative of the industry as a whole, but nonsensical as applied to the states where the standards are to be met. Commenters said, moreover, EPA has made no attempt to determine the cost

- effectiveness of such measures, nor whethe r such activities consider the remaining useful life of the assets as required by Section 111(d).

Commenters stated, unlike previous rulemakings, EPA has not devised a rule that impacts a single "source category." Commenters said, rather, by including buil ding blocks 2, 3 and 4, it has constructed a rule that impacts four categories, not all of which "emit": (1) fossil fuel

- fired EGUs, (2) natural gas combined cycle plants, (3) some renewable and nuclear energy resources and (4) demand

- side energy efficienc y. Commenters said, therefore, the proposed standard has to be representative of each of these categories because each of them will be potentially accountable for achieving it.

Commenters stated, EPA claims that each of its building block assumptions are a chievable because they have already been implemented in many places, but the data it relies upon are not representative of the industry as a whole. Commenters said, moreover, EPA's limitations on when a state can be credited for the reductions associated w ith the building blocks raises significant questions about the viability of the building blocks nationally.

Commenters argued that the agency's data, and resulting assumptions, are not reflective of real

world technological or market realities, and therefo re are not representative of each category as a whole. Commenters said, the Building Block 1 data do not catalogue actual improvements undertaken at plants. Commenters said, further, the agency's Building Block 2 data do not account for existing technology or permit conditions which preclude the ramping up of NGCC optimization by almost double. Commenters said, nor do they account for transmission restrictions or inadequate pipeline capacity. Commenters said, additionally, the agency's Building Block 3 data selectively choose certain RE, and exclude others, while only accounting for theoretical "at

- risk" nuclear rather than real "at

- risk" nuclear. Commenters said, finally, the agency's Building Block 4 data do not reflect reductions achieved as a result of e xisting programs and rely predominantly on theoretical efficiency improvements and other flawed assumptions (e.g., using gross rather than net data). Commenters said, for these reasons, the data that underlie the standard (i.e., state emission guidelines) are not representative of the whole of each of the four categories.

Commenters stated, similarly, with respect to EPA's Building Block 2 assumption that NGCCs can operate at a 70% utilization rate, the agency cites no data to show how an industry that
oper ated at a 46% utilization rate in 2012 (26% in Illinois) can overcome permitting and design restrictions to achieve such a rate. Commenters said, EPA states that a "substantial number of existing NGCC units have proven the ability to sustain 70% utilizatio n rates for extended periods of time." 79 Fed. Reg. at 34,863. Commenters said, that fact may be true, but it does not mean that NGCCs, many of which are located in densely populated areas and are only permitted to operate at such a high level during perio ds of peak demand, can overcome such permitting restrictions based on safety and reliability concerns to actually achieve the goal. Commenters251 said, in addition to permitting issues NGCCs need fuel, water and transmission capacity to be able to operate at a 70% utilization rate and any one of these items can prevent operation at a higher capacity factor. Commenters said, thus, this assumption is also not based on data representative of the industry as a whole.

Commenters stated, regarding Building Block 3, EPA relies upon the EIA Annual Energy Outlook, which projected a 5.7 GW (5.8%) capacity reduction to the nuclear fleet. Id. at 34,871. Commenters said, this projected reduction is not tied to the projected retirement of any specific unit, but rather in rec ognition of the "continued economic challenges" faced by the higher

- cost nuclear units." Id. Commenters said, EPA accepts this esoteric national projection and applies this 5.8% reduction to every state goal. Commenters said, the agency does not attempt to seek a retention figure reflective of actual projected retirements in each state as opposed to one serving as a mere representation of an economic downturn. Commenters said, thus, the data the agency relies upon in its projection are not representative of the whole nuclear industry.

Commenters stated, while they encourage RE development, EPA's regional approach to RE quantification is inefficient and misguided. Commenters said, in the calculation, EPA first divided the country into six regions (based on NE RC regions). Commenters said, second, an RE generation target was calculated for each region based upon averaging all 2020 RPS requirements in that region. Commenters said, third, an annual growth factor was calculated that would allow the region as a whol e to reach the regional RE target in 2029 assuming that RE generation would increase from 2012 levels beginning in 2017. Commenters said, fourth, the annual growth factor for a given region was applied to individual states' 2012 RE generation to calculate future RE generation in that state from 2017 through 2029, not to exceed a maximum RE generation level equivalent to the regional RE target. Commenters said, finally, these annual RE generation levels for each state were used to calculate interim and final RE targets for the
state.
Commenters stated, EPA claims that "states within each region exhibit similar profiles of RE potential or have similar levels of renewable resources." GHG Abatement Measures TSD, Page 4

- 12. Commenters said, however, this assumption is not representative because the regions are large and encompass states with drastically different renewable resources. Commenters said, given the sizeable areas spanned by the six EPA regions, there are clearly differing levels of renewable en ergy resource adequacy and availability across these proposed regions. Commenters said, additionally, the EPA assumption that existing RPS targets are feasible across all states within a defined region does not adequately consider differing RPS requirement s, including the varying definitions of "renewable" across the states. Commenters said, EPA did not properly consider the significant pre

- 2020 investments in RE that some states have made. Commenters said, further, renewable resources physically located in one state are often used to satisfy RPS requirements in other states. Commenters said, since these benefits are not allocated to the buyer's state under the proposal, RPS quantification is not representative for determining RE potential.252 Commenters stated , finally, with the Building Block 4, the Agency requires each state to achieve a goal of 1.5% savings in electricity generation achieved through demand

- side energy efficiency programs. Id. At 34,872. Commenters said, the arguments above are applicable her e because the rate is not achievable. Commenters said, by not accounting for future emission reductions achieved via existing state programs, EPA is not only punishing states for being good actors, but misrepresenting its data source as being representativ e of the industry as a whole.

Response 12: The EPA disagrees with this comment. As described in section V.A.3 of the final rule preamble of the CPP, the EPA has revised the BSER since proposal, based on public comments, to ensure that the EPA's determinati on of BSER in the final rule is adequately demonstrated. These changes include revising the heat rate improvement goals with regional rates ranging from 2.1 percent to 4.3 percent (rather than 6 percent) as the average heat rate improvement opportunity ach ievable by steam units under building block 1; use of 75 percent of summer capacity (rather than 70 percent of nameplate capacity) as the target capacity factor for existing NGCC units under building block 2; and use of updated information from the Nationa l Renewable Energy Laboratory (NREL) on renewable energy costs and potential, and revision of the list of quantified RE technologies. Finally, for the reasons discussed in section V.B.3 of the final rule preamble, the EPA is not finalizing the proposal to include building block 4, demand

side energy efficiency measures, as part of the BSER.

Comment 13: Proposed individual goals are not feasible or reasonable

Commenters noted that EPA believes the final goal for Ohio, comprised from the individual goals f rom the four building blocks, is set at a "reasonable level ... rather than the maximum possible level" and states will be able to reasonably implement measures, but if a state falls short for one building block, it is assumed they could implement another building block more stringently. Commenters further noted that EPA repeatedly referred to the "flexibility" afforded to states to implement some or all of the assumed portions of the four building blocks or to implement other measures not included in the b uilding blocks. Commenters stated EPA noted several "distinct" types of flexibilities being afforded to the states: (1) choices as to measures employed, including the timing; (2) the "core flexibility" provided under section 111(d) that while a state is re quired to establish standards of performance that reflect the degree of emission limitation from the control measures used to establish BSER, they need not mandate the particular control measures that EPA identifies as the basis for its BSER; (3) "targeted reasonably achievable rather than maximum performance" goals; (4) flexibility in timing that can help states address concerns about stranded assets and enabling states to defer imposition of requirements on EGUs that may be scheduled to retire after 2020 but before 2029; (5) the ability to translate rate to mass; and (6) the opportunity to do multi

- state plans.

Commenters firmly believed this "flexibility" is strained under this proposal. Commenters believed EPA has established the goals based on fundamen tal errors and flawed assumptions in each of the building blocks. Commenters stated it may be possible for a particular state to find all253 of the building blocks feasible, some building blocks feasible, or no building blocks feasible. Commenters indicated t hat can only be understood by each individual state based on an analysis of technical feasibility, cost

- effectiveness, legal authority, life of the unit, and numerous other factors. Commenters argued that EPA's analysis does not evaluate feasibility and re asonableness at the state level as section 111(d) affords states the ability to do when setting their standards of performance based upon EPA emission guidelines. With respect to Ohio, commenters disagreed these individual goals are feasible or reasonable at the levels that EPA has identified.

Commenters stated there is no flexibility if a state, like Ohio, cannot achieve any of the individual goals and finds, as EPA did, that other non

- BSER options are infeasible and/or provide little reduction at a given cost. Commenters also noted that, if EPA erred in one building block and the individual goal for that building block is not feasible, it does not warrant an increase to what was determined the "best system of emission reduction" from another building block

. Response 13: The EPA disagrees with this comment. As described in section V.A.3 of the final rule preamble of the CPP, the EPA has revised the BSER since proposal, based on public comments, to ensure that the EPA's determination of BSER in the final rule is adequately demonstrated. These changes include revising the heat rate improvement goals with regional rates ranging from 2.1 percent to 4.3 percent (rather than 6 percent) as the average heat rate improvement opportunity achievable by steam units under building block 1; use of 75 percent of summer capacity (rather than 70 percent of nameplate capacity) as the target capacity factor for existing NGCC units under building block 2; and use of updated information from the National Renewable Energy Laborator y (NREL) on renewable energy costs and potential, and revision of the list of quantified RE technologies. Finally, for the reasons discussed in section V.B.3 of the final rule preamble, the EPA is not finalizing the proposal to include building block 4, de mand

side energy efficiency measures, as part of the BSER.

Comment 14: States have demonstrated that substantial carbon emission reductions are achievable.

Commenters stated, many of their states have already made substantial commitments to achieve deep reductions in carbon emissions, from the power sector and economy

- wide. Commenters said, the long

- term greenhouse gas emissions reduction targets set by states in their clean energy and climate action plans or established by their state legislatures reflec t the level of ambition that is achievable. Commenters said, for example, their state greenhouse gas reduction commitments include the following:

• California: 80 percent below 1990 levels by 2050

• Connecticut: 80 percent below 2001 levels by 2050

• Maine: 75

- 80 percent below 2003 levels long term ("may be required")254 • Massachusetts: 80 percent below 1990 levels by 2050

• Minnesota: 80 percent below 2005 levels by 2050

• New Hampshire: 80 percent below 1990 levels by 2050

• Oregon: 75 percent below 1990 levels by 2 050

• Vermont: 75 percent below 1990 levels by 2050 ("if practicable")

Commenters stated, the electric power sector is responsible for about one

- third of national greenhouse gas emissions and approximately 40 percent of CO 2 emissions, making it the single la rgest sector for emissions in the United States. Commenters said, moreover, the fact that these emissions are produced by a small number of sources relative to other sectors (e.g., transportation), and that there are a large number of cost

- effective opport unities to reduce emissions, means that it is critical that we achieve significant reductions from the power sector in order to address the challenge of climate change.

Response 14: We agree with this comment. However, as described in section V.A.3 of the final rule preamble of the CPP, the EPA has revised the BSER since proposal, based on public comments, to ensure that the EPA's determination of BSER in the final rule is adequately demonstrated.

Comment 15: State Experience Confirms that this Overall Level of Implementation is Achievable

Commenters stated, their state experience also confirms that the overall, national level of reduction expected from EPA's proposed emission guideline is achievable, as many of their states have cost

- effectively achieved even greater reductions on a shorter timeframe.

Commenters noted, EPA projects that the proposed emission guideline will achieve a 22 percent reduction over a 19

- year period (2012

- 2030). Commenters stated, as described above, many of their states have already achieved reductions of this magnitude in a shorter time frame and, on average, their states have reduced carbon pollution from the power sector by 23 percent in the eight

- year period between 2005 and 2012 . Commenters stated that the nine states participating in the Regional Greenhouse Gas Initiative have together reduced carbon pollution in the region by over 40 percent from 2005 to 2012.

Commenters stated, in short, the collective experience of their sta tes demonstrates that the system identified by EPA is already being successfully implemented to achieve emission reductions of a similar magnitude, in a shorter timeframe, than the overall reductions proposed by EPA, and a number of are states have achieve d significantly greater reductions.2 55 Response 15: We agree with this comment. However, as described in section V.A.3 of the final rule preamble of the CPP, the EPA has revised the BSER since proposal, based on public comments, to ensure that the EPA's deter mination of BSER in the final rule is adequately demonstrated.

Comment 16: States have Demonstrated Various Programs that are Achieving Meaningful CO 2 Emission Reductions in the Power Sector along with Other Significant Benefits

Commenters stated, their states

- along with others

- have developed a variety of state programs that achieve substantial, cost

- effective carbon emission reductions and improvements in net carbon emission rates. Commenters stated, through market

- based programs, renewable portfolio standards, energy efficiency resource standards and funding commitments, utility planning, and other efforts, their states have reduced carbon pollution from the electricity sector by 20 percent from 2005 to 2011, and similarly improved their net carbon e mission rate 19 percent over the same time period, from 941 to 759 pounds CO 2 per megawatt hour of electricity produced (lbs CO 2 /MWh). Commenters stated that these programs are also delivering numerous additional benefits, including reductions of conventio nal pollutants and the significant public health benefits that accompany those reductions.

Commenters stated, their state programs have been developed through substantial democratic processes, and reflect the different on

- the

- ground experience of their sta tes, including differences in the structure of energy markets and market participants. Commenters said, taken together, these approaches are driving improvements and innovation throughout the electricity system, leading to a cleaner and more efficient syst em overall.

Commenters provided a chart on page 51 of their written comments entitled "Percent Change in Electricity Sector Carbon Dioxide Emissions, from a 2000 Baseline" showing the decline in CO 2 emissions for the electricity sector from 2001 to 2011 fo r ten states.
Commenters also provided a chart on page 51 of their written comments entitled "Percent Change in the Carbon Dioxide Emissions Rate (lbs CO 2 / MWh), from a 2000 Baseline, Including All Electricity Resources" showing the decline in CO 2 emission s rate for the electricity sector from 2001 to 2011 for fourteen states.

Response 16: We agree with this comment. However, as described in section V.A.3 of the preamble to the final rule, the EPA has revised the BSER since proposal, based on public
comment s, to ensure that the EPA's determination of BSER in the final rule is adequately demonstrated.

Comment 17: Commenters stated, the four building blocks represent measures already being implemented by industry and states.256 Commenters stated, EPA appropriat ely defines BSER to reflect the system of emission reductions that the electric sector is already implementing. Commenters supported a program that achieves meaningful emission reductions and that is based on measures beyond those that can be taken at exis ting affected units. Commenters said, EPA appropriately recognizes the interconnected nature of the electric grid in defining BSER in the proposed rule and identifies BSER in a way that reflects the fact that fossil emissions can be reduced both through ch anges in the operation of fossil

- fuel power plants as well as through the displacement of higher emitting resources with lower

- and zero

- emitting generation and energy efficiency measures. Commenters said, EPA's approach to BSER reflects the essence of the way the electric industry operates and is fully consistent with successful practices. Commenters said, the proposed building blocks capture electric system strategies that are already being deployed to lower GHG emissions across the electric system.

Comme nters stated, the case law supports EPA's approach in examining the cost of compliance. Commenters said, under Essex Chemical Corp. v. Ruckelshaus, EPA must consider the economic cost associated with achieving the reductions as well as the cost to the envi ronment if the reductions are not achieved. Commenters said, in the proposed rule, EPA considers costs for each building block, and in their experience, EPA is capturing measures such as renewables and energy efficiency that they are already implementing b ecause they are cost

- effective and provide value to their customers.

Response 17: We agree with this comment. However, as described in section V.A.3 of the preamble to the final rule, the EPA has revised the BSER since proposal, based on public comments, t o ensure that the EPA's determination of BSER in the final rule is adequately demonstrated.

1.10.9 BSER based on emissions trading

Comment 1: The proposal is consistent with past rules that use emissions trading in BSER.

Commenters stated, mass

- based allowance trading mechanisms for compliance are contemplated by the Clean Air Act and the Agency's longstanding section 111(d) rules. Commenters said, 40 CFR Section 60.24(b)(1) explains that approvable state plans may incorpo rate emissions standards in the form of either an allowance system, or allowable rates, and that section 60.21(f) still references an “allowance system.”

Commenters stated, EPA recognized that under a section 110 SIP, allowance trading mechanisms had been used successfully in the electric generating sector.

Commenters stated, EPA has already interpreted the phrase "standard of performance" to include trading programs in two recent Section 111(d) rulemakings. Commenters said, in its Clean Air257 Mercury Rule ( "CAMR"), EPA enacted a cap

- and

- trade system for power plants under Section 111(d). Commenters stated, though later struck down by the D.C. Circuit on unrelated grounds, the CAMR rulemaking explained that a tradable permit program fit within "a careful read ing of the section 111(a) definition [of] standard of performance," finding support in both the statutory text and the legislative history of the 1977 Clean Air Act Amendments. Commenters stated, in determining that a cap

- and

- trade program could be conside red the BSER, EPA concluded that it was the best system "in the relevant timeframe." Commenters said, similarly, the emissions reductions strategies EPA has identified for existing power plants to cut CO2

- including supply side energy efficiency, fuel switc hing, co

- firing with cleaner fuels, shifting dispatch to lower

emitting facilities, and demand side energy efficiency

- are all available "in the relevant timeframe." Commenters said EPA's justifications for a power plant trading program in CAMR are equally valid here, especially given that CO2 emissions from power plants do not pose the "hot spot" concerns associated with power plant emissions of mercury.

Commenters said, prior to CAMR, EPA authorized a trading scheme under Section 111(d) for emissions of ni trogen oxides from large municipal waste combustors. Commenters said, the MWC program gave states the option of allowing credit trading among plants. Commenters said, EPA used average plant

- wide emissions to effectively regulate NOx emissions from MWCs.

Commenters stated, EPA allowed each state to choose whether to fulfill its section 111(d) obligations by participating in a cap

- and

- trade program or selecting some other means to stay within its statewide emissions budget. In CAMR, EPA let each state choos e an allocation method and choose whether to set aside allowances to account for new units. Commenters said, similarly, the Proposed Rule should allow states to have the option of including all power plants, including those that may come on

- line after a st ate plan is approved, within a trading plan for CO2 emissions.

Commenters said the only Congressional effort to date that exclusively addresses power plant emissions reductions is the Title IV Acid Rain Program, which is a mass

- based allowance trading syst em covering the sector. Commenters said, the Acid Rain Program provides evidence that Congress clearly intended emissions reductions from existing (and new) power plants could be achieved using a mass

- based allowance trading system, and that measures such as energy conservation and efficiency improvements could be used to achieve such reductions.

Response 1: We appreciate the commenters ’ support and agree with many of the comments . See the following sections of the final rule preamble of the CPP for additio nal information related to these comments: EPA discusses emissions trading in the context of BSER in sections III.B
, V.A.2. and V.B.3 of the final rule preamble of the CPP; the EPA discusses the legal basis for emissions trading in state plans in preamble section VIII.C.6 of the final rule preamble. EPA references and summarizes major Clean Air Act regulations with trading programs for power plants in sections V.B.3 and II.E of the final rule preamble.258 Comment 2: Commenters argued that the EPA should definitively interpret Section 111(d) to allow states to utilize a greenhouse gas market reduction strategy that allows greenhouse gas reductions to come from any source. Commenters noted that states, such as Californ ia and the Northeastern RGGI states, have already implemented programs allowing for GHG reductions from sources such as verified GHG offsets or other industries (such as the petroleum industry). For this reason, commenters recommended the EPA clarify that states could choose to keep or utilize such reductions and be compliant with the BSER rulemaking. Commenters noted that in Union Electric Co. v. EPA, 427 U.S. 246, 96 S.Ct. 2518, 49 L/Ed/ 2d 474 (1976), the Supreme Court upheld the EPA's position that if a state proposes a strategy that is effective in meeting the ambient air quality standards, the EPA must approve that State Implementation Plan. Commenters said this follows statutory language in Section 110(a) and also supports the cooperative federalism a t the heart of the CAA. Commenters stated, Section 111(d) of the CAA states that the procedure governing approval of state systems of emission reduction for existing sources should be a "procedure similar to that provided by section 7410 [Section 110]." Co mmenters argued that if the EPA is not willing to grant the same sort of flexibility to the states under this section that it does under section 110, then the EPA is ignoring the reference to section 110 out of the statute, which was not the intent of the drafters.

Response 2: We disagree with these comments. As explained in the final rule preamble (especially Section V.B.3(c)), the EPA interprets section 111 as imposing the constraint that the BSER must be based on achieving the requisite emission reductio ns from the affected sources. Similarly, we interpret section 111 as requiring state plans that will have the effect of reducing emissons from the affected source category. Accordingly, actions taken by affected sources (or other entities) that do not resu lt in emission reductions from the affected source category (e.g, “out

- of

- sector” carbon offsets) can not qualify for inclusion in the BSER and can not be used to determin e whether a state is meeting its goal. But see the discussion in final rule preamble section VIII.J. regarding state coverage of new sources in a state mass

- based plan to guard against leakage and sections VIII.J.2 and VIII.J.3 regarding emissions budget trading programs with broader source coverage and flexible features such as RGGI.

T hese emission guidelines provide states with significant flexibility in designing section 111(d) plans, particularly the ability to follow a state measures approach. California and RGGI states have indicated that they intend to maintain their current stat e programs, which this rule would allow. Nonetheless, the EPA has the obligation to ensure that state plans comply with the requirements of section 111 of the Clean Air Act.
While the EPA agrees that the CAA establishes a framework for state

- federal part nership based on cooperative federalism, the EPA does not agree with the comme n t er s’ characterization of that relationship

. Please see the discussion in section 1.2 of this response to comment document. See also
, “State Implementation Plans: Response to Petition for Rulemaking; Restatement and Update of EPA’s SSM Policy Applicable to SIPs; Findings of Substantial Inadequacy; and SIP Calls To Amend Provisions Applying to Excess Emissions During Periods of Startup, Shutdown and Malfunction; Final Rule,” 80 Fed. Reg. 33840, 3387 6

- 79 (June 12, 2015). Additionally, the commenter ignores the differences between the goals and approaches of sections 110 and 111.259 Comment 3: EPA should define "Best System" as an efficient market, and set budgets accordingly.

Commenters stated, EPA could further improve the rule by defining the "best system of emission reduction" as an efficient trading program, and set state budgets accordingly. Commenters said, a properly calibrated emissions cap could maximize net benefits b y equalizing marginal costs with marginal benefits. Commenters said, EPA could fine

- tune its four "building blocks" by equalizing marginal abatement costs across the building blocks and by calculating states' renewable energy targets according to the "best " use of renewables (not just the regionally average use of renewables). Commenters said, states would still be free to achieve those targets however they see fit, though EPA should offer states more guidance and encouragement on how to implement a flexibl e, market

- based scheme.

Commenters stated, key terms in the statute's description of "standard of performance," "best," "system," "degree," "achievable," "adequately demonstrated," "taking into account the cost," and "energy requirements" are undefined bu t broad. Commenters said, given recent Supreme Court decisions holding "most efficient" as one reasonable interpretation of the "best" regulatory approach and holding that EPA may consider costs in allocating the "amounts" of cross

boundary pollution that states must mitigate. EPA should have ample discretion to interpret Section 111's broad terms as consistent with a flexible, cost

- benefit calibrated, market mechanism.

Commenters said, "system" is, as EPA suggests, anything that reduces emissions from affe cted sources, and need not be technological. Commenters said, furthermore, flexible compliance mechanisms have been "adequately demonstrated," as EPA has successfully implemented multiple market

- based systems.

Commenters stated, an efficient market for po wer plants' greenhouse pollution, with an emissions cap set by cost

- benefit analysis, would optimally balance EPA's criteria for the "best system": total emissions reductions, reasonableness of costs, promotion of technological development, and maintenance of grid reliability. Commenters said it would maximize net benefits because regulated entities could prioritize the lowest

- cost abatement opportunities first, and would require them to abate only up to the point where marginal costs equal marginal benefit s. Commenters said, the cap would also guarantee that a specified level of emissions reductions will be achieved and easily verified. Commenters said, by generating auction revenue that states can redistribute back to consumers or invest in improving energ y efficiency, reducing energy demand, and upgrading the grid.

Commenters further stated, Executive Orders prescribe that, when not prohibited by statute, agency regulations should strive to maximize net benefits and utilize efficient, flexible compliance options.260 Response 3: While the commenters have suggested that the EPA has the authority for a theoretical alternative approach that would have the EPA determine that a trading program is the BSER, they have not made the case that the approach the EPA too k to determining the BSER is impermissible or that the EPA is required to select a trading program as the BSER. The basis for the EPA’s determination of the BSER is set forth in the final rule preamble ( see Section V), as well as in the Legal Memorandum an d other rulemaking documents

. Furthermore, the commenters present only a theoretical alternative approach to BSER; they fail to provide enough specificity for the EPA to follow their approach. They do not suggest or provide data to support the appropriate level for state budgets, nor do they explain whether the information and methodologies exist to determine accurately the point at which marginal costs equal marginal benefits. Section 111 does not require the EPA to maximize net benefits or to set the BSER at the point where marginal costs equal marginal benefits. The EPA has appropriately taken cost into account as required by Section 111
, as explained in the final rule preamble (Section V.) and other rulemaking documents.

The EPA agrees with the commenters that flexible compliance mechanisms, such as trading programs, have been adequately demonstrated. In fact, the EPA notes that emissions trading is an integral part of our BSER analysis. Furthrmore, many of the advantages of a trading pr ogram noted by the commenters are focused on the benefits that would accrue from state adoption of trading programs, not from determining that a trading program is the BSER. Among states’ options for 111(d) plans are the us e of either a mass

- based or rate

- based trading program. The final rule greatly facilitates flexibility for EGUs by establishing a basis for states to set trading

based emission standards and compliance strategies. The EPA has included in the final rule both

mass

- based state goals ( in addi tion to rate

- based goals ) and source

- level emission performance rates for the two subcategories of sources . These pave the way for states to implement mass

based trading, as some states have requested. In fact, these additions, together with the model rul es and federal plan being proposed concurrently with this rule, should demonstrate the relative ease with which states can adopt mass

- based trading programs, including interstate mass

- based programs that lend themselves to the kind of interstate compliance strategies so well suited for integration with the current interstate operations of the overall utility grid.

Comment 4: Commenters expressed support for a BSER based on emissions trading.

Commenters stated, the proposed rule should set a mass

- based emi ssion cap rather than a carbon intensity standard and prohibit states from establishing rate based standards. Commenters said, "state flexibility" is not one of the criteria EPA must consider in determining BSER and setting an emission standard. Commenters said, while the D.C. Circuit has acknowledged EPA has "a great degree of discretion" in balancing various factors to set BSER, the bottom line is that BSER cannot be "best" if [it] create[s] greater problems than [it] solve[s]." Commenters said, further, the D.C. Circuit has found that there is "no sensible interpretation of the statutory word 'best'" that does not "incorporate the amount of air pollution as a relevant factor to be weighed when determining the optimal standard." Commenters said, it is clea r that a rate

- based standard261 cannot assure that the rulemaking's target will be reached; that it necessitates unverifiable adjustments; that it incentivizes increased generation; and that it discourages RE and EE. Commenters said, such a system clearly can not be "best." Commenters said, conversely, a mass

based standard that functions as an emissions cap would require no adjustments and create immediately verifiable emission reductions.

Response 4: This rule allows, but does not require, states to adopt mass

- based trading programs. See discussion in sections VII. and VIII. in the final rule preamble. The EPA disagrees with the commenters’ position that rate

- based standards cannot be the “best” syste m of emission reductions. To the contrary, the majority of standards the EPA has issued under section 111 are
rate

- based standards. The EPA agrees that the amount of air pollution to be reduced is a relevant factor in determining the BSER, and the EPA has considered it in th e BSER determination for this rule, as explained in section V and elsewhere in the preamble

. The EPA disagrees that it is required to set a mass

- based emission cap as the BSER.

Comment 5: Mass

- based allowance trading is consistent with the CAA.

Commenters said, Congress in 1990 removed the word "technology" from the section 111(a) definition of "performance standards," indicating that the application of specific technologies is not a requirement of section 111. Commenters said, whil e that in no way reduces the technology

forcing nature of section 111 performance standards, it does provide support for existing source standards based on "systems" of emission reduction that go beyond the application of source

specific control technology requirements.

Response 5: See EPA’s discussion of the legal basis for emissions trading in state plans in sections III.B, V.B and VIII.C.6 of the final rule preamble of the CPP for EPA’s response to this
comment.

Comment 6: Commenters stated, while EPA encourages states to devise market

- based compliance programs, especially on a regional basis, it does not explain how this approach could meet the requirements of its proposed section 111(d) program, or how such a program woul d work on a practical level. Commenters said, without providing such information, EPA's proposal lacks support and fails to provide any opportunity for meaningful comment. Commenters said, issues that EPA has failed to address in order to provide a support able basis for its position that market

- based systems can satisfy its proposed rule include the following:

• How would a regional program such as RGGI be implemented as a federally enforceable program under section 111(d)? The compliance obligations under th e proposed rule are imposed on affected entities, but a regional cap and trade program such as RGGI would be implemented through a regional emission budget imposing regional obligations on
states.262 • In this regard, would a regional market

- based program have to ensure that each affected unit actually reduces emissions, or would affected units not have to be controlled if the regional budget were met? What sectors could contribute to those reductions (note that, in California, sectors beyond the electric utilit y industry can contribute to reductions)?

• How would a regional mass emission target be calculated from state rate

- based targets? How would an emissions intensity

- based emissions trading program work? Several interpretations have been advanced under the current proposal, not all of which would be compatible with RGGI.

• If the basic conversion of a rate

- based target to a mass

- based target is Emission Rate (lbs/MWh) * Generation (MWh) = Mass Emissions (tons), how is future generation incorporated to calculate f uture year targets?

• At what point will EPA approve a regional mass

- based target proposed by states? Modeling and determining a mass

- based goal is a significant, resource

- intensive undertaking. In addition, because a regional target will impact states in a region differently, designing and negotiating such a system can take years (as was the case with RGGI). Will there be any guidance that states can use to ensure that a negotiated mass

based target will be approved?

• In a regional or multi

- state mass

- based t rading program, if one state fails to meet its targets, how will the other states be affected? Will the entire region and all its industries be out of compliance? How would enforcement work in a regional program?

Response 6: The EPA provided adequate notic e as required under section 307 of the Clean Air Act of issues related to the treatment of regional programs in the proposal, the November Supplemental Proposal , the November NODA and the supporting TSDs, including the TSD titled “Translation of the Clean Power Plan Emiss on Rate

- Based CO 2 Goals to Mass

- Based Equivalents.” The extensive and thoughtful comments filed on these issues is evidence that the issues were adequately noticed.

These emission guidelines provide states with significant flexibility in designing section 111(d) plans, particularly the ability to follow a state measures approach. California and RGGI states have indicated that they intend to maintain their current sta te programs, which this rule would allow.

EPA has provided a supportable basis for its position that market

- based systems can satisfy its proposed rule. See sections VIII.A and VIII.C.1 of the final rule preamble of the CPP for an overview on emissions t rading in state plans under the CPP, and section VIII.C.6 of the final rule preamble for a discussion of legal and enforceability issues associated with emissions trading in state plans

. See sections VIII.J.2 and VIII.J.3 of the final rule preamble of the CPP for EPA’s response to this comment regarding emissions budget trading programs with broader source coverage and flexible features such as RGGI, multi

- state coordination among emission budget263 trading programs, and mass

- based “trading

- ready” programs. Se e section VIII.C.5 of the final rule preamble for information on multi

- state plans. Additional information on EPA plan approval is provided in section VIII.E of the final rule preamble. General information on development of guidance documents for multi

- sta te plan development is referenced in section VIII.H of the final rule preamble. See section VI I.C of the preamble and CO2 Emission Performance Rate and Goal Computation TSD sections 3, 5 and 6 for information on converting category

- specific performance rat es into mass goals. Specifically, EPA’s computation of the mass goals allows for increased generation consistent with the performance rates, as detailed in section VII.C of the preamble. With respect to a mas s

- based goal proposed by a state or states , EPA is not allowing states to propose their own goals , although states can submit programs that achieve more CO 2 emission reductions than the minimum goals in these emission guidelines. Thus the concern about resource burden in modeling and negotiating a regio nal mass

- based target does not exist.

Comment 7: Section 111(d) does not allow cap and trade.

Commenters stated, Congress did not allow EPA to promulgate a section 111(d) rule that allows emissions trading between an existing source and other existing s ources or from nonaffected sources. Commenters said, section 111(d) specifically requires standards of performance "for any existing source,” on a source

- specific basis, and limits the term to only stationary sources subject to the rule.

Commenters said, E PA rationalizes that "for" could apply to renewable energy and demand side energy efficiency decreases that would result in degreased generation at EGUs (federally enforceable requirements on third parties that directly reduce emissions at EGUs); however, EPA's interpretation of "for" does not support using offsets or allowances as part of a cap and trade system.

Commenters said, EPA states that cap and trade meets the standard of performance definition (is a continuous emission reduction) "because, in the case of a tradable emission rate, the rate is applicable at all times, and, in the case of a tradable mass limit, the source is always under the obligation that its emissions be covered by allowances." Commenters said, EPA ignores the fact that the emissio n reductions come from another source (even potentially non

- EGUs) and the Act's language, which does authorize trading as a standard of performance.

Commenters said, the plain language demonstrates that Congress wanted standards of performance for "any" ex isting EGU, and not to establish a trading program. Commenters said, where Congress has opted for a trading program (in the Acid Rain Program and for nonattainment New Source Review) Congress has expressly done so. Commenters said, alternatively, to the e xtent that "standard of performance" is ambiguous, which it is not, Congress expressly limited the term to only stationary sources subject to the rule.264 Response 7: EPA disagrees with the comment that states cannot use a trading program to set standards of performance for EGUs in compliance withsection 111. For EPA’s response to this comment see sections III.B, V.B and VIII.C.6 of the final rule preamble of the CPP.

Furthermore, c ontrary to commenters’ assertion, the EPA is not allowing emission reductions from non

- EGUs (e.g., out

- of

- sector offsets) to count towards whether a state or an EGU has met its obligations under section 111. As explained in the final rule preamble (especially s ection V.B.3

. c

. ), the EPA interprets section 111 as imposing the constrai nt that the BSER must be based on achieving the requisite emission reductions from the affected sources. Similarly, we interpret section 111 as requiring state plans that will have the effect of reducing emissons from the affected source category. Accordin gly, actions taken by affected sources (or other entities) that do not result in emission reductions from the affected source category (e.g, “out

- of

- sector” carbon offsets) can not qualify for inclusion in the BSER and cannot be used to determine whether a state is meeting its goal. But see the discussion in final rule preamble section VIII.J. of state coverage of new sources in a state mass

- based plan to guard against leakage.

1.10.10 BSER based on emissions averaging

1.10.11 Other

Comment 1: Comment ers argued that if EPA finalizes the proposed BSER definition under Section 111(d) and includes Building Blocks 2, 3 and 4, it would have significant implications for the regulation of new EGU sources under section 111(b). Commenters argued that EPA is obl igated to review, and if appropriate, revise the standards applicable to new sources under Section 111(b) every 8 years, and if EPA finalizes its proposed broad regulatory definition of BSER under Section 111(d), there would be nothing to keep EPA from app lying the Section 111(d) definition of BSER to Section 111(b), applicable to new units, under the 8

- year review. Commenters argued that applying the broader definition of BSER in 111(d) to 111(b) would enable EPA to preclude the construction of any new gen eration unless, and until, the state has maximized dispatch of natural gas EGUs and exhausted a wide range of other, non

- generation options that could include additional energy efficiency measures, new renewable energy requirements, and non

- electric utilit y actions such as discouraging new industrial development, imposing building standards or any number of other measures that have nothing to do with electricity generation. Commenters argued that EPA is saying, essentially, the best technology available to reduce new gas plants emissions is to "redefine" the source, thereby forcing utilities to invest in more expensive resources that might not meet their integration needs.

Response 1: We disagree with these comments. It is premature to attempt to anticipate the type of BSER that the EPA may determine for new affected EGUs during the next 8

- year review. For265 example, it is possible that CCS may be less expensive by then. We respond elsewhere to “redefining the source” arguments.