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Page **1** of **31 I. General Information**  A. Executive Summary 1. Overview In this rulemaking , the EPA proposes to limit GHG emissions from new fossil - fuel - fired power plants by limiting CO 2 emissions . I n 2009 , the EPA issued a finding that GHG air pollution may reasonably be anticipated to endanger Americans’ public health and welfare, now and in the future, by contributing to climate change. Fossil fueled power plants emit more GHG emissions than any othe r stationary source category in the United States, and among new GHG emissions sources, the largest individual sources are in this source category. Th is rulemaking proposes federal standards of performance for new fossil fuel - fired power plants that can be met with existing technology. Note that in this preamble, while we refer to these sources, interchangeably, as power plants, steam generating units, affected sources, fossil - fuel - fired electric generating units , covered EGUs, or, simply, EGUs , the proposed standards apply to only those sources identified in Section III.A. as the affected source category . 2. Why is the EPA proposing this rule?*********E.O. 12866 Review**

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Page **2** of **31** This proposed rule reflects the EPA’s common - sense approach to reducing CO 2 and other GHG emissions , which by causing climate change, pose a serious threat to public health and welfare. The EPA is focus ing first on reducing emissions from the largest emitters through measures with reasonable costs . The EPA is proposing to control CO 2 pollution from fossi l - fuel - fired power plants because they are responsible for approximately 40 percent of all U.S. anthropogenic GHG emissions. 1 I ndividual new power plants powered by coal are among the largest individual new sources of GHGs. Furthermore, technology exists that can be readily and cost - effectively used to reduce GHG emissions from fossil - fuel - fired power plants . Thus, this proposed rule is a rational first step to control GHG emissions from the largest - emitting stationary sources under CAA section 111 . a . The Serious Threat of Climate Change to the Public’s Health and Welfare. Climate change, including global warming, is a significant threat to the global environment. The National Research Council (NRC) of the National

1 From information in Table 2 - 1 from ‘Inventory of U. S. Greenhouse Gas Emissions and Sinks: 1990

– 2009’, U. S. Environmental Protection Agency, EPA 430 -R- 11 - 005, April 2011.*********E.O. 12866 Review**

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Page **3** of **31** Academies 2 stated in a 2011 report, “E ach additional ton of greenhouse gases emitted commits us to further change and greater risks. In the judgment of the [NRC] Committee on America's Climate Choices, the environmental, economic, and humanitarian risks of climate change indicate a pressing
ne ed for substantial action to limit the magnitude of climate change and to prepare to adapt to its impacts.” 3 Action to reduce emissions is warranted because, as the EPA stated in its 2009 Endangerment Finding 4 , GHGs endanger the public health and public welfare of current and future generations. The anthropogenic buildup of GHGs in the atmosphere is very likely (90 to 99 percent probability) the cause of most of the observed global warming over the last 50 years . 5 Based on the Endangerment

2 The National Academies comprise the National Academy of Sciences, National Academy of Engineering, Institute of Medicine and National Research Council. 3 National Research Council (2011) America’s Climate Choices , Committee on America’s Climate Choices, Board on Atmospheric Sciences and Climate, Division on Earth and Life Studies, The National Academies Press, Washington, DC. 4 EPA, “ Endangerment and Cause or Contribute Findings for Greenhouse Gases Under Section 202(a) of the Clean Air Act” (74 FR 66,496; Dec. 15, 2009). http://epa.gov/climatechange/endangerment.html 5 Endangerment Finding at 74 FR 66,518, which notes that the 2007 conclusion of the Intergovernmental Panel on Climate Change was re - confirmed by the June 2009 assessment by the U.S. Global Change Research Program.*********E.O. 12866 Review**

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Page **4** of **31** Finding and its underlying TSD 6 , reasons to reduce GHG emissions include the following:

 The key effects of climate change observed to date and projected to occur in the future include, but are not limited to, more frequent and intense heat waves, more severe wildfires, de graded air quality, heavier and more frequent downpours and flooding, increased drought, greater sea level rise and storm surge , more intense storms, harm to water resources, continued ocean acidification, harm to agriculture, and harm to wildlife and ecos ystems.

 These effects are anticipated to result in premature deaths, illnesses, damage to property and infra structure, and other harm to people’s welfare in the U.S .
 Those “most vulnerable” to climate related health effects, such as children, the elderly and the poor

–

6 EPA, “Technical Support Document for Endangerment and Cause or Contribute Findings For Greenhouse Gases under Section 202(a) of the Clean Air Act, Dec. 9, 2009.” Both the Federal Register Notice and the TSD for Endangerment and Cause or Contribute Findings are found in the public docket established for the endangerment rulemaking, Docket No. EPA

–OAR

– 2009

– 0171 and at http://epa.gov/climatechange/endangerment.html.*********E.O. 12866 Review**

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Page **5** of **31** and future generations -- face disproportionate risks. 7

 Human - induced climate change impacts have the potential to be far - reaching and multidimensional , though not all risks and potential impacts can be quantified. 8

 A supporting consideration is that c limate change impacts in certain regions of the world (potentially leading for example to food scarcity, conflicts or mass migration) may exacerbate problems that raise humanitarian, trade and national security issues for the United States. 9 The TSD further notes that some risks , such as the extinction of many species, would be irreversible. 10 Also, the TSD points to research on the potential for “abrupt changes” 11 which have uncertain or low probability but high potential impact. The NRC has said abrupt changes are an

7 Endangerment Finding, 74 FR 66498. 8 Endangerment Finding, 74 66497. 9 Endangerment Finding, 74 FR 66535. 10 Endangerment TSD, p. 136 11 Endangerment TSD, p. 75 - 78. The U.S. Climate Change Science Program defined “abrupt change” as a “large - scale change in the climate system that takes place over a few decades or less, persists (or is anticipated to persist) for at least a few decades, and causes substantial disruptions in human and natural systems.” Synthesis and Assessment Product (SAP) 3.4: Abrupt Climate Change (2008).*********E.O. 12866 Review**

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Page **6** of **31** important consideration because, if triggered, they could occur so quickly and unexpectedly that human or natural systems would have difficulty adapting to them. 12 Examples include severe drought in subtropical areas, release of large amounts of GHGs stored in the sea floor and frozen Arctic soils , and rapid disintegration of Greenland ice or collapse of the West Antarctic ice sheet leading to many feet of sea level rise. 13 The special characteristics of GHGs make it important to take initial steps to control the largest emissions categories without delay. Unlike most traditional air pollutants, GHGs persist in the atmosphere for time periods ranging from decades to millennia, depending on the gas. Greenhouse gases will continue to accumulate in the atmosphere at higher and higher concentrations each year unless substantial reductions in global emissions are achieved . The NRC notes that emissions reduction choices made today matter in determining the level of impacts experienced not just over the next few decades, but in the

12 Endangerment TSD, p. 75, citing National Research Council (2002) 13 Endangerment TSD , pp. 76 - 78*********E.O. 12866 Review**

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Page **7** of **31** coming centuries and millennia. 14 Also, the longer that the U.S. and other countries take to reduce emissions, the steeper the future emissions reductions that will be required to limit global temperature increase to any given level. This proposed rule to reduce GHG emissions from the largest U.S. stationary source category will contribute to the emissions reductions required to slow or reverse the accumulation of GHG concentrations in the atmosphere, which is necessary to protect against projected climate change impacts and risks. Reducing GHG emissions reduces the impacts and risks articulated in the Endangerment Finding and TSD . b . The High Level of GHG Emissions from Fossil - Fuel - Fired Power P lants and the Opportunities to Reduce these Emissions. Fossil - fuel - fired power plants comprise the largest category of stationary source GHG emissions in the U . S. These sources account for 60 percent of U.S.

14 National Research Council (NRC) (2011). Climate Stabilization Targets. Committee on Stabilization Targets for Atmospheric Greenhouse Gas Concentrations; Board on Atmospheric Sciences and Climate, Division of Earth and Life Sciences, National Academy Press. Washington, DC.*********E.O. 12866 Review**

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Page **8** of **31** stationary source GHG emissions, and 32 percent of total U.S. GHG emissions, based on 2009 data. 15 Furthermore, a range of technologies are available to reduce these EGU emissions. Most new power plants being built in the U.S. today are either natural gas - fired or are powered by renewable sources of energy, such as wind, and therefore generally produce significantly fewer emissions than existing coal - fired power plants. Coal - fired power plants can install CCS technology and can thereby limit their CO 2 emissions per MWh generated to levels similar to, or even lower than, those of natural gas - fired combined cycle plants without CCS . Coal - fired power plants with CCS are be ing permitted and built today , albeit with considerable financial assistance from the federal government . There are also opportunities to reduce emissions at existing fossil - fired plants. For instance, the efficiency of much of the existing generation can be improved, lower emitting plants can be dispatched more often, and higher

15 “Inventory of US GHG Emissions and Sinks” (April 201 1); “Regulatory Impact Analysis for the Mandatory Reporting of Greenhouse Gas Emissions Final Rule (GHG Reporting)” (September 2009).*********E.O. 12866 Review**

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Page **9** of **31** emitting plants can co - fire fuels , such as natural gas , with lower CO 2 intensity. c. Alignment with Industry’s Other CAA Obligations. Establishing the overall regulatory requirements for GHG emissions from new fossil - fuel - fired power pl ants at this time is efficient because the EPA has recently issued regulations to limit conventional pollutants (criteria and hazardous air pollutants) from these sources . Aligning the timing of these GHG rules with the rules for conventional pollutants give s the industry more regulatory certainty , will facilitate the industry’s investment decisions, and will help inform its compliance decisions to meet all of its CAA obligations. d. Promotion of Energy Diversity. This proposed rule is consistent with the p resident’s goal to ensure that “by 2035 we will generate 80% of our electricity from a diverse set of clean energy sources - including renewable energy sources like wind, solar, biomass and hydropower, nuclear power, efficient natural gas and clean coal.” 16 The propos ed rule will assist the deployment of CCS technology for new coal - fired power plants and create an incentive for the use of efficient natural gas - fired generation. Regulatory
16 “Blueprint for a Secure Energy Future”, March 30, 2011*********E.O. 12866 Review**

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Page **10** of **31** uncertainty may be hindering the development and deployment of CCS, as evidenced by American Electric Power (AEP)’s recent deferral of a large scale CCS retrofit demonstration project on one of its coal - fired power plants because the state’s utility regulators would not approve CCS without a regulatory requirement to reduce CO 2 . 17 The standard established in this proposal would help create the regulatory certainty that CCS is the path forward for new coal - fired generation. 3. Legal Proceedings Leading up to this Rulemaking. In April 2007, the U.S. Supreme Court ruled , in Massachusetts v. EPA , 18 that GHGs meet the definition of “air pollutant” in the CAA. This decision clarified that the authorities and requirements of the CAA , including section 111, apply to GHG emission s.

17 In a July 17, 2011, press release, AEP’s chairman said, “We are placing the project on hold until economic and policy conditions create a viable path forward ... We are clearly in a classic ‘which comes first?’ situation. The commercialization of this technology is vital if owners of coal - fueled generation are to comply with potential future climate regulations without prematurely retiring efficient, cost - effective generating capacity. But as a regulated utility, it is impossible to gain regulatory approval to recover our share of the costs for validating and deploying the technology without federal requirements to reduce greenhouse gas emissions already in place. The uncertainty also makes it difficult to attract partners to help fund the industry’s share.” 18 549 U.S. 497 (2007).*********E.O. 12866 Review**

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Page **11** of **31** As a result of this decision, the EPA obtained a voluntary remand from the U.S. Court of Appeals for the D istrict of C olumbia Circuit (the “Court”) to reconsider the EPA’s actions in a 2006 rulemaking for EGUs under CAA section 111, in which the EPA had promulgated standards for conventional air pollutants, but had declined to regulate GHG emissions. In part in response to threatened litigation over the EPA’s failure to act on the remand, the EPA agreed to propose today’s action to regulate GHG emissions from new EGUs . 4. Legal Basis for CAA Standards for Fossil - Fired Power Plants. a. General Legal Requirements. Clean Air Act s ection 111 establishes a several - step process for the EPA and the states to regulate air pollutants from stationary sources. First, the EPA must list categories of stationary sources that cause or contribute significantly to air pollution that may reasonably be anticipated to endanger public health or welfare. Then, the EPA must regulate emissions from new sources in the source catego ry by issuing a standard of performance, which is defined as “a standard for emissions of air pollutants which reflects the degree of emission limitation achievable through the application*********E.O. 12866 Review**

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Page **12** of **31** of the best system of emission reduction which (taking into account ... cost [and other factors]) ... has been adequately demonstrated.” New sources include new construction, and, as discussed below, modifications to existing sources as well as reconstructed sources. Standards of performance for new sources are often refe rred to as new source performance standards (NSPS). Clean Air Act section 111 also requires regulation of existing sources of certain pollutants

– in general, ones that are other than NAAQS pollutants or HAPs

– and provides the states the authority to act as the direct regulators. Regulation of new sources of those pollutants triggers a requirement that EPA also promulgate emission guidelines for existing sources. The states must then develop standards of performance based on those emission guidelines and s ubmit those standards in state plans to the EPA for approval. The states have flexibility in applying the standards of performance to particular sources. CAA section 111(d)(1). b. Cause - or - Contribute - Significantly Finding for Power Plants and Endangerment Finding for GHG Air Pollution. The EPA is authorized to regulate GHGs from power plants based on earlier actions concerning endangerment. Before today’s*********E.O. 12866 Review**

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Page **13** of **31** rulemaking, the EPA listed different types of fossil - fuel fired EGUs as source categories that caused o r contributed significantly to air pollution that may reasonably be anticipated to endanger public health or welfare. Specifically, the EPA listed boilers, including coal - fired boilers, and initially regulated them in subpart D of its regu lations under CAA section 111. Subsequent regulation of utility boi lers has been under subpart Da. The EPA listed combustion turbine engines and initially re gulated them under subpart GG. The combustion turbine engine portions of combined cycle facilities we re regulated under subpart GG. Heat recovery steam generators associated with combined cycle facilities with duct burners were regulated under either subpart Da or one of the industrial boiler regulations, depending on the specific characteristics of the heat recovery steam generator. To minimize the compliance burden for owners/operators of combined cycle facilities some monitoring harmonization was done, but 2 subparts were still applicable. In 2005, EPA proposed subpart KKKK as a replacement for subpart GG and specifically covered the entire combined cycle facility under subpart KKKK such that only a single se t or requirements would apply. In that same year, EPA proposed*********E.O. 12866 Review**

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Page **14** of **31** to include Integrated Gasification Combined Cycle ( IGCC ) facilities under the applicability of subpart Da. The E PA is authorized to promulgate the rulemaking proposed today -

- which would establish standards of performance for CO 2 emissions from EGUs currently in the Da and KKKK source categories -- because the EPA has already determined that both those source categories cause or contribute significantly to air pollution that may reasonably be expected to endanger public health or welfare. Clean Air Act section 111 does not require the EPA, as a prerequisite to regulating any particular air pollutant, to issue an endangerment finding or a cause - or - contribute - significantly finding for that air pollutant from that source category. As an alternative, the EPA solicits comment on whether CAA section 111 should be interpreted to require that the EPA base its regulation of CO 2 emissions from EGUs on two findings: (i) a finding that GHG air pollution may reasonably be anticipated to endanger public health or welfare; and (ii) a finding that CO 2 emissions from EGUs cause or contribute significantly t o that air pollution. If section 111 were so interpreted, the EPA believes that (a) the 2009 Endangerment Finding, along with the EPA’s 2010 action denying petitions to reconsider that finding (which*********E.O. 12866 Review**

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Page **15** of **31** action reviewed scientific developments after the Endangerment Finding) would fulfill any requirement to make the endangerment finding concerning GHG air pollution; and (b) the large amount of CO 2 emissions from EGUs clearly exceeds the low applicability threshold upon which the EPA would make the cause - or - cont ribute - significantly finding. As another alternative, the EPA solicits comment on whether CAA section 111 should be interpreted to require that the EPA base its regulation of CO 2 emissions from EGUs on a rational basis for protection of the public health o r welfare. If section 111 were so interpreted, the EPA believes that (i) its 2009 Endangerment Finding and 2010 denial of petitions to reconsider, by themselves, and particularly in conjunction with the National Academy of Sciences’ assessment reports issued since then, coupled with (ii) the fact that EGUs are the largest stationary source emitters of CO 2 , provide a rational basis for regulating CO 2 emissions from EGUs. There is no reason to revisit the 2009 Endangerment Finding given recent scientific findings that strengthen the scientific*********E.O. 12866 Review**

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Page **16** of **31** conclusion that GHG air pollution endangers public health and welfare. 19 5 . Summary of Today’s Proposed Requirements to Reduce GHG Emissions from New Fossil - F ired Power Plants , and Rationale for those requirements a. Summary of Proposed Revisions to Categories and Requirements for New Sources i. Revisions to Categories of EGUs. In today’s action, the EPA is proposing to combine electric utility steam generating units (boilers) (which are currently included in the Da category) and combined cycle units (including IGCC units) that generate electricity for sale and meet certain size criteria (which are currently included in the KKKK category), into a new category for new sources (the TTTT category). Today’s proposed rul emaking would not affect conventional air pollutants or s imple cycle turbines . 20 ii. Control Requirements for New Sources. The EPA is proposing standards of performance that require that all

19 These recent scientific findings are described in section II of this notice, titled “Background.” See subsection II.B.3., “Climate Impacts Detailed in Recent NRC Assessments.” The legal options introduced here are presented in detail below in section IV. A.2, “Endangerment and Cause - or - Contribute - Significantly Finding.” 20 Thus, today’s rulemaking does not affect the Da and KKKK categories for conventional pollutants and does not affect the KKKK category for simple cycle turbines.*********E.O. 12866 Review**

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Page **17** of **31** new fossil - fuel - fired EGUs meet an electricity- output -based emissi on rate of 1,000 lb CO 2 /MWh of electricity generated on a gross basis. This proposed standard is based on the demonstrated performance of natural gas combined cycle (NGCC) units , which are currently in wide use throughout the country . C oal - , coal refuse - , and pet - coke - fired boilers and IGCC units should also be able to meet this standard by employing CCS technology. There are a number of coal - and pet - coke - fired EGU projects under development that include CCS . While a coal unit with CCS may be more expensive than NGCC generation, for reasons explained below, we expect the difference to decrease over time as CCS becomes less expensive. Accordingly, we include in today’s proposed rulemaking
an alternative compliance option under which affected sources that implement CCS could comply with the 1,000 lb CO 2 /MWh standard on a 30
- year average basis. Coal - and pet coke - fired EGUs that use this compliance alternative must meet an immediate performance standard of 1,800 lb CO 2 /MWh (gross) on a 12 -month rolling average basis , which can be achieved by a “supercritical” efficiency level, during the period before installation of CCS. By no later than the 11 th*********E.O. 12866 Review**

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Page **18** of **31** year, the facility would be required to meet a reduced emiss ion limit of no more than 600 lb CO 2 /MWh (272 kg CO 2 /MWh) (gross) on a 12
-month rolling average basis for the remaining 20 years of the 30 - year period, such that the weighted average CO 2 emissions rate from the facility over the 30 - year time period would be equivalent to the proposed standard of performance of 1,000 lb CO 2 /MWh . We seek comment
on an alternative mechanism for establishing practicably enforceable short term limits during the 30 - year period , requiring the owner/operator to identify and obtain approval of , at the time of construction, an alternative 30 - year emission trajectory, specifying the emission rate for each year during the 30 - year period consistent with meeting a 30 - year average emission rate of 1,000 lb CO2/MWh; Under CAA section 111(b)(1)(B), the EPA is required to conduct a review of the new source standards in eight years and we intend at that time to review the availability and cost of CCS. b. Rationale Today’s proposal to combine the relevant parts of the Da and KKKK categorie s is authorized under CAA section 111(b)(1)(A) because that provision authorizes EPA, after drawing up the list of affected source categories, to*********E.O. 12866 Review**

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Page **19** of **31** “revise” that list from time to time . Combining the relevant parts of the categories, as EPA proposes to do, i s one method to “revise” the list . Moreover, EPA’s action to combine is reasonable because with the combination, all new fossil - fuel - fired electricity generating units (and that meet specified minimum criteria) will be subject to the same requirements, and therefore will be treated alike because they function alike. EPA is not including simple cycle turbines in this rule, because they generally operate differently than the other units covered by today’s rule. The units covered by today’s rule are generall y used for base - load or intermediate power generation, while simple cycle turbines are generally used much less often (and thus have low GHG emissions) and are used to meet peak rather than base or intermediate load requirements. Today’s proposal to requi re an emission rate of 1,000 lb CO 2 /MWh meets the requirements for a “standard of performance,” as defined under CAA section 111(a)(1) . This proposed standard is based on the degree of emission limitation achievable through natural gas combined cycle (NGCC ) . NGCC qualifies as the “best system of emission reduction” (BSER) that EPA has determined has been*********E.O. 12866 Review**

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Page **20** of **31** adequately demonstrated because NGCC emits the least amount of CO 2 and does so at the least cost . The just - described reasons are sufficient as a legal
matter to justify today’s proposed action s to combine source categories and establish the 1,000 lb CO 2 /MWh standard . Such a standard could also be met today b y coal fired units using CCS. In addition, we propose to include the compliance alternative of all owing coal - fired power plants to meet either the 1000 CO 2 /MWh standard or to meet this standard over a 30 - year periodso that plant developers can take advantage of potential advancements in CCS technology that could lower prices . We recognize that in light of the increased availability and significantly lower price of natural gas, energy industry modeling forecasts uniformly predict that few, if any, new coal - fired power plants will be built in the foreseeable future . Therefore, for these economic reasons, the new source component of the fossil - fuel - fired electricity generating industry is in effect restructuring towards gas and away from coal . Today’s proposed action is consistent with that trend, and in no way could be considered a cause of that trend. We recognize that some owners/operators may nevertheless seek to construct new coal - fired capacity .*********E.O. 12866 Review**

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Page **21** of **31** This may be beneficial from the standpoint of promoting energy diversity, and today’s proposal does not interfere . In the first instance, a new coal - fired power plant may be able to meet the 1,000 lb CO 2 /MWh standard by installing CCS at the time of construction . At present, CCS would add considerably to the costs of a coal - fired power plant, but there are some sources of funding available through a limited number of government pilot programs. Because modeling forecasts construction of no more than a few coal fired power plants under any circumstances, those few may well have access to those government pilot programs. The proposed 30 - year compliance option adds additional flexibility for coal - fired power plants by allowing them to construct and begin operations, and then install CCS at some time in the future, as long as they install CCS at a time and in a manner that allows them to meet the 1,000 lb CO 2 /MWh standard over the 30 - year period . We expect that the costs of CCS will decline in the future as CCS is utilized more widely. Today’s action, if finalized, would promote utilization of CCS by making clear that CCS is required for coal - fired power plants . The p rospect of declining CCS costs, in conjunction with the possibility of continued availability of additional funding*********E.O. 12866 Review**

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Page **22** of **31** mechanisms (e.g. pilot funding such as DOE grants, tex credits for investment or EOR and state incentives such as Clean Energy standards) , i ndicates that CCS may be sufficiently accessible in the near future to the few coal fired power plants that could be expected to construct . Thus, the 30 - year compliance option, along with the current opportunities for funding to install CCS immediately,
counters any concerns that today’s action could restrict new coal - fired construction. It should be noted that we are not required to justify the 30 - year average compliance alternative on grounds that it qualifies as the “best system of emission reduction” adequately demonstrated, and we are not stating in this action whether that compliance alternative does or does not qualify as such . Thus, it is not necessary to determine that our expectation that costs will go down meet s the standards for determining that CCS is “adequately demonstrated . ” Rather, to reiterate, the 30 - year compliance alternative, along with the opportunities to install CCS immediately, make clear that CCS remains sufficiently available for the limited number of coal - fired power plants that may newly construct to serve the policy*********E.O. 12866 Review**

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Page **23** of **31** goals of promoting energy diversity . 21 Indeed, by clarifying that in the future, new coal - fired power plants will be required to install CCS, this rulemaking eliminates uncertainty about the status of coal and may wel l enhance the prospects for new coal - fired generation, and thereby promote energy diversity.
c . Requirements for Modifi cations, and Rationale . For purposes of today’s action, the EPA does not have a sufficient base of information to develop a proposal for the relatively few affected sources that may be expected to take actions that would constitute “modifications” (as defined under the EPA’s NSPS regulations) and therefore be subject t o requirements for new sources. As a result, the EPA is not proposing requirements for NSPS modifications . The EPA’s current regulations define an NSPS “modification” as a physical or operational change that increases the source’s maximum achievable hourl y rate of emissions, but specifically exempt from that definition pollution control projects, which are projects that entail the installation of pollution control equipment or systems. The significant majority of projects that we believe EGUs

21 EIA analysis (AEO 2012 early release) shows that “coal remains the dominant energy source for electricity generation”*********E.O. 12866 Review**

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Page **24** of **31** are most like ly to undertake in the foreseeable future that could increase the maximum achievable hourly rate of CO 2 emissions would constitute pollution control projects. In many cases, those projects would involve the installation of add- on control equipment required to meet CAA requirements for conventional air pollutants . These increases in CO 2 emissions would generally be small and would occur as a chemical byproduct of the operation of the control equipment. In other cases, those projects would involve equipment changes to improve efficien c y to meet the requirements of a future 111(b) rulemaking for existing
sources and would have the effect of increasing a source’s maximum achievable hourly emission rate (lbs CO2/hr) , even while decreasing its actual output based emission rate (lbs CO2/MWh) . Because all of these actions would be treated as pollution control projects under EPA’s current NSPS regulations, they would be specifically exempted from the definition of modification. In the past, there have been a small number of instances , on approximately an annual basis, in which power plants have undertaken actions that, in EPA’s view, should be treated as modifications . The sources that took these actions vary widely one from another, and the types of*********E.O. 12866 Review**

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Page **25** of **31** actions were dispa rate . In light of this, we do not have adequate information as to the types of actions that qualify as modifications, the amount of increase in CO 2 emissions they cause, the types of control measures, or the costs and effectiveness of control measures, on which to base a proposed standard of performance. Therefore, in today’s action, we are not proposing a standard of performance for modifications . As a result, sources that undertake modifications will be treated as existing sources and thus not subject to the requirements proposed in this notice, although they would be subject to requirements that EPA intends to propose separately for existing EGUs . In today’s action, we solicit comment on the types of modifications power plants undertake and appropriate
c ontrol measures . Depending on the information we develop, we may issue proposed standards of performance in the future. d . Requirements for Transitional sources. The EPA is aware that approximately 18 proposed EGUs have received CAA permitting authority approval for their preconstruction permits, but may not have “commenced construction” by the date of today’s proposed rulemaking. A few of these sources have taken additional action preparatory to commencing*********E.O. 12866 Review**

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Page **26** of **31** construction. For this proposed rule, these sources that, as of the date of this proposal, have a PSD permit and are poised to commence construction within the very near future are referred to as “transitional sources.” We are aware that approximately seven of these permitted sources are permitted to implement CCS to some degree. CAA section 111 provides by its terms that sources that have not “commenced construction” before the date of proposed standards for new sources will be subject to the NSPS when they do commence construction. The EPA’s regulations define “commenced construction” as, in general, undertaking a continuous program of construction or entering into a binding contract to do so. 40 CFR 60.2. Commenters 22 have pointed out that absent different treatment , transitional sources will be subject to the same requirements that apply to new sources that did not obtain their permit before the date of proposal, and these commenters have suggested that today’s proposed rule should treat transitional sources specially , in light of the substantial redesign that meeting such a standard would

22 As mentioned elsewhere, the EPA held a series of listening sessions and allowed for a period of additional comment after announcing it was moving forward with development of new source performance standards for GHGs emitted from fossil fuel - fired EGUs. The term “commenters” here refers to those who commented during the listening sessions or during the subsequent comment period.*********E.O. 12866 Review**

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Page **27** of **31** have and the impact that redesign would have on the schedule for a project that was nearly ready to commence construction. The transitional sources at issue are coal fired EGUs that, absent special treatment, would be subject to the standard of performance proposed in this rulemaking. In today’s proposed rulemaking, the EPA is not proposing a standard of performance for transitional
sources , which we define as sources that a PSD permit by the date of this proposal and that commence construction within 12 months of the date of this proposal . Upon finalization of this rulemaking without a standard of performance applicable to these sources, they will not be treated as new sources and therefore will not be subject to the specific limitations set forth in the final new source standards. These sources would remain obligated, by the terms of their permits, to construct and operate in accordance with their permits. In addition, these sources will be treated as existing sources and would be subject to any requirements a state promulgates to meet its obligations under section 111(d). Sources that do not commence construction within 12 months of the date of this proposed action will be subject to the standard of performance for new sources.*********E.O. 12866 Review**

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Page **28** of **31** e. Requirements for Reconstructed sources, and Rationale. The EPA’s CAA section 111 regulations provide that reconstructed sources are to be treated as new sources and, therefore, subject to new source standards of performance. The regulations define reconstructed sources as, in general, existing sources (i) that replace components to such an extent that the capital costs of the new components exceed 50 percent of the capital costs of an entirely new facility, and (ii) for which compliance with standards of performance for new sources is technologically and economically feasible. 40 CFR 60.15. Historically, we believe that very few power plants have undertaken reconstructions . The EPA is not aware that any powe r plants are presently planning any project that could meet the requirements for a reconstruction. In light of this limited experience concerning reconstructions, we lack adequate information about the type of source; the type of changes; the extent of emissions increases; and the type of control measures, including their cost and emissions reductions, that we need to propose a standard of performance for reconstructions , and we so licit comment on these issues .*********E.O. 12866 Review**

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Page **29** of **31** As a result, i n today’s action, the EPA is not including a proposal for reconstructions and instead is soliciting comment on two different options . Under the first, we would not promulgate a standard of performance concerni ng reconstructions when we finalize this action, but, depending on the information we receive, we may propose and finalize such a standard at a later time . Under the second option , we would finalize a standard of performance . Under one sub - option, we woul d finalize a standard of 1 ,8 00 lb CO 2 /MWh (gross) . This would be consistent with the first phase requirement for new sources availing themselves of the 30 - year alternative compliance option. It would represent upgrading the unit to an efficiency level cons istent with some of the best performing existing units . A second sub - option would treat reconstructed sources the same as any other new source (e.g. subject to an emission limit of 1 , 000 lb CO 2 /MWh) . Th is sub - option could be based on the view that if the owner of a source plans to invest enough capital into an existing unit to reach the reconstructed threshold, it is likely with the intent of significantly increasing the life of the plant . The purpose would be to avoid creating an incentive for an owner to forego building a new clean*********E.O. 12866 Review**

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Page **30** of **31** facility, in favor of merely reconstructing an existing facility that operated with higher emissions. . 6. Summary of Emissions Impacts, Costs and Benefits We are projecting that there will be no construction of new coal - fired generation without CCS even absent this proposed rule. In addition to looking at a primary case consistent with EIA’s primary case assumptions for electric demand, we also looked at a case with higher electric demand and another case with higher natural gas prices. We did not see any additional coal builds through 2030 in either of these cases. We also looked at a case with both increased natural gas prices and increased electric demand. In this case we saw small amounts of coal being built in 2030. Because we did not see any new coal builds in 2020 in any of the cases examined and we only saw small amounts of coal in the most extreme case examined in 2030 we do not project that this proposed rule will impose costs upon sources. While this proposed rule will not have direct impact on U.S. emissions of greenhouse gases, it will send a strong signal both domestically and internationally. Domestically, this proposed rule will further stimulate investment in CCS technology, by making it clear that such technology does provide a clear path forward for coal.*********E.O. 12866 Review**

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Page **31** of **31** Internationally, this rule may encourage others to consider less GHG- intensive forms of power generation.